Canada has the right to impose tariffs on U.S. imports in the future to ward off the threat of the United States penalising Canadian manufacturers for alleged unfair subsidies, the World Trade Organization said on Wednesday.
Canada brought a case to the WTO in 2016 over U.S. anti-subsidy duties on Canadian “supercalendered” paper, which is used in glossy magazines and catalogues. A WTO panel in 2018 and a WTO appeals body in 2020 found these duties breached global trading rules, prompting Canada to request the right to impose tariffs on a specific amount of U.S. goods.
The WTO typically allows successful complainants to impose tariffs on a specific amount of imports, but in this case awarded Ottawa a formula to calculate the volume of U.S. imports to hit should Washington use similar methods to determine whether U.S. producers are facing unfair Canadian competition.
At issue is a U.S. rule that allows the Commerce Department to select only the facts that are adverse to the other party, in this case Canada, if it is not satisfied that the other party has complied with a request for information to the best of its ability.
Canada said this was an ongoing practice in the United States, citing nine U.S. cases of duties applied in this way, including to Chinese solar cell, tyre and PET resin makers, as well as to Indian stainless steel pipe producers.
The U.S. Trade Representative’s office said the decision upheld the U.S. duty calculation model. But the USTR added that it was unhappy with the WTO’s decision since U.S. duties on the Canadian paper were removed years ago and Canada was not suffering any economic harm.
“Canada’s pursuit of this arbitration under these circumstances is a further demonstration of a broken system that emboldens (WTO) members to litigate for the sake of litigation instead of helping Members resolve disputes,” USTR said. It added that this reinforces the Biden administration’s calls for WTO reform.
The U.S. subsidy investigation into paper had resulted in import duties for Canadian firms Port Hawkesbury Paper LP, Resolute FP, Irving Paper Ltd and Catalyst Paper Corp.
U.S. authorities removed the duties in 2018, and payments made by importers since August 2015 were returned with interest.