There is a trade war brewing with the U.S., and for Canada to succeed in this epic struggle, we need more inspiration and less retaliation.
George W. Bush's recent talk of freer trade and open borders was sweet to hear, he being the most powerful man in the world, after all. But Bush Jr. is not all-powerful, and he struggles with some mighty protectionist forces at home.
The Byrd Amendment (BA for short), which funnels tariffs directly from foreign producers into the pockets of their direct competitors in the United States, is the most salient example of how these forces have sway, and softwood lumber provides the most cogent application of their nefariousness. But there are many other examples in which the Americans spurn arbitration, negotiation, precedent or even judicial rulings on trade matters. They plough ahead with Durham wheat tariffs, hog duties and more as if they have not signed agreements with us on these issues.
The classical response in such trade wars is the tit-for-tat, eye-for-an-eye, retaliatory stab for which we are seeing the federal Liberals prepare us. Last month, armed with a WTO ruling that said it would be reasonable for Canada to undertake a measured retaliation, the feds convened hearings, asking Canadians to reflect on 150 potentially taxable products, including peanut butter (my beloved PB), that might best hurt the states that are now benefiting from the softwood duties.
NDP Leader Jack Layton (also a peanut butter fan) piped in that we should tie our oil exports, where Americans are desperate, to issues such as softwood and beef, where Americans are obstinate. But that's like threatening your neighbour with a shotgun because his dogs are pooping in your yard. It's overblown and old-fashioned (not to mention dangerous – lest we forget that Japan attacked the U.S. at Pearl Harbor over oil). Besides, oil is the goose that's laying Canada's golden egg right now.
When I speak of inspiration instead of retaliation, I mean that we can throw the Americans a healthy dose of their own logic, not in anger or aggression, but simply using common sense.
Let's take softwood, a huge industry in Canada, and apply the logic to a huge industry in the U.S. – the film business. The U.S. government has said that because Canadian softwood had captured 30 per cent of the American market, it was hurting producers there.
Well, the United States, according to Statistics Canada, had 97 per cent of the Canadian film marketplace in 2003. So harm in that arena is proved according to their own measuring stick.
Next, we have the dumping issue. Protectionist Americans contend that we overproduce wood and therefore are dumping our excess on their market. I would say the case is much easier to make again in regards to their films. With 300 million people in the U.S., a film producer there can recover the costs of even the largest-budget films domestically. This makes the international market pure gravy. It's much harder to make the case against softwood on that basis. It costs just as much to produce a board going to the U.S. as it does in Canada, maybe more. The same cannot be said of films.
Then there is the issue of subsidies. Americans argue that our Crown land system and stumpage fees are subsidies. This may or may not be true, depending on your definition of subsidies. But it's much harder to argue that the Americans are not subsidizing films. California, for example, penalizes through taxation companies that film outside the U.S., and there are dozens of incentive programs attracting producers to shoot in various states. Those are as blatant subsidies as you will ever find.
To a slightly lesser degree, I could apply this same logic to entertainment in general – TV, books and music – produced south of the border. Maybe even video games. All these giant exports to Canada could qualify for a 27-per-cent-plus tariff, by American, not our, standards. We could essentially flash them the Byrd by sending that tariff income to Canadian producers who shoot here (record here, write here), based on volume of sales in Canada.
Canadians may rightly dislike a plan that would increase the cost of their beloved American films and music. I cannot imagine you reading something favourable about this idea in the National Post or Globe and Mail, especially since their parent companies are such big purchasers of, and profit so greatly from, U.S. TV shows.
But if inefficient, outmoded American softwood lumber producers get the billions of dollars being collected from Canadians, then it should go the other way too, based on volume. Canada's own Lion's Gate Films and Alliance Atlantis would likely reap billions, and who knows what wondrous things they might do with it, separated as they could be from ridiculous Canadian-content requirements. Canada would get such a windfall (i.e. American stars, scripts), we could stop all current subsidies and incentives and CRTC regulations.
Joe Movie Watcher might be peeved by having to pay an extra dollar at the video store, but that dollar would stay in Canada. We could start a worldwide Byrd trend, where inefficient local industries are paid to stay in business.
And if you think that logic sucks, then you should think that the softwood duties suck for Americans, and we should stay out of the tits-for-tats.
But if you think the Byrd Amendment is flying for Americans, it will fly here.
(Ian van de Burgt can be reached at ian@businessedge.ca)
