Canada ambassador expects permanent U.S. tariff exemption

Posted By Student Newsroom

By Ethel Jiang
Medill News Service

WASHINGTON – Canada is “fully confident” that it will receive permanent exemptions on aluminum and steel tariffs from the U.S. despite challenging trade negotiations, said David MacNaughton, Canada’s ambassador to the U.S., Thursday night at the Embassy of Canada.

“I continue to be hopeful that we will have a permanent exemption,” MacNaughton said to attendees of the Society of Advancing Business Editing and Writing’s 2018 Spring Conference.

Canada Ambassador to the U.S. David MacNaughton spoke Thursday to the Society of Advancing Business Editing and Writing at the Embassy of Canada. Canada is in the midst of renegotiating NAFTA trade deals with the U.S.

President Donald Trump imposed global tariffs of 25 percent on steel and 10 percent on aluminum last month but exempted Canada and Mexico until May 1. The president will decide whether to continue suspensions based on discussions addressing U.S. national security, the White House said in a press release.

“If Canada’s a national security threat to the United States of America,” MacNaughton said, following laughter from the audience, “Then, give me a break.”

The ambassador said Canada found it strange that it was caught in the middle of the dispute over metal tariffs. He added that it felt like the U.S. was punching Canada “in the nose” while trying to punish countries in the Far East.

Canada is America’s second-largest goods trading partner, following China. The United States ran a seasonally adjusted trade deficit of $23.2 billion in goods with Canada last year, according to the U.S. Census Bureau.

The United States Trade Representative released objectives in July for the NAFTA renegotiation, specifically aiming to reduce trade deficit and save American jobs. Trump said in a tweet last August that the North American Free Trade Agreement among Canada, Mexico and the U.S. is the “worst trade deal ever made,” threatening to leave the agreement.

The USTR is negotiating an increase in North American content to allow products to move freely across NAFTA countries, up from the current NAFTA requirement of 62.5 percent for North American content, to give Americans new opportunities to grow their exports.

“We couldn’t accept that,” said MacNaughton, who had just returned from a grueling three-and-a-half-hour negotiation at the USTR, adding that he “would’ve scheduled a root canal for the end of the day in order to ease the pain.”

He told reporters that Americans started with a domestic content rule of 50 percent but agreed to move off that requirement and seek alternative options to help manufacturers.

The ambassador also said that the U.S. hasn’t given up demanding a “sunset clause” in the agreement that would allow NAFTA members to automatically terminate the pact every five years. Canada stated that it will “create a degree of uncertainty” that is unnecessary to the NAFTA community, MacNaughton said, but reaching a final NAFTA deal has not been easy.

Canada rejected the change in rules of origin because auto manufacturers will have to replace their suppliers with U.S. companies to meet new requirements, said Euijin Jung, research analyst at Peterson Institute for International Economics. The change will disrupt the sophisticated supply chains that have been developed in North America, she said.

“In general, higher regional value content will raise cost of production and pass it down to consumers eventually,” Jung said in a Thursday email interview, adding that reaching a new NAFTA deal by early May is not feasible with so many issues unresolved.

Approaching next week’s deadline for the metal tariffs exemption, however, will unlikely give the U.S. leverage on the thorny NAFTA renegotiation, MacNaughton said.

“We don’t acknowledge that there’s any linkage to NAFTA,” he said.

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