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Lawrence Herman is a former Canadian diplomat, lawyer, and trade expert. He was one of four speakers at the 2018 Annual Experts' Meeting of the Canada-United States Law Institute. The event was held in Washington at the law offices of Steptoe & Johnson on Wednesday, November 14, 2018. In other words, it took place after the text of the newly minted United States-Mexico-Canada Agreement had been out for a while but before it had been signed by the leaders of the three countries. That now famous signing ceremony took place in Buenos Aires, Argentina, on November 30. Prime Minister Trudeau signed for Canada, then President Peña Nieto for Mexico, and President Trump for the United States.
To state the obvious, the USMCA is a trilateral agreement. In his presentation on November 14, Mr. Herman talked a lot about the trilateral institutions created by or imbedded in the agreement, including a Free Trade Commission, a Trade Facilitation Committee, and a USMCA Secretariat. Those elements of the agreement are important, and we expect to return to them and to what Mr. Herman said about them in a later entry.
As today's featured quote indicates, he also dealt with the relationship between the national security tariffs on steel and aluminum on the one hand and USCMA on the other. We noted in Monday's TTALK that many had hoped that the conclusion of the negotiation for a NAFTA replacement would mean an end to the tariffs on steel and aluminum from Canada and Mexico. And indeed the Administration had done nothing to discourage that hope, quite the opposite. Now, however, the negotiations have been completed, the agreement has been signed by all three countries, and the metals tariffs are still in place.
Of course we are a long, long way from implementation. As Mr. Herman said at the very beginning of his talk last November, "There's a long way to go before we really know whether it [USMCA] is going to see the light of day." For starters, it is impossible to say now whether the U.S. Congress will approve the new agreement. The current atmosphere is not encouraging, but it is also not necessarily predictive.
To repeat our focus today is on what Mr. Herman had to say about three things: the 232 tariffs on steel and aluminum; Canada's implementation of the USMCA, the new NAFTA; and the relationship of national security tariffs to USMCA itself. Let's take them in that order.
Regarding the tariffs, Mr. Herman said:
Let's be clear that the use of unilateral surcharges by the United States [has] changed the dynamics of world trade. There is no question that unilateral surcharges or tariff increases, notwithstanding bound WTO obligations, have changed the nature of the global trade rules.
Canada's Implementation of the USMCA. Having noted that the metal tariffs are not dealt with in the body of the agreement, Mr. Herman expressed the optimistic thought that "hopefully we'll find some solution before much further time passes." He then went on to discuss the implementation process in Canada as follows:
The government of the day, the Liberal government, has a majority in the House, and there is no doubt that the bill will be passed and the treaty will be approved. But, it will not be done before there is a clear indication that this deal will get through the U.S. Congress. ...
And a number of things can happen to make sure that that agenda is maintained. You know, in the Canadian system, legislation can be passed by the House of Commons, passed by the Canadian Senate, and given royal assent - we still are a constitutional monarchy, you know, and our legislation has to receive royal assent. So the legislation approving this agreement can be passed, given royal assent, but the date it enters into force will depend on Cabinet decisions or, in a formal sense by the approval of the Governor in Council.
In other words, the Cabinet will be given the right to bring it into force on a date which the Cabinet agrees to, and that will depend on what happens here in Washington. In other words, again I'm predicting, Canada will not fully implement the agreement unless and until the tariff surcharge issue is resolved.
Finally, National Security and the USMCA. The current tariffs on steel and aluminum are not dealt with in the text of the agreement, but the subject of national security is. This is an area where Mr. Herman has some misgivings about the result. He said:
One of the worries that I have is that the USMCA enshrined Canada's acceptance of [the idea that] unilateral surcharges can be used under the guise of national security interests. The national security provision in the USMCA is different from the NAFTA. It broadens the scope of unilateral national security measures, because it doesn't contain the important qualification in the WTO agreement. So, Canada, I think, directly acceded to the use of unilateral measures for national security reasons unconstrained by the requirement that those measures be taken in time of war or other emergencies in international relations. Those caveats are not included.
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