In the decades-long era of free trade between Canada, the United States and Mexico, disputes were settled in civil and staid legal forums. William Pellerin knows such venues well, from six years at Global Affairs Canada, where he worked on international trade disputes. He is a partner at McMillan LLP in Ottawa and co-lead of the firm’s international trade team.
We have a free-trade deal with the United States. How is this legally happening?
It’s not – is the short answer. The imposition of these tariffs is a clear violation of the CUSMA [Canada-United States-Mexico] trade agreement that President Trump himself very proudly signed. The CUSMA provides that you cannot simply increase your tariffs unilaterally.
What does the CUSMA dispute process look like?
It arises under Chapter 31, the state-to-state dispute mechanism. A panel would be composed and Canada would very likely win. There might be some defences that the United States could use, including various national security defences. Without giving a legal opinion, I think the U.S. would have a very low chance of success, given the lack of a nexus between the imposition of a tariff and fentanyl crossing the border.
Would winning make a difference?
If the U.S. was so willing to depart from the plain text of the agreement, it would come as a surprise if they all of a sudden decided to comply with the ruling of a panel that found them to be acting contrary to the agreement.
What about fighting at the World Trade Organization?
The only point would be to make a stand in favour of the rule of law. It’s unlikely to yield anything concrete. The likelihood that even if we did win that the U.S. would abide by a WTO panel ruling is exceedingly low.
If you were the chief adviser to the Prime Minister, what would you recommend?
Despite not having easy outcomes, Canada can showcase that it is a country of laws and respect for those laws. I would still bring the WTO challenge or the CUSMA challenge – one of the two, because you have to select your forum.
Which makes more sense?
I’d be tempted to go the CUSMA route. There’s an optics point there to say I’m sticking with the trade agreement. There’s power there. But there’s something to be said about showcasing this to the global community through a WTO proceeding.
Are there any other options?
The most important piece is exploring challenges under U.S. domestic law and challenging the constitutionality of the IEEPA, the International Emergency Economic Powers Act. It’s the statute President Trump has used to impose these tariffs. The U.S. used it to deal with Iran in 1979. It’s particularly insulting that this is used against Canada. It was never intended to use it for tariffs against a friendly nation.
How could this avenue play out?
There’s a real question for U.S. lawyers whether this can be halted before the U.S. courts. I know that [president of the Automotive Parts Manufacturers Association of Canada] Flavio Volpe was discussing this and looking to join whatever U.S. company that would first challenge this. There would absolutely be room for the Government of Canada in such a challenge as an amicus [intervenor], to support that litigation.
Back on the CUSMA, how long would the dispute take?
The panel is normally five members. There is a roster of panelists, trade experts, including Mexican panelists or panelists from other countries. They normally move quite quickly. This process could be done within a year, assuming the United States co-operates with respect to panel selection. They could try to stall that process.
Who gets the majority on the panel?
You pick from the roster of the other party. And it’s a coin toss as to who would have a majority.
Literally a coin toss?
Literally a coin toss. It happens at the embassy in Washington or you go over to the U.S. Trade Representative, and the parties flip a coin.
And if it takes year to resolve – and Mr. Trump rejects the result – it doesn’t help the present moment, or this summer, or fall. The trade deal is already in some ways dead. So is the legal fight just a paper exercise?
We’ve had disputes under this trade agreement before: automotive rules of origin, dairy. These are the types of disputes that friendly trading nations have and that’s fine. You continue to abide by the rule of law.
In a situation where you have such a broad departure from the foundational principle of the trade agreement, you really have to wonder what’s left.
This interview has been edited for length and clarity.