Canada Warns of Coming Trade War

U.S. exporters are currently trying to figure out how to continue to sell products to Mexico — our third-largest trading partner — notwithstanding tariffs imposed against them because the U.S. has violated NAFTA. It appears that a whole new range of companies may soon face the same problem, since the U.S. has also violated our NAFTA obligations toward our largest trading partner — Canada:

International Trade Minister Stockwell Day lashed out Friday at growing American protectionism, warning that if trade barriers continue multiplying, retaliatory action is inevitable.

Day, in Calgary to speak to the city’s chamber of commerce, said Ottawa is aggressively lobbying political, diplomatic and business leaders in the United States in a bid to quell `Buy American’ fervour.

He encouraged Calgary’s business community and provinces to join the federal effort.

“If this continues – the Buy America provisions – people everywhere are going to get hurt,” Day told reporters after his speech. “Workers will be hurt in Canada and the United States, and we want to see this turn around.”

Day said the Harper government would like to see U.S. President Barack Obama sign an executive order overruling a decision by Congress to expand Buy American rules that bar Canadian companies from bidding on $787 billion US worth of economic-stimulus projects.

The fallout is already being felt in Canada, as some municipal and state governments are prohibiting Canadian firms from bidding on lucrative infrastructure contracts.

In response, one municipality west of Toronto has banned the purchase of goods from any country that bars Canadians products. A similar resolution will be debated at the Federation of Canadian Municipalities’ annual conference next month.

While warning retaliatory action is brewing, the international trade minister cautioned against adopting protectionism in Canada. He said the country’s prosperity depends on trade.

Obama and the Democrats in Congress have already started a few low-level trade wars, and it seems things will get worse before they get better. About 30 nations have criticized the US for recent moves to protect the domestic dairy market; that dispute may lead to retaliation. Congress is considering action against China for supposedly manipulating the value of its currency – a suicidal threat considering how the Obama administration will depend on China to purchase US securities. There seems to be little interest in resolving existing disputes with Canada and Mexico. If the US does not reverse course, Obama will have frittered away all international goodwill through a trade policy that costs US jobs.