The case for surrender

Suddenly, everybody’s gone all macho. It’s time for Canadians to play “hardball,” the leader of the NDP says, between spits of tobacco. While working the heavy bag, a union official demands the federal government “show some guts.” A trade lawyer, guns drawn, advises we aim for our adversaries’ “soft underbelly,” while a particularly butch newspaper columnist confesses a desire to hit them over the head with a two-by-four.

Not since Bruce Cockburn bragged of what he’d do with a rocket-launcher has so much bloodthirsty talk issued from such unlikely sources. The object of these Jacobean fantasies? Why, none other than the Americans, their ambassador’s pleas for dialogue falling unheard amid the cries of revenge and clamour for war.

Trade war, that is. Ever since the United State declared earlier this month that it would not be bound by the findings of a NAFTA panel in the long-running softwood lumber dispute, commentators on this side of the border have pushed the indignation meter several notches past its usual setting. The Americans’ position on lumber imports, as on Iraq, land mines and satellite radio, was held to reflect deep-seated failings in the national character.

When that proved unsatisfying, the calls began for retaliation. Some, including the premier of British Columbia, advocate restrictions on exports of Canadian oil and gas to the US market. Others demand the imposition of tariffs on imports of selected American products, a suggestion the federal government yesterday said it was considering. Lloyd Axworthy went so far as to urge that we pull out of NAFTA. Oh what a lovely war!

Speaking as a member of the pantywaist community, I can only pray that we put aside all this militaristic talk and deal with the root causes of the conflict. To be sure, in strictly legal terms, the United States is in the wrong: that at least has been the finding of a series of tribunals under both NAFTA and the World Trade Organization, who have held that provincial fees for cutting timber on Crown land do not count as a subsidy under international trade law.

On the other hand, international trade law is an ass. The same international trade law, remember, sanctions such absurdities as anti-dumping and countervailing duties, the very weapon the Americans have used to such effect against us. Competitive strategies that are regarded as unobjectionable when practiced at home -- selling for less in one market than another, or even selling below cost -- mysteriously become crimes the instant a national border has been crossed.

To protect themselves from “unfairly” traded Canadian lumber, the American authorities have penalized their own citizens far more than they have ours -- the disputed 20%-plus tariffs are estimated to add roughly $1,000 to the cost of every new home built in America. But the same logic applies in reverse. Were we to match their refusal to lift their tariff with new tariffs of our own, the first victims would be Canadian consumers.

Should that concern us? “Don’t worry about consumers,” Jeffrey Simpson advises: it would simply be a matter of switching from suddenly expensive American wines to their domestic or foreign competitors. But it’s just possible that competing producers would take the opportunity to raise their own prices. Moreover, it would not only be the consumers of these products who would pay, but workers and firms across the economy, since the tax on American imports would leave consumers that much less left over to purchase other things. And of course, trade wars, like other wars, have a habit of lasting longer, and spreading further, than the belligerents intended.

What to do? Let me suggest a novel strategy, as daring as it is ingenious: unconditional surrender. However much we might beat our chests about it, if the Americans are really as determined to have their way on this as they seem, there’s nothing we can do about it. Galling as it may be, sometimes giving in is the best option. If it helps, we might console ourselves with the thought that, in fact if not in law, the Americans are in the right.

Everyone who has ever looked into it will tell you: the provinces have been selling timber rights at less than their full economic cost. It may not meet the legal definition of an export subsidy, but it’s a subsidy all the same. Indeed, it doesn’t get much ink, but we’ve tacitly admitted as much: the latest Canadian proposal to resolve the dispute is for Canada to replace the US tariff with an export tax, to be drawn down as provinces switch over to an auction regime -- the sort of market-oriented system the Americans have long demanded. Talk of retaliatory tariffs, one suspects, is aimed less at the Americans than at the domestic political audience -- a brave front, before the inevitable climbdown.

Is this humiliating? Possibly. It also happens to be the right thing to do. Subsidized logging is bad for the economy -- the same lands might have more remunerative uses, for example as tourist destinations -- and even worse for the environment. If it takes the Americans to save us from ourselves, well, it’s a crazy old world, ain’t it?