Playing the Indian Card

Thursday, June 21, 2018

The Growing Security Threat of Canada

Made in China?

What is the deal on the US tariffs on Canadian steel and aluminum? Since when is Canada a security concern for the Americans?

Wilbur Ross, US Commerce Secretary, recently explained to a US Senate hearing.

To begin with, let us concede the strategic importance of maintaining a healthy domestic steel and aluminum industry for the US. In case of war, if any country does not have a secure domestic supply of these materials, they will soon be unable to manufacture armaments. American strategy is always to count on a long war, and to win through America’s vast production capacity. A lack of raw materials, therefore, makes the US a sitting Norwegian duck.

Now, granted, relying on Canadian sources for aluminum and steel is still secure. Nobody other than the US is likely to be able to invade Canada, Canada is unlikely ever to be on the other side in a war, if they were they could be conquered by the US in a week or two, and the roads and rails from Canada to the US are secure.

The problem is, the US cannot be certain Canadian steel is Canadian steel. Canada is letting Chinese steel in at low prices. This can then be transshipped to the US as Canadian steel, bypassing any tariff against China. At the same time, of course, by allowing this, Canada is letting its own steel and aluminum industries decline, so that they will not be available to the US in time of crisis.

Accordingly, if the security concerns are valid, which they seem to be, the US had no choice but to include Canada in the tariffs.

Ross further claimed that the Canadian government was apprised of this issue, and given the opportunity to impose their own harmonized tariffs on Chinese steel, over a year ago. That would have let Canadian aluminum and steel preserve its US market. The Canadian government had their choice, and they chose trade war with the US, presumably for the sake of preserving their trade relations with China. Understandable, perhaps, but you can’t blame the Americans.

One might imagine an alternative system which could clearly and indelibly identify Chinese steel as Chinese steel on entering Canada, so that it could not be re-shipped without hitting the US tariff protection. But it is hard to imagine how that could be done with a material. It would almost need to be coded into every molecule.

So there is no solution but this: either Canada enters a trade war with the US with devastating effects, in particular for Canada, or Canada makes the concession here. And the Canadian government and media stops playing political games.

No comments: