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Steel, Aluminum, and the WTO’s Pandora’s Box – Part II

Posted by on Mar 12, 2018

On Thursday March 8th, President Trump followed through on his threat to impose tariffs on all of steel (25%) and aluminum (10%) on a global basis. The Proclamations on the two products are notable in that it aims to link the tariffs to the national security of the United States.  “The persistent threat of further closures of domestic steel production facilities and the “shrinking [of our] ability to meet national security production requirements in a national emergency.” This same rationale is used to justify exempting both Canada and Mexico.  As the Proclamation on steel sets out: Given our shared commitment to supporting each other in addressing national security concerns, our shared commitment to addressing global excess capacity for producing steel, the physical proximity of our respective industrial bases, the robust economic integration between our countries, the export of steel articles produced in the United States to Canada and Mexico, and the close relation of the economic welfare of the United States to our national security …  the necessary and appropriate means to address the threat to the national security posed by imports of steel articles from Canada and Mexico is to continue ongoing discussions with these countries and to exempt steel articles imports from these countries from the tariff, at least at this time.  I expect that Canada and Mexico will take action to prevent transshipment of steel articles through Canada and Mexico to the United States. However the President added an important caveat and linked the exemption to the ongoing NAFTA negotiation: Without this tariff and satisfactory outcomes in ongoing negotiations with Canada and Mexico, the  [aluminum and steel] industry will continue to decline, leaving the United States at risk of becoming reliant on foreign producers of steel to meet our national security needs — a situation that is fundamentally inconsistent with the safety and security of the American people …  Note that “steel articles” are defined at the Harmonized Tariff Schedule (HTS) 6‑digit level as:  7206.10 through 7216.50, 7216.99 through 7301.10, 7302.10, 7302.40 through 7302.90, and 7304.10 through 7306.90, including any subsequent revisions to these HTS classifications. “Aluminum articles” are defined in the Harmonized Tariff Schedule (HTS) as:...

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Steel, Aluminum, and the WTO’s Pandora’s Box of National Security – Part I

Posted by on Mar 9, 2018

President Trump has followed through on his promise to impose significant tariffs on imports of steel (25%) and aluminum (10%).  Canada and Mexico were exempted in the context of the ongoing tri-lateral negotiations.  As the President put it; “… we’re going to hold off to see “see whether or not we’re making a deal on NAFTA.”  The threat of this action and then announcement that the duties will go into force within the next fifteen days has led to swift responses from U.S. trade partners and raises the spectre of a global trade war.  The president appears to welcome a trade war as “good (and) easy to win.” The U.S. Administration is proceeding pursuant to Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. §1862) which authorizes the U.S. Secretary of Commerce to conduct comprehensive investigations to determine the effects of imports of any article on the national security of the United States.  Although this issue appears to be new, the Department of Commerce initiated the Section 232 investigation in April 2017 in response to an order from the President. It has now completed its work It released its findings last week. Some may find that Section 232 is part of the Trade Expansion of Act of 1962 to somewhat ironic in that  that legislation was passed by Congress in order to give the White House the to negotiate the deep tariff reductions that lead to the successful conclusion of the Kennedy Round of GATT.  Ironic in that some commentators fear that we may now be moving back to the time of high tariffs and other trade barriers which helped contribute to the Great Depression of the 1930’s.  Section 232 was written in the dark days of the Cold War and was included in the Act in order to give the President the ability to protect the national security of United States by reviewing the effects of imports of any articles in that context.  If the Secretary of Commerce finds that imports threatens to impair U.S. national security, the President has broad power to impose trade remedies such as tariffs and quotas.  It was inspired by and...

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GATT Article XXI’s National Security Exception – The Ultimate Trade Policy Conundrum

Posted by on Mar 9, 2018

[Originally published 4/9/ 2015. Updated: 3/9/2018.] Is it a necessary “safety valve” or the “ultimate threat” that could reverse and unwind the sometimes slow, but relatively constant progress in global trade liberalization?   When old friend and former Foreign Service colleague, Michael Virr, invited Catherine Walsh and me to discuss trade law with his Algonquin College (Ottawa) class, the topic was the GATT national security exception, which according to some, represents “the broadest and most controversial” of the GATT exceptions. The student’s played an active part in our discussion and both the students and their professor are to be congratulated for their passionate interest in trade law and their ability to engage in active, value-added dialogue on one of the discipline’s more complex subjects. The modern national security exception was introduced as a part of the original 1947 General Agreement on Tariffs and Trade (GATT) and has since remained in place in WTO disciplines and as part of most other major Free Trade Agreements. GATT 1994 Article XXI reads: Nothing in this Agreement shall be construed to require any contracting party to furnish any information the disclosure of which it considers contrary to its essential security interests; or to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests relating to fissionable materials or the materials from which they are derived; relating to the traffic in arms, ammunition and implements of war and to such traffic in other goods and materials as is carried on directly or indirectly for the purpose of supplying a military establishment; taken in time of war or other emergency in international relations; or to prevent any contracting party from taking any action in pursuance of its obligations under the United Nations Charter for the maintenance of international peace and security. The GATT 1994 and many other WTO agreements include general and specific exceptions as well as carve-outs and exemptions from their mandated obligations.  A closer review of GATT Article XXI in comparison to other trade law exceptions reveals that Article XXI is distinct in that it is “self-declaratory.”  Unlike the case with other exceptions commonly...

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Canada-EU – Old Ties, New Trade Partners

Posted by on Feb 19, 2018

The following column was co-authored by Michael Woods and Gordon LaFortune and published today on Slaw.ca. For Canadian business, the threat of U.S. withdrawal from NAFTA is the biggest and most immediate challenge.  Without progress that satisfies the U.S. Administration, the current NAFTA negotiations may end with the U.S. issuing a Notice of Withdrawal that starts the six month clock on formal U.S. withdrawal from the Agreement and the market uncertainty that will likely follow. Canada can and will survive the U.S. withdrawal from NAFTA.   Canada and the U.S. have deep economic ties and market integration that will result in trade between the countries continuing, but on different terms.  To address the problem of dependence on the U.S. Market successive Canadian governments have looked to trade diversification, particularly since the economic downturn of 2008 and the sharp rise of U.S. protectionist measures like the “Buy America”.  The result of these efforts have been substantive trade initiatives in Europe and Asia-Pacific, including the 2017 Comprehensive Economic and Trade Agreement agreed between Canada and the European Union and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership which was just agreed between the remaining eleven states. However, Canadian government efforts to diversify trade through trade agreements cannot succeed on their own.  To truly diversify trade, Canadian business has to take steps to sell to customers in these new markets.  In light of the possible U.S. withdrawal from NAFTA and the uncertainty that will create, Canadian business should take the “America First” challenge as an invitation to lessen our dependence on the U.S. market and find new trading partners in Europe and Asia. NAFTA  The underlying impetus for the U.S. threat to NAFTA is a growing economic nationalism that has fueled an unapologetic ‘‘America First’’ platform.  At this stage, it is already creating uncertainty about NAFTA and the integrated market that the Canada economy relies upon.  As the United States shifts it focus to creating more jobs at the cost of championing economic liberalization and free trade many more sectors of the Canadian economy will be attacked  as fiercely as aircraft and lumber are now. The United States has failed to meet its...

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Wood, LaFortune LLP in Texas – Houston Strong!

Posted by on Oct 13, 2017

Last month Woods, LaFortune LLP was talking international trade in Texas as Gordon LaFortune and Jean-Marc Clément attended the Advanced Customs Compliance Conference that took place in Houston September 20-22. Jean-Marc, the firm’s Montreal- based counsel, was a speaker and he addressed the audience of over 300 trade compliance professionals on the Canadian perspective on the on-going NAFTA negotiations.  Joining him on the panel designed to give the audience views on NAFTA form Canada and Mexico was trade lawyer Brenda Cordova from the Mexico City based firm of Braumiller Law Group.  DeLeon Trade LLC, a trade compliance firm also based in Houston, organized the event which has become an important annual event for international trade experts.  Copies of our conference presentation are available upon...

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