Will the US trade wars affect Canada?

Lawyers are advising their clients to look at new markets on both the supply and demand ends

EVEN AS THE US and China ramped up their trade war rhetoric, international trade lawyer Darrel Pearson found himself busier than he’s ever been in his 36 years of practice.

“We anticipate that the workload will continue to increase,” says the Toronto-based co-head of Bennett Jones LLP’s international trade group, which has 12 dedicated full-time lawyers.

Pearson’s experience, however, may well be counterintuitive, because trade wars and their anticipated effect on economic growth would not seem to augur well for the workloads of international trade practitioners.

But, as Pearson points out, Canada is not a direct party to this particular war. And in some ways, that gives the international trade bar in this country reason for optimism.

For example, Canada is for the time being exempt from the steel and aluminum tariffs imposed on US imports from a number of countries, including China. Still, the US will likely ramp up its scrutiny of Canadian products that include aluminum and steel components originating in the countries affected. A new NAFTA might even include an obligation to ensure that Canadian companies don’t morph prohibited materials into products that simply bear another name.

“Canadian processors who use aluminum and steel are looking at these developments with concern,” Pearson says. “The upshot is that Canadian lawyers are busy and will continue to be busy with related circumvention and NAFTA issues.”

The steel and aluminum tariffs could also direct a fair share of exports to Canada that would otherwise have made their way to the US from the affected countries. “If they do make their way to Canada and result in reduced prices that cause substantial injury to Canadian concerns, we could see the type of safeguard actions that fuel work for international trade lawyers,” Pearson says.

The signs are already there. At press time, the federal government was in the process of implementing new provisions to make enforcement of safeguard actions, such as anti-dumping measures, more rigorous. “The Canadian steel lobby was a huge force behind these changes,” he adds. “You could swear that they were written by the lobby itself.”

Import surges that result from tariffs on the additional US$100 billion worth of products that are also threatened objects of the US-China trade war will also fuel the movement toward safeguarding. “Not only will there be a host of new trade remedy cases involving dumping and subsidization, but existing cases are more likely to be rigorously enforced,” says Pearson.

As well, circumvention and trade remedy cases are becoming much more complicated, with an increasing number are finding their way to the Federal Court of Appeal. “I used to appear in the FCA once a year,” Pearson says. “Now it’s three or four times annually.”

Otherwise, the uncertainties mean that international supply chains are under threat. “More than ever before, international trade lawyers and their clients who quite understandably regarded the softwood lumber dispute as a big deal have to be on top of developments and stay aware of what is a new and much larger scale phenomenon,” says John Boscariol, the Toronto-based head of McCarthy Tétrault LLP’s international trade and investment law group. “At the same time, we have to come up with solutions for clients that work in a short-term environment.”

Still, Boscariol says he’s advising clients to avoid radical redesign of their supply chains. “They should be taking steps to look at new markets on both the supply and demand ends, and evaluating potential new sources and customers.”

Boscariol, who says practising international trade law is “a lot more hectic” these days, believes it will become even more so. “The whole world will be reacting to the superpowers’ actions,” he says.  “As countries find it increasingly challenging to keep their markets open, the protective measures they take will feed right into trade lawyers’ bailiwick.”

Even capital-markets and M&A lawyers, who regard slowing economic growth as anathema to their practices, are optimistic. “In the past, we found that trade wars and regulatory barriers elsewhere can shift capital to Canada,” says Mark Trachuk, the Toronto-based chair of Osler, Hoskin & Harcourt LLP’s corporate practice group.

“Some of that happened, for example, when the US instituted draconian compliance rules under the Dodd-Frank Act.