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Likelihood of U.S. border tax fades in face of mounting opposition

Canada's Prime Minister Justin Trudeau (L) and Speaker of the House Paul Ryan (R-WI) talk before a meeting on Capitol Hill February 13, 2017 in Washington, DC.

BRENDAN SMIALOWSKI/AFP/Getty Images

The Trudeau government is increasingly optimistic that a U.S.-imposed border tax is unlikely to hit Canada because of mounting opposition to the Republican congressional plan from corporate America and the White House.

The hefty 20-per-cent border tax, promoted by Republican House of Representatives Speaker Paul Ryan, was not even raised in the Oval Office meeting between Prime Minister Justin Trudeau and President Donald Trump on Monday, according to a Canadian official.

The President is already on record as being skeptical of the tax, calling it "too complicated."

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Mr. Trudeau voiced his own opposition to the proposed border tax in a later meeting with Mr. Ryan on Capitol Hill on Monday, the senior official said.

The Ryan plan would hit imports with a 20-per-cent tax while exports would enjoy a 20-per-cent tax subsidy. It is seen by Mr. Ryan as way to pay for Mr. Trump's proposed wall with Mexico, his plan to slash corporate taxes and massive infrastructure spending.

Canadian and U.S. corporate leaders are mounting an intense lobbying campaign against the Ryan blueprint. More than 100 U.S. retailers, including Wal-Mart and Target, and trade associations, such as the U.S. Chamber of Commerce, have warned that the border tax would drive up consumer prices.

"The border-adjustment tax idea is part of a broader tax reform. This is very much in the early stages and there is a broad diversity of opinion in the United States around that," Foreign Affairs Minister Chrystia Freeland told The Globe and Mail on Tuesday. "We are in very close conversation with a lot of leading U.S. politicians."

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When she was in Washington last week, Ms. Freeland told U.S. Secretary of State Rex Tillerson that Canada was prepared to respond with tariffs of its own if the border tax was imposed.

The U.S. Senate finance committee, which must sign off on new tax proposals, has also raised concerns about how the tax would affect consumers, workers and shareholders.

Mexico Economy Minister Ildefonso Guajardo also said on Tuesday he doubted a proposed border tax on Mexican imports to the United States would ever materialize.

Speaking on the sidelines of an event in Mexico City, Mr. Guajardo said he had spoken with several Trump advisers and had not found any uniformity in their backing of the border tax.

"I wouldn't be so certain that it will end up in the proposal," he told reporters.

The C.D. Howe Institute estimates the Ryan border tax would shave a full percentage point off Canada's gross domestic product and would also damage the U.S. economy by making imports more costly to ordinary American families.

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Mr. Trudeau returned from Washington with a major achievement – a commitment from the President that he only wants to tweak the North American free-trade agreement as it affects Canadian trade. Mr. Trudeau also spoke to Mexico's President on Tuesday to brief him on his talks at the White House.

The opposition parties did not talk about NAFTA during the House of Commons Question Period on Tuesday, opting to focus on the softwood lumber dispute and Mr. Trump's ban on Syrian refugees and immigrants from seven Muslim-majority countries.

NDP MP Jenny Kwan attacked the Prime Minister for not criticizing the President's "racist immigration policies," and for not lodging strong objections about the fact that some Canadians have been turned back at the border.

"From Vietnam to Iraq, Canada has a proud history of standing up to the U.S. on issues of principle," she told the House. "So now that he is back safe and sound on Canadian soil, will the Prime Minister summon the courage to denounce Trump's immigration policies?"

Mr. Trudeau said the focus of the White House talks was to protect the Canadian economy, which sends more than 70 per cent of its exports to the United States.

"We were able to ensure the Americans understood how many good jobs on both sides of the border depend on the close working relationship that we will continue to focus on," he said.

Public Safety Minister Ralph Goodale confirmed Tuesday that Mr. Trudeau did not broach the issue of Canadians who were turned back at the border under the President's immigration ban, now rescinded by the U.S. courts.

"There wasn't an opportunity yesterday, but I do intend to make sure that the new Secretary is aware of the legitimate concerns of Canadians so we can both work together to make sure citizens of both countries are treated properly," Mr. Goodale said.

Instead, Mr. Goodale said the meeting was about economic co-operation, pointing to the President's commitment to work out a deal to have joint U.S.-Canada customs officers preclear cargo at the plants.

"Right now, we already have $2.5-billion of trade that moves back and forth across that border every day. That's a huge volume. We can improve that relationship and one of the ways to do that is the preclearance process for cargo," Mr. Goodale said.

The Conservatives asked what the Prime Minister did to press the President to get a deal on softwood lumber, because it was not mentioned in Monday's joint statement.

"In Washington last week with [U.S.] Secretary Tillerson, I defended our producers and [Monday] in Washington the Prime Minister did that with energy and vigour and I did too," Ms. Freeland told the House. "We are seeking a good deal for Canada, not just any deal."

In his Oval Office meeting with the President, Mr. Trudeau made the case to Mr. Trump that Canada should be exempted from his demand that NATO countries spend at least 2 per cent of gross-domestic spending on defence, military equipment and personnel, a Canadian official said.

Canada's defence spending is at 1 per cent, far less than the 3.6 per cent that Washington spends, or more than double the rest of all NATO countries combined.

An official said the Americans do not believe the 2-per-cent threshold should apply to Canada because this country's military has stepped up on repeated occasions to put troops on the ground, from major world wars to Afghanistan to Latvia.

"The Canadian contribution to NATO is appreciated," the official said. "We send real soldiers to do the difficult things."

Video: While Trudeau and Trump praise Canada-U.S. trade agreements, the president adds ‘we’ll be tweaking it’
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About the Author
Ottawa Bureau Chief

Robert Fife is The Globe and Mail's Ottawa Bureau Chief and the host of CTV's "Question Period with The Globe and Mail's Robert Fife." He uncovered the Senate expense scandal, setting the course for an RCMP investigation, audits and reform of Senate expense rules. In 2012, he exposed the E. More

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