Trudeau Orders Ministers to Take Harder Line on U.S. Trade

The marching orders were contained in mandate letters to cabinet ministers released Thursday afternoon, nearly three months after Trudeau was re-elected to a third term in September.

The letters to Canada’s finance, trade and procurement ministers all included language that could be seen as a veiled threat to counter Buy American policies put forward by President Joe Biden’s administration — a notable change of tone from a prime minister who has been a strong proponent of open trade.

Finance Minister Chrystia Freeland’s mandate letter sets out a reciprocal procurement policy that “will ensure goods and services are procured from countries that grant Canadian businesses a similar level of market access.”

Trade Minister Mary Ng’s mandate letter calls on her to “engage the United States to address bilateral trade issues and protectionist measures.”

Procurement Minister Filomena Tassi, meanwhile, was instructed to “continue the modernization of procurement practices so they support Canada’s economic policy goals, including balanced procurement opportunities with Canada’s trading partners.”

Increased Friction

Over the past few weeks, Canada and the U.S. have clashed over Biden’s push to grant addition tax rebates for electric vehicles built by unionized American workers and proposed Canadian legislation to levy a new tax on U.S.-based digital giants. Increased U.S. duties on softwood lumber and a halt to shipments of potatoes from Atlantic Canada are also causing friction.

Beyond Canada’s primary trading relationship, Ng’s letter and that of Foreign Minister Melanie Joly include instructions to deepen ties with the Indo-Pacific region. Neither mentions China, the country’s second-largest commercial partner.

Trevor Kennedy, trade policy lead at the Business Council of Canada, said it’s clear who Trudeau is targeting with the reciprocal trade policy language.

“Clearly this is about the United States,” he said in a phone interview. “I just wonder what exactly that would look like,” he said, noting Canada is subject to many bilateral and multilateral agreements governing its procurement practices.

Kennedy is concerned about the heated trade rhetoric between Canada and the U.S. on numerous issues, saying it’s in part due to a U.S. administration and Congress that is currently “quite inward looking.”

“It’s a regrettable situation,” he said. “A lot of this is linking to Congress, and the complicated politics in the United States and the difficulty of raising Canada’s profile.”

Freeland’s mandate letter repeated the Trudeau government’s promise to implement a contentious digital services tax if a global agreement on tax reform related to the world’s largest tech corporations isn’t enacted by 2024. Legislation setting the stage for that drew a rebuke from the Office of the U.S. Trade Representative on Wednesday.

The finance minister’s letter contained a lengthy list of other tasks, including to “champion the adoption of a global minimum standard on carbon pricing,” and to “consider applying Border Carbon Adjustments to emissions-intensive imports, such as steel, cement and aluminum.”

-Bloomberg