Tariffs, Trade, and Economic Security: Insights on Canada’s Latest Consultation

Tariffs, Trade, and Economic Security: Insights on Canada’s Latest Consultation

On August 9, 2024, Global Affairs Canada (“Global Affairs“) launched a 45-day public consultation to explore new strategies for safeguarding and enhancing Canada’s economic security. Open until September 23, 2024, these consultations are designed to inform the Government of Canada’s efforts to strengthen the country’s economic resilience against threats posed by both state and non-state actors, which could undermine Canadian interests and the international rules-based order.

This initiative builds on the Government of Canada’s ongoing efforts to address economic security challenges. Notably, it follows the recent consultation by Canada’s Department of Finance concerning tariffs on electric vehicles (EVs) and related supply chains. That consultation underscored the critical intersections between trade policies, supply chain security, and national economic interests—issues that are now central to Global Affairs Canada’s focus. Companies that engaged in the Department of Finance’s review may find their concerns around tariffs and supply chain vulnerabilities equally pertinent in this broader examination of economic security.[1]

Whether and How Your Business Should Engage

Global Affairs Canada highlights that economic security involves protecting and stabilizing the economy from a range of risks and threats, such as protectionist and non-market policies and practices by other countries and other forms of economic threats or coercion.

For businesses concerned about the security and resilience of their supply chains and export markets, participation in this consultation process is critical. Companies should also consider the potential tools Canada may deploy to protect its economic security interests. For example, regulatory and policy frameworks that enforce laws supporting economic growth while safeguarding against unfair trade practices, monopolies, and market failures may be relevant.

The consultations document specifically requests that parties provide views on whether such additional tools are needed to effectively respond to harmful economic practices in the evolving economic and geopolitical environment. In this context, the government is seeking stakeholder views of stakeholders on the potential benefits and risks of the following potential measures:

1. Suspension of benefits under a free trade agreement in response to trade actions that harm Canada.
2. Enhanced trade remedies authorities (e.g., anti-circumvention and enforcement) that could further protect against unfairly dumped or subsidized imports.
3. New forms of investigations or reviews needed to achieve economic resilience objectives.
4. Strengthened supply chains through policy measures geared at critical or strategic sectors, including by limiting the sourcing of these products from entities that pose risks related to Canada’s essential security interests.
5. Expanding Canadian incentives and tax credits.
6. Trade controls, including changes to the Export Control List or Import Control List.
7. Export duties or restrictions on specified products in critical or strategic sectors in response to the trade actions of other countries or for Canada’s economic security.
8. Supply chain resilience through investments in critical minerals, including to address price volatility and to support diversification of critical minerals supply chains.

Strategic Considerations on Tariffs and Trade

The government requests that parties consider whether duties or tariffs could play a role in safeguarding Canada’s economic security by regulating imports and exports and protecting domestic industries from unfair foreign competition. When strategically applied to goods that are vital to national security—such as critical technologies, essential raw materials, or key industrial sectors like the steel industry—tariffs can mitigate the adverse effects of unfairly traded goods on Canadian producers and workers. Companies might wish to consider whether targeted tariffs could support the preservation of domestic manufacturing capabilities and reduce the risks of economic threats from foreign entities.

Moreover, stakeholders should consider whether maintaining open and free access to international markets through new bilateral or plurilateral agreements may further Canada’s economic and national security, and whether existing benefits under trade agreements are working or need to be modified or even suspended.

Contact Information

Canadian and global businesses and stakeholders are encouraged to submit their written comments by September 23, 2024. McMillan LLP’s International Trade Group regularly assists leading Canadian and global companies in articulating their perspectives on economic security and national security matters. Our team is available to support your participation in this consultation process.

[1] See our prior McMillan bulletin, Charging Forward on Tariffs: The Government of Canada Launches Consultations on Tariffs on Chinese Electric Vehicles.

by William Pellerin, Neil Campbell, Jonathan O’Hara, Philip Kariam, Tayler Farrell & Courtney Aucoin (Articling Student)

A Cautionary Note

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2024