On August 23, 2005, two Canadian government federal ministers warned of the imposition of tariffs on American products in retaliation for the Bush Administration’s policies against Canadian lumber. This warning comes one week after the Bush Administration indicated that it would ignore a NAFTA trade panel’s conclusion that Canadian lumber exports did not harm U.S. producers. Canadian officials said the ruling indicates that the U.S. must eliminate its duties on Canadian lumber and refund the $4 billion it has already collected from the tariffs.
Unfortunately, this U.S. action is just another step in the Bush Administration’s increasing use of trade as an element of domestic politics. The Bush folks should embrace the free market policies that it champions for other countries instead of protecting U.S. industries in search of popular votes or legislative support in Congress.
Last year, U.S. exports to Canada grew by 11.9 percent. This year, I expect U.S. exports to Canada to surpass $200 billion, or approximately 23 percent of total U.S. exports. No intelligent seller or merchant spits in the face of its most important customer. Furthermore last year, the U.S. imported $19 billion of crude oil from Canada, or virtually the same level as from Saudi Arabia, the largest supplier of oil from abroad. Additionally, the U.S. imported almost $20 billion in natural gas from Canada in 2004. Recent shortages of both crude oil and natural gas point to the importance of a free flow of goods and services across the nation’s northern border. The Bush Administration’s actions threaten economic progress in both nations.
Just as it did when it raised tariffs on imported steel to secure votes in Pennsylvania and Ohio in the last Presidential election, the Bush Administration’s trade policies appear to be more influenced by the political motivations of Carl Rove than the economic goals of Carlos Gutierrez, the U.S. Commerce Secretary.