A side letter
aiming to prevent the future use of such Section 232 national security tariffs has already been released, along with the text of the USMCA, which will replace the 1994 North American Free Trade Agreement (Nafta), Simard told Fastmarkets MB.
He also stressed that the US and Canadian negotiators have formulated a model (in another side letter
) that aims to prevent future disputes over Canadian exports of automobiles to the US, which involves effective caps on trade volumes. Export volumes up to the cap levels would not be subject to Section 232 tariffs under this agreement.
While Simard would not rule out Canadian support for such a model to resolve the aluminium tariff dispute, he called for negotiators to consider a range of trade levers, including rules of origin, when devising an aluminium-specific agreement that will stick.
The key is to allow for increased Canadian exports in the future. “There are so many references to carve a realistic approach for a very singular industry like aluminium. The worst thing would to be to cut and paste what you might do for steel,” he said.
This is because the Canadian aluminium industry’s output for US aerospace, automobile and military buyers is often specialist and - because of intellectual property arrangements - in some cases is not available anywhere else in the world. A deal would have to factor in “all our historic military relationships as well as the integrated characteristics of our industries,” Simard said.
In terms of the general side letter on Section 232 tariffs, it commits the US to holding off on imposing such tariffs for 60 days after a decision is made to erect such duties.
During that time, “the United States and Canada shall seek to negotiate an appropriate outcome based on industry dynamics and historical trading patterns,” the note states. If the US then goes ahead and imposes such duties anyway Canada can impose retaliatory tariffs (as it has done in the ongoing dispute over aluminium and steel tariffs) and also challenge such duties at the World Trade Organization, it added.