(Bloomberg) -- The latest U.S. trade volley against aluminum and steel imports could mark a sea-change in cooperation between Canada and the U.S. over defense production that's been in place since World War II.
On Wednesday, the Trump administration said it will begin investigating whether aluminum imports pose a threat to self sufficiency. In the event of war, U.S. Commerce Secretary Wilbur Ross said, there is concern the Pentagon might be unable to secure enough domestic aluminum to meet its needs. The decision followed a similar investigation into steel imports.
Using national security to justify protectionism is nothing new, according to Jack Cunningham, program coordinator for the Bill Graham Centre for Contemporary International History at the University of Toronto. Back in 1949, Congress famously pressed President Harry Truman's administration to crack down on cheese and wool imports, arguing they undermined America's ability to be self-sufficient in times of war, to no avail.
What's different this time around is the source of the argument.
“We're getting protectionist sentiment from the Executive Branch and that's something that we haven't seen in about 85 years,” Cunningham, an historian specializing in nuclear strategy, counterinsurgency warfare and foreign policy, said by phone on Friday. “Trump is really a throwback to the wing of the Republican party that held sway in the '20s and '30s.”
Aluminum Security Probe Threatens Imports
The modern era of close ties between the Canadian and U.S. defense industries began in World War II with the 1941 Hyde Park Declaration, which allowed the U.S. to produce war materials in Canada for British use.
Ties tightened further in the 1950s when the U.S. began rearming for the Korean War. Later, in an effort to eliminate trade imbalances between the countries on military spending, a 1956 agreement offset Canadian purchases of U.S.-made weapons with American defense production contracts. That pattern of cooperation continued through much of the Cold War, Cunningham said.
Underpinning all of these agreements was an assumption that the U.S.-Canada relationship is unlike any other. Until a decade ago, Canadians and Americans didn't even require passports to drive across each others' borders -- a birth certificate and drivers' license would do. Canadian energy has long been touted as a way for the U.S. to lessen its dependence on supply from less predictable countries in the Middle East and Africa, although Trump appears to be focusing inward on that front too.
Rio Confident
Rio Tinto Group, which ships more than 1.4 million metric tons of aluminum to the U.S. annually from Canada, was quick to issue a response to Ross's announcement.
“We are confident this review will recognize the importance of North America's well established aluminium supply chain, where Canadian producers play a vital role in supplying American manufacturers including in the transport, aerospace and defense sectors,” Alf Barrios, chief executive of Rio Tinto Aluminium, said by email.
Similarly, on Thursday, Leo Gerard, the International President of United Steelworkers, called for Canada to be excluded from any trade actions, noting that “in steel, the U.S. has a generally balanced trade relationship with Canada.”
Unpredictable Swings
But while the main target of the aluminum probe is top producer China, and history suggests Canadian imports should be excluded from any U.S. actions, Trump's attitude toward Canada has proven unpredictable. In the space of a week, the U.S. president swung from attacks on Canada's dairy and softwood lumber industries, to plans to cancel NAFTA entirely, to praise for his country's strong relationship with the leaders of Canada and Mexico.
“He generally views international economics in zero sum terms and that is cause for concern regardless of what happens with softwood lumber, or dairy, or now aluminum,” Cunningham said.
Meanwhile Canada -- which sends about 75 percent of its 3.2 million-ton annual output of aluminum to the U.S. -- risks being caught up in an American crackdown on imports that's being justified on the grounds of national security.
“Our biggest preoccupation is being collateral damage,” Jean Simard, head of the Aluminium Association of Canada, said by telephone.
To contact the reporter on this story: Danielle Bochove in Toronto at dbochove1@bloomberg.net.
To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net, Steven Frank
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