THE TTALK QUOTES

On Global Trade & Investment
Published Three Times a Week (with occasional bonus quotes) by
The Global Business Dialogue, Inc.
Washington, DC  20006
No. 70 of 2020
TUESDAY, SEPTEMBER 22, 2020

Click HERE for last Friday’s quote from Amb. Lighthizer on the U.S. loss to China in the WTO.


LIFT THE ALUMINUM TARIFFS BECAUSE...

“Canada and New England share more than just a border, we are allies, business partners, colleagues, and family.”

Vermont Governor Philip B. Scott
New Hampshire Governor Christopher T. Sununu, and
Maine Governor Janet T. Mills
September 8, 2020
CONTEXT
Today’s quote is from a letter sent to President Trump on September 8 by the governors of the three northern New England states: Vermont, New Hampshire and Maine. In it, Governors Scott, Sununu, and Mills described the 10 percent tariff then in effect on non-alloyed, unwrought aluminum from Canada as “unnecessary and inappropriate” and urged the President to lift them. In one sense, their petition was granted a week later. 

On September 15, the Office of the U.S. Trade Representative announced that “the United States will resume duty-free treatment of non-alloyed, unwrought aluminum retroactive to September 1, 2020.” For many, this was a welcome development in the seesaw ride of 232 tariffs on aluminum. (See the chronology in the Notes below.) 

Obviously it was good news for those in the U.S. opposed to these tariffs, but it was not an unalloyed win for their side. The decision to drop the Section 232 or national security tariffs on Canadian aluminum was conditional. It represented a change in expectations, not a change in position. As the USTR statement explained, “the United States has determined that trade in non-alloyed, unwrought aluminum [from Canada] is likely to normalize in the last four months of 2020, with imports declining sharply from the surges experienced earlier in the year.”

The release went on to explain that the 232 tariffs could return “if actual shipments [exceed] 105 percent of the expected volume,” for the remaining months of this year.

We should add that, when the U.S. announced the roll back of these aluminum tariffs, Canada was on the brink of imposing retaliatory tariffs on U.S. exports to Canada. Those too have been shelved, at least for now. Canada’s Deputy Prime Minister, Chrystia Freeland, summed up Canada’s view of the situation last Tuesday afternoon, saying:

Let me be clear. This is not a negotiated deal between Canada and the United States. … . The United States has chosen unilaterally to lift its tariff on Canadian aluminum exports to the United States. … Of course, we welcome that decision. 

Going forward, we [Canada] have been clear. … Were tariffs to be imposed in the future on Canadian aluminum, we would retaliate with reciprocal dollar for dollar retaliation.

COMMENT
So, should we say all quiet on the northern front and leave it at that? Or is there more to say? Maybe just a little. 

First, the decision to lift the tariffs on unalloyed, unwrought aluminum from Canada was based on expected changes in the volume of exports of this product. Readers of these pages will not have been surprised by this change in expectations, as it was clearly laid out by Nadia Bourély of the Canadian Embassy in her interview with GBD earlier this summer and written up in the TTALK Quote for September 4.

As for the fundamental question of whether the United States should or should not have imposed such tariffs in the first place, we take no position. We regret, however, that, as in many trade cases, the rhetoric associated with the action far outstripped the only important question. We can recall reading arguments in safeguard cases, for example, in which those in the exporting country were accused of illegal subsidization, of dumping etc., etc., almost obscuring the fact that the only real issue was whether a U.S. industry was being harmed. Similarly, in this case, our recollection is that the U.S. Administration has accused Canada of acting unfairly. Those opposed to the tariffs have put all the emphasis on overcapacity in China, and the Canadians have taken offense at what they saw as a challenge to their standing as an ally of the United States. A pox on all of their houses.

One, exporting in response to market demand is not unfairness. And arguments about fairness and unfairness are not the issue in a 232 case.

Two, Chinese overcapacity may be a problem. We don’t doubt that it is, but it is not something that this or any American administration can control.

And three, the U.S.-Canada alliance is strong, and we do not believe anyone is seriously suggesting otherwise. 

We do, however, think former Senator Even Bayh of Indiana had a point when he said:

Our alliances make us stronger … But no nation can afford … to put its entire productive capacity for something as important to its national security as aluminum and steel entirely in the hands of others. And so there is an important national security component here as well.

That said, we repeat that we take no position on the question of whether the U.S. should have imposed 232 tariffs on Canadian aluminum in the first place. For the moment, however, that issue is quiescent, off-the-table, and we hope it stays that we for a very long time. As for the larger question of tariffs and national security writ large, the cat is out of the bag. It is an issue, or rather a series of issues, that will not go away. We only hope that the next time it comes up the focus is where it belongs, namely on the requirements of U.S. national security and not on some litany of complaints against exporting countries.
It

SOURCES, LINKS & NOTES
An Appeal from Three Governors takes you to the September 8 letter to President Trump from the governors of Vermont, New Hampshire, and Maine, respectively, Gov. Philip B. Scott (VT), Gov. Christopher T. Sununu (NH), and Gov. Janet T. Mills (ME).  This was the source for today’s featured quote. 

Tariffs Lifted is a link to the USTR statement on this issue of September 15, quoted above.

Aluminum Now is a link to a panel discussion in December 2018, highlighting the concerns of American Primary Aluminum Association and others with respect to the Section 232 tariffs on certain imported aluminum. 

Freeland Responds is a video clip from Global News with a reaction to the lifting of the tariffs on Canadian aluminum from Canada’s Deputy Prime Minister, Chrystia Freeland. 

A Summer Interview is the TTALK Quote for September 4. This included excerpts from GBD’s August interview with Nadia Bourély of the Canadian Embassy in Washington, namely those portions of the interview that deal with Canada’s aluminum exports to the United States and the 232 tariffs.

Aluminum, a Short Chronology:
March 23, 2018 -- The United States begins imposing 10 percent ad valorem tariffs on aluminum imports from most countries, including Canada. The authority for these is Section 232 of the Trade Expansion Act of 1962, a provision dealing with U.S. national security.

May 19, 2019 – President Trump lifts the Section 232 tariffs on aluminum imports from Canada.

August 6, 2020 – President Trump reimposes the 10 percent national security tariffs on unalloyed, unwrought aluminum from Canada.
September 15, 2020 – USTR announces the suspension of the 10 percent 232 tariffs on Canadian aluminum, with such suspension retroactive to September 1, 2020. This is done with the caveat that, if imports exceed specified thresholds, the tariffs will be reimposed.

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