Canadian tariffs

[doc75]

https://www.washingtonpost.com/news/global-opinions/wp/2018/06/11/why-trudeau-doesnt-have-the-high-ground-on-trade/?utm_term=.501b63fbca70

 

I've never heard of JJ McCullough before, and I'm strictly an amateur on trade policy, but I'm sure some of the Canadians know him.  Is this piece a predictable output based on his past opinions and ideology, or is he presenting the facts fairly?

 

I see nothing unfair in his presentation.

 

I think a major problem here is that even when Trump gets his facts right, he cherry picks to such a degree that any sense of scale is lost. 

I'm sure the Canadian negotiators don't try to pretend the dairy tariffs aren't there.  The US has their own subsidies.  Surely for a successful relationship, there must be an understanding that both sides will have their quirks, and the end focus has to be on aggregate numbers.

 

Strange times.  I hope the cooler heads behind the scenes prevail (on all sides).

[EliG]

is he presenting the facts fairly?

 

Yes and No.

 

Yes, Canadian dairy tariffs are bullshit. Yes, Canada should dismantle them.

 

No, dairy tariffs are not the major stumbling block in NAFTA negotiations. It's a fairly small item in the grand scheme of things. Trump keeps talking about this issue to put Trudeau on defense.

[rb]

https://www.washingtonpost.com/news/global-opinions/wp/2018/06/11/why-trudeau-doesnt-have-the-high-ground-on-trade/?utm_term=.501b63fbca70

 

I've never heard of JJ McCullough before, and I'm strictly an amateur on trade policy, but I'm sure some of the Canadians know him.  Is this piece a predictable output based on his past opinions and ideology, or is he presenting the facts fairly?

To answer your question, no he's not anyone of importance. He's a cartoonist who likes to chime in on politics. I don't think he's presenting facts fairly but instead he's presenting his opinion and ideology. Take this little tidbit:

 

The wisdom of the dairy tariffs is a source of debate and second-guessing in Canada, and we can’t take for granted that voters will stand foursquare behind Prime Minister Justin Trudeau as he insists that dairy protectionism is something he’s “100 percent” ready to defend.

 

Ok, so who will the voters stand behind then? The leaders of all three majour parties unequivocally support supply management.

 

Or this little bit:

 

To call this a minor triviality of Canadian life is to ignore one of the country’s highest-profile policy debates of the past half-decade. In 2012, centrist Liberal politician Martha Hall Findlay provoked the conversation by running for her party’s leadership on what was a mostly one-issue campaign to abolish dairy tariffs.

 

Nope, that wasn't even close to one of the country's higher profile debates. I guess maybe it would break the top 50 on a slow news day. Oh, also there are not hoards of Canadians crossing the boarder every day in a desperate hope to save $1.49 on dairy.

 

Now ignoring this fool let's take a closer look at the facts.

 

Canada has supply management. We restrict production of certain ag goods (dairly, eggs, poultry) which results in higher prices for Canadians. This is mostly a private matter. The US has massive farm subsidies. In fact the US subsidies for dairy are larger than the profits of the dairy sector. So the US is basically straight up dumping dairy.

 

So when Canada and the US got to talking NAFTA, Canada didn't much care for scrapping supply management and we sure weren't gonna let the US dump dairy. The US didn't really want to cut farm subsidies to dairies either. So we agreed to side pocket this bit.  We get to keep supply management and the US gets to keep its subsidies. In order to prevent dumping, Canada will get to impose tariffs to prevent US dumping. It was all good because the trade relationship is so deep and broad that dairy is just a speck of dust on the windshield. This is how responsible adults do things. Also these provisions were codified into law.

 

Now for the boring bits. Every free trade agreement of the face of the planet contains a "national security" loop hole. You must keep in mind that free trade agreements are usually ratified by parliament (also in the case of the US). So they are actually laws in their countries. But the national security loophole generally allows the executive to go around them for the obvious reasons for national security. Now it was laughable when it was presented that Canadian steel and aluminium present a threat to the national security of the United States. But imposing steel and aluminium tariffs against Canada for Canadian dairy tariffs under national security is illegal. Unless of course we are egging the US's national security.

 

But of course none of this matters. Furthermore, The Donald of course doesn't give a hoot about dairies. He's just found a little loose piece of string he can pull at to create the discord that he relishes. He probably thinks that he can tweet Canada into submission. But Canada isn't Rosie O'Donell. Also Canada doesn't conduct foreign and economic policy via twitter.

[Cardboard]

"But Canada isn't Rosie O'Donell. Also Canada doesn't conduct foreign and economic policy via twitter."

 

Can't tell you exactly what Canada is but, I am certain of this, we are as close as it gets to beggars relative to the U.S.

 

Regarding foreign and economic policy it is mostly about PeopleKind and apologizing.

 

Trudeau has been unbelievably weak in his handling of TransMountain (which is one element to help fix this dependency on the U.S.). Now he has to do a trade deal with a country (politicians) completely out of his control from a position of weakness. Good luck! He seems to act like the global community will fix it for him because we are polite... LOL!

 

Regarding this supply management stupidity that some farmers and groups impose on our citizens to enrich themselves, it must go! This is not a choice from Canadian people.

 

Moreover, if you believe that this protects the small farmers you are naive or unaware of what is going on. Quotas have become so expensive, that the only rational decision for a small farmer is to sell the farm to a large operator: annual return vs at risk capital (at market) is in the low single digits.

 

Then if the family wants to retain the farm (still stable income and if they like this work), it creates very large internal issues. It is near impossible for a kid to acquire the farm without significant parental help which typically leads to family fights over money: one gets it all.

 

Cardboard

[Spekulatius]

^ You always have a choice, Peter.

[sys]

you poor canadians need some nukes.  then we could be friends.

[Cardboard]

No need for nukes, just balls.

 

You guys don't like Trump? You guys don't like these steel and aluminium tariffs? Would you like regime change?

 

There is an election coming in November and Trump appears quite worried about gasoline prices with a few tweets on that already.

 

-> Cut the oil supply

 

That is it, reduce significantly the amount of oil heading down there, especially heavy. Compensate companies for the few weeks/months required.

 

Just the threat of it will make gasoline prices in the U.S. to explode.

 

We are apparently a national threat to their security so why not? Trump will try to tap into the SPR but, it will be too late and not the right kind of oil.

 

Then Democrats will win the election in both Senate and Congress and impeach Trump.

 

Cardboard

[Jurgis]

you poor canadians need some nukes.  then we could be friends.

 

OT? Seems like a theme. If Ukraine had held onto their (Soviet Union's really) nukes instead of giving them up, they'd still have Crimea. Or we'd have a nuclear wasteland in the middle of Europe.

 

Don't give up nukes. Ever. © Kim Jong Un.

[sys]

No need for nukes, just balls.

 

You guys don't like Trump? You guys don't like these steel and aluminium tariffs? Would you like regime change?

 

There is an election coming in November and Trump appears quite worried about gasoline prices with a few tweets on that already.

 

-> Cut the oil supply

 

That is it, reduce significantly the amount of oil heading down there, especially heavy. Compensate companies for the few weeks/months required.

 

Just the threat of it will make gasoline prices in the U.S. to explode.

 

We are apparently a national threat to their security so why not? Trump will try to tap into the SPR but, it will be too late and not the right kind of oil.

 

Then Democrats will win the election in both Senate and Congress and impeach Trump.

 

Cardboard

 

pretty sure no nukes + oil + speak english + milk tariffs + trudeau's little smirk = casus belli

[rb]

No need for nukes, just balls.

 

You guys don't like Trump? You guys don't like these steel and aluminium tariffs? Would you like regime change?

 

There is an election coming in November and Trump appears quite worried about gasoline prices with a few tweets on that already.

 

-> Cut the oil supply

 

That is it, reduce significantly the amount of oil heading down there, especially heavy. Compensate companies for the few weeks/months required.

 

Just the threat of it will make gasoline prices in the U.S. to explode.

 

We are apparently a national threat to their security so why not? Trump will try to tap into the SPR but, it will be too late and not the right kind of oil.

 

Then Democrats will win the election in both Senate and Congress and impeach Trump.

 

Cardboard

Pretty much agree with Cardboard here.

 

The US seems to not place much value or has forgotten entirely the value of having a stable, developed, and peaceful trading partner and neighbor. There's nothing like a little oil shortage to focus the mind.

 

Though I would say, if the Americans really had balls they would place tariff on oil and energy imports.

[Uccmal]

No need for nukes, just balls.

 

You guys don't like Trump? You guys don't like these steel and aluminium tariffs? Would you like regime change?

 

There is an election coming in November and Trump appears quite worried about gasoline prices with a few tweets on that already.

 

-> Cut the oil supply

 

That is it, reduce significantly the amount of oil heading down there, especially heavy. Compensate companies for the few weeks/months required.

 

Just the threat of it will make gasoline prices in the U.S. to explode.

 

We are apparently a national threat to their security so why not? Trump will try to tap into the SPR but, it will be too late and not the right kind of oil.

 

Then Democrats will win the election in both Senate and Congress and impeach Trump.

 

Cardboard

Pretty much agree with Cardboard here.

 

The US seems to not place much value or has forgotten entirely the value of having a stable, developed, and peaceful trading partner and neighbor. There's nothing like a little oil shortage to focus the mind.

 

Though I would say, if the Americans really had balls they would place tariff on oil and energy imports.

 

 

The thought had crossed my mind.  A gentle reminder of our importance over a few days.... 

But these tariffs are really about Donald keeping his face omnipresent in the news so he can watch it. 

[Cigarbutt]

Trying to understand the intent and the objective.

-Is this part of a strategy to set the tone before dealing with the bigger imbalances in trade?

-Is this just to format the message and please parts of the electoral base?

 

I guess it is expected that the larger partner gets a better deal but if pushed too far, isn't there a risk of a backlash?

Anyways Nafta negotiations will continue in the next few months.

 

Relevant info trying to answer some questions:

https://www.cfr.org/article/o-canada

[rukawa]

This has become a US vs Canada issue so I expect all Canadians to support supply management. But I don't for purely selfish reasons...I am a huge consumer of cheese and diary products.

 

Most people are pretty stupid when it comes to free trade. The ordinary Canadians who go to Tim Hortons hate free trade with a passion and love things like supply management even though they have no clue what it is. But at the same time they hate that American's pay lower prices than Canadians or that Amazon doesn't work that well in Canada. This hypocrisy is repeatedly pointed out on the Canada.com reddit to no avail.

 

The truth is that free trade is one of those things the Elite has always supported and the ordinary guy has been suspicious of.

 

[KinAlberta]

 

 

Family farms one of many concerns in unified fight against Trump's trade threats: Don Pittis

 

 

Abandoned farms are a symbol of the kind of market forces many rural (conservative) Canadians oppose

 

Don Pittis - CBC News

 

7 Hours Ago

 

http://www.cbc.ca/news/business/trump-tariffs-canada-1.4707631

[wabuffo]

If Canada dismantled its supply management system, wouldn't the center of gravity of dairy production move west where dairy farming would be lower cost due to land availability/herd size scale advantages?  I think this as much an East/West issue as a North/South issue.

 

My own 2-cents is that Canada would be world-competitive in dairy production but it would become an BC/Alberta/Sask. industry and not a Quebec/Eastern Ontario industry anymore.  Much like the US where California/Idaho dairy farms are lower cost milk producers vs Wisconsin/upstate NY.

 

Of course, its never gonna happen in our lifetime.

 

wabuffo

[DTEJD1997]

Hey all:

 

I thought NAFTA was supposed to eliminate and vastly lower tariffs on almost all products.

 

If that is the case, why is Canada charging a 250% tariff on dairy products?  I presume they have been doing this for a long time?  What other items have significant tariffs on them?

 

Was the USA charging significant tariffs on any Canadian products before this kerfluffle started?

 

I heard somebody saying the other day that the USA charges a 2.5% tariff on autos entering the USA from Germany.  Conversely Germany charges a 25% tariff on autos coming from the USA?  German cars are typically VERY high quality & in demand.  Why does Germany even need to charge ANY tariff on USA product?  Especially if their items are so much better?

 

Canadian dairy and German autos are but two examples, I wonder if there are others?

[rukawa]

If that is the case, why is Canada charging a 250% tariff on dairy products?  I presume they have been doing this for a long time?  What other items have significant tariffs on them?

 

RB already explained this, there are exemptions in all free trade agreement for all sorts of things. The other bigger one than dairy products is the de minimis threshold. Raising that threshold would have a huge effect because it would basically eliminate the difference between US and Canadian retail prices. That would be a retail killer in Canada but it would massively benefit Canadian consumers. Again I support eliminating this for obviously selfish reasons.

 

I'm kind of curious as to whether any Canadian here would support eliminating the de-minimus threshold and if not why? Because you are definitely hurt badly by this.

 

Minimally we should raise the de-minimus to the point where the government breaks even and the cost of administering the threshold equals the taxes collected. Right now we actually lose money on this.

 

http://www.cbc.ca/news/politics/online-shopping-cross-border-duties-taxes-1.3647965

 

I heard somebody saying the other day that the USA charges a 2.5% tariff on autos entering the USA from Germany.  Conversely Germany charges a 25% tariff on autos coming from the USA?  German cars are typically VERY high quality & in demand.  Why does Germany even need to charge ANY tariff on USA product?  Especially if their items are so much better?

 

I have to confess that I find the viewpoints here very strange. You should be happy if your own country has low tariffs much more than being pissed about another country having high tariffs. If US has lower tariffs on car you should be really happy about that. Its Germans that should be pissed. Trump is hurting his own country but he is really doing the Canadian consumer a big favor.

[EliG]

I heard somebody saying the other day that the USA charges a 2.5% tariff on autos entering the USA from Germany.  Conversely Germany charges a 25% tariff on autos coming from the USA?  German cars are typically VERY high quality & in demand.  Why does Germany even need to charge ANY tariff on USA product?  Especially if their items are so much better?

 

The EU tariff on cars is 10%, not 25%.

 

The U.S. charges a 2.5% tariff on cars and 25% on light trucks, aka "the chicken tax".

 

https://en.wikipedia.org/wiki/Chicken_tax

 

 

Canadian dairy and German autos are but two examples, I wonder if there are others?

 

Sugar supply management in the U.S. is a good example. Why? Because the system is very similar to dairy supply management in Canada.

 

http://www.aei.org/publication/the-farm-bill-and-the-sugar-program-time-for-reform/

 

 

[StubbleJumper]

I heard somebody saying the other day that the USA charges a 2.5% tariff on autos entering the USA from Germany.  Conversely Germany charges a 25% tariff on autos coming from the USA?  German cars are typically VERY high quality & in demand.  Why does Germany even need to charge ANY tariff on USA product?  Especially if their items are so much better?

 

The EU tariff on cars is 10%, not 25%.

 

The U.S. charges a 2.5% tariff on cars and 25% on light trucks, aka "the chicken tax".

 

https://en.wikipedia.org/wiki/Chicken_tax

 

 

Canadian dairy and German autos are but two examples, I wonder if there are others?

 

Sugar supply management in the U.S. is a good example. Why? Because the system is very similar to dairy supply management in Canada.

 

http://www.aei.org/publication/the-farm-bill-and-the-sugar-program-time-for-reform/

 

 

Sure, there are high US tariffs on sugar and peanuts, but that's not the end of US protectionism.  Let us not forget their efforts to put in place Country of Origin Labelling for meat products where every meat item in a grocery store was supposed to be labelled as "Born in country X, raised in country Y and slaughtered in country Z."  That nonsense effectively meant that US packing plants had to segregate Canadian born or Canadian raised animals from their US counterparts.  It was a logistical nightmare and some packing plants just said, "screw it, too complicated."  And that's to say nothing of ground beef or pork which is made from the trimmings of multiple different animals. 

 

Then, there's the Buy American regulations for government procurement which excludes Canadian vendors.

 

Protectionism takes many forms.  The President has focussed on a single class of Canadian products (dairy) as an example of egregious Canadian protectionism, but there are a great many examples of outrageous US protectionism.  If the US seriously wants to drop all of its tariff AND non-tariff barriers, it should come out and say so, loud and proud.  "We will drop all Buy American provisions, all other non-tariff barriers, we will open the TRQs and drop the over quota tariffs on sugar, tobacco and peanuts if the Canucks open the dairy market."  But, Trump knows very well that congress would never accept that arrangement.

 

 

SJ

[rb]

Hey all:

 

I thought NAFTA was supposed to eliminate and vastly lower tariffs on almost all products.

 

If that is the case, why is Canada charging a 250% tariff on dairy products?  I presume they have been doing this for a long time?  What other items have significant tariffs on them?

 

Was the USA charging significant tariffs on any Canadian products before this kerfluffle started?

 

I heard somebody saying the other day that the USA charges a 2.5% tariff on autos entering the USA from Germany.  Conversely Germany charges a 25% tariff on autos coming from the USA?  German cars are typically VERY high quality & in demand.  Why does Germany even need to charge ANY tariff on USA product?  Especially if their items are so much better?

 

Canadian dairy and German autos are but two examples, I wonder if there are others?

As rukawa mentioned I already went into this in a previous post. Trade agreements are peppered with little things like this. But you've also answered your own question:

 

I thought NAFTA was supposed to eliminate and vastly lower tariffs on almost all products.

Yes NAFTA did exactly that! Of course Americans don't care about that. They just want to rouse the hoards against big, bad, scary Canada.

 

Now the US is being hypocritical and disingenuous. Yes, the US also has provisions like this one. For example a 350% tariff for tobacco. But there are others as well. SJ pointed out a few more.

 

On dairy specifically. Dairy is one of those industries prone to overproduce and destroy themselves. Countries deal with this in different ways. Canada uses supply management. The US uses huge subsidies. In fact the whole US dairy industry produces at a loss. The only thing that keeps it going are huge subsidies. Canada does not subsidies producers. This is the very definition of dumping. So under NAFTA the US was given a tariff free quota for dairy exports into Canada and above that they have to pay a steep tariff. This was actually very fair! The opposite of VERY UNFAIR. Ask yourself, would the US accept for Canada to heavily subsidize one of its industries and then dump its output in the US?

 

If Canada would drop its dairy tariffs and we don't move to heavily subsidize dairy then the whole industry would be wiped out because they wouldn't be able to compete with loss making US products. Now as rukawa pointed out, as a selfish and self centered consumer, should I care? If the US taxpayer wants to put money in my pocked why should I stop him? I should just tell the Canadian dairy farmer, sorry, sucks to be you, I'm getting mine. And I may even be inclined to do that if the US would be a reliable, friendly, and fair partner. But as it's proving out, the US is anything but that. The US is an asshole who doesn't mind screwing it's best friend to try to make a buck. So I'll stick with the status quo because I have no guarantees that once the US destroys the Canadian dairy industry it won't move to screw me on the price of dairy.

 

In regards to German cars, as Eli posted the EU tariff is 10% not 25%. Moreover the EU wants to eliminate auto tariffs on trade with the US. Dropping most goods tariffs between the US and the EU was part of the TTIP. Negotiations for TTIP failed because the US wasn't happy to just have a free trade deal. A facset summary for TTIP trade in goods is below:

 

http://trade.ec.europa.eu/doclib/docs/2015/january/tradoc_152998.1%20Trade%20in%20goods%20and%20customs%20tariffs.pdf

 

[rb]

I'm kind of curious as to whether any Canadian here would support eliminating the de-minimus threshold and if not why? Because you are definitely hurt badly by this.

I would not support eliminating the de-minimus threshold. This is why: Let's say that a Canadian retailer imports an US product for sale in Canada. When a customer purchases that product the customer has to pay sales tax. If the customer instead goes and purchases that product across the border (or from a US e-tailer) then the customer would pay no sales tax.

 

This logically makes no sense to me, aside from wiping out the Canadian retail sector. I guess I'm not so selfish to wipe out entire sectors of the economy in order to save a buck. One also has to wonder, if one goes about intentionally and systematically wiping out sectors of one's economy, how many bucks will be left for one to save?

 

However I would wholeheartedly support reforming the current system in order to greatly simplify the collection of applicable taxes. Something as simple as swiping one's credit card at the border gate.

 

EDIT: From personal experience, the Canadian border guards are very liberal in not enforcing the de-minimus. So in reality the threshold is significantly higher than what is codified.

[scorpioncapital]

I believe the problem with TTIP for the US was the same as for NAFTA, refusal to have a sunset clause. There is a great article why a sunset clause is very important because you don't negotiate a deal 'forever'. Things change.

 

https://www.theguardian.com/commentisfree/2018/jun/13/trump-nafta-g7-sunset-clause-trade-agreement

[rb]

I believe the problem with TTIP for the US was the same as for NAFTA, refusal to have a sunset clause. There is a great article why a sunset clause is very important because you don't negotiate a deal 'forever'. Things change.

 

https://www.theguardian.com/commentisfree/2018/jun/13/trump-nafta-g7-sunset-clause-trade-agreement

TTIP died because of Buy American regulations, insistence from the US for provisions that would weaken signatories ability to negotiate drug prices, and the proposed investor-state dispute settlement mechanism.

[Cigarbutt]

I believe the problem with TTIP for the US was the same as for NAFTA, refusal to have a sunset clause. There is a great article why a sunset clause is very important because you don't negotiate a deal 'forever'. Things change.

 

https://www.theguardian.com/commentisfree/2018/jun/13/trump-nafta-g7-sunset-clause-trade-agreement

 

In 1984, President Reagan used his clout to push for the Trade and Tariff Act which gave presidential authority to devise, negotiate and draft trade agreements and then to submit the deal to Congress in order to avoid the inevitable political bickering that would ensue. Using the same principles, given the long term nature of the arrangements and multitude of interest groups, sunset clauses are not included since there are embedded mechanisms to resolve conflicts.

 

I think it is fair to say that the present mandate allows to reconsider this conclusion.

 

Still, I want to be convinced how the deal was unfair and how it could be improved.

 

 

 

[Cardboard]

"On dairy specifically. Dairy is one of those industries prone to overproduce and destroy themselves. Countries deal with this in different ways. Canada uses supply management. The US uses huge subsidies. In fact the whole US dairy industry produces at a loss. The only thing that keeps it going are huge subsidies. Canada does not subsidies producers."

 

This is totally false and propaganda from dairy farmers. Same from chicken farmers or the meat that anyone in poor countries produce in their own backyards! Cheapest meat on Earth and a chicken breast sells for the same price as steak in many grocery stores in Canada!

 

Canadians do provide an enormous subsidy to farmers by paying double the price of the normal price for the product at the grocery store. That is the cost of supply management which gives guaranteed pricing to producers no matter what. No cyclicality. Wonderful cartel.

 

If you guys want to block American dairy from coming in, fine. However, supply management must go.

 

Cardboard