USMCA Ratification Seen Likely Not Tied to Section 232 Tariffs' End, but Implementation May Be

Hillman was part of a panel of two Canadians and two American trade lawyers speaking Nov. 14 at the annual experts meeting of the Canada-United States Law Institute. Larry Herman, an international trade lawyer at Herman & Associates in Toronto, said while there's movement on the Section 232 tariffs, he thinks the tariffs won't be lifted before the three leaders sign the new NAFTA in Argentina.

"There is no doubt in my mind that this agreement will be signed by the prime minister on the 30th of November," he said. "It may not be signed in any ceremonial gathering of the three." He noted, however, that signing doesn't put the treaty into force in Canada, just as Congress must approve an implementation bill, too. He said even once the Canadian parliament passes its implementing bill, "the date it enters into force will depend on a Cabinet decision ... that will depend on what happens here in Washington. In other words, Canada will not fully implement the agreement unless and until the tariff surcharge issue is resolved." He also said that the Canadian parliament won't vote until "there's a clear indication that this deal will get through the U.S. Congress."

Dick Cunningham, a partner at Steptoe & Johnson, which hosted the panel, said he's skeptical that the 232 tariffs on steel and aluminum will be lifted on Mexico and Canada. "It's become apparent that a 232 measure, while it is done initially for a stated reason, it becomes for the administration a multifaceted leverage tool to get that country to do something that it wants it to do. The question I have in my mind is: why would [U.S. Trade Representative] Bob Lighthizer agree to abandon the 232 ... without getting something in return? And I don't see that quid pro quo happening right now."

Hillman disagreed with Cunningham, who suggested that foreign steel producers aren't that bothered by the tariff, because they just charge higher prices in the U.S. market. She said every week, U.S. steel exporters visit her to ask about how the problem can be resolved, because of Canadian retaliatory tariffs on steel and steel products. She said some U.S. steel is taxed more than once, as it begins in the U.S., crosses the border to Canada for processing, and then comes back into the U.S. and is taxed again. She said pressure from commercial interests will eventually convince the U.S. to change tacks.

She emphasized that Canadian steel producers are hurt by Chinese overproduction, too, and that Canada has many antidumping and countervailing duties on Chinese steel. She said there isn't a problem with transshipment through Canada, but Canada has bolstered its oversight. Lighthizer has complained that transshipment isn't the only threat from Canada, that when Canadian producers use Chinese steel and do further processing, that damages U.S. steelmakers. Hillman said where there are not AD cases, "our perspective is that these are priced appropriately and our industry is using inputs from all around the world [at market prices]. That being said, what I would say is that there is no way in which we are not willing to in a fact-based manner look at challenges with respect to overcapacity and the impacts of that on our industry in North America."

While most of the conversation was about the new NAFTA, Cunningham addressed the U.S.-China trade war as well. He said the primary goal of the tariffs on Chinese goods is to get China to back off from Made in China 2025. "I think there's almost zero chance that this will happen," he said. "At most China will make a couple of changes around the edges." He said what if you levy tariffs on all Chinese imports, prohibit technology exports to certain Chinese tech firms, and limit investment in U.S. firms. "Suppose none of that works. Where does that leave the U.S.?" He said that drives the U.S. to maximize the NAFTA region for competitiveness. But, he said, "if it doesn't go that way, then it's a total devastating trade war expanding continuously."