As the United States-Mexico-Canada Agreement talks are coming to an end there is pressure from Mexico and Canada for the US to restore the tariff exemptions on steel that the US originally revoked to put pressure on Mexico and Canada to come to an agreement. The US is worried however that if they do restore the exemptions this will allow China to hurt the US steel industry and is instead proposing a quota system for steel with Mexico and Canada. Neither country is happy with this proposal and do not understand why the exemptions can not go back into place now that they are tentatively scheduled to sign the USMCA in the end of November. Some people support the quota system proposal because they can be as effective as tariffs but unlike Tariffs the exporting country would get the money instead of the US getting the tariff money. Others however believe a quota system may create a political problem for the exporting country as the government picks and chooses what companies get allocated part of the quota amount. Though there may be another solution according to “Hugo Perezcano Diaz, deputy director of the international law research program at Canada's Centre for International Governance Innovation and a former NAFTA negotiator.” Diaz believes that talks of a quota system could lead the United States, Mexico, and Canada to adopt a closed North American steel market. Canada already has a similar safeguard in place that protects against imports of steel products from the rest of the world. Diaz thinks if Mexico were to implement a similar system, closing off the steel market in North America the U.S. may feel secure enough to eliminate the steel tariffs.
I think that the US is smart not to implement the exemptions on the tariffs just yet. They have not officially come to an agreement with Mexico and Canada so I think the exemptions would be premature. I however don’t think that the quota system proposal will go through with Canada and Mexico and also may cause a rif in the relationship between the countries just as they are trying to come to an agreement. I think Diaz’s solution is very interesting and may be a smart move for the three countries while it will upset many other countries such as China, who the US is currently involved in trade talks with. Realistically, I do not know if Diaz’s proposal would ever be able to be implemented but I think it would be a viable solution for the United States, Mexico, and Canada.
https://www.washingtonexaminer.com/policy/economy/mexico-canada-play-hardball-on-trade-deal-over-steel-tariffs
I think that the U.S. is asserting dominance by restructuring our trading agreements, however, offering exemptions would show bias and discrimination on the part of U.S. negotiators. The initial dumping of steel and aluminum by Chinese corporations could be quelled by tariffs and quotas, however, the situation becomes or complicated with multiple nations being targeted for the actions perpetrated by a single nation, and allowing only a fraction of the targeted nations to rebalance their terms would be an act of discrimination. Diaz's idea strays from the current WTO philosophy of turning quotas (which can be used to discriminate) into tariffs, which are also reduced by WTO activity. I believe the U.S. should not offer exemptions unless they are reached by a bilateral consensus, for quotas and priority tariff reductions would discriminate against other nations. I also believe that Canada and Mexico renegotiating their positions will slightly degrade our terms of trade while improving theirs, however, re-balancing the TOTs can be beneficial for all nations.
ReplyDeleteI think that America is right to reestablish all of their foreign terms of trade, but like Gradin says, it would be very unfair on US to offer bias to some countries to keep their relations good. Countries which are not on the receiving end of the bias will take it very negatively which could impact the future terms of trade. I don't think Diaz's idea will ever stand because of the negative effects that it will have on the outliers such as China.
ReplyDeleteI agree with Gradin that the U.S. should try and restructure the foreign terms of trade but shouldn't go to the extreme of showing dominance. If the U.S. does that, then no one will want to trade with them. Also with the bias situation that Gradin and Lewis brought up, there should be no bias so every country that wants to trade steel can do so without disrupting terms of trade that they have currently and the potential future terms of trade..
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