Canada’s trade laws lack critical national security provisions, leaving the country vulnerable to emerging global threats, according to a new report by C.D. Howe Institute Senior Fellow and lawyer Lawrence L. Herman.In “Closing the National Security Gap: Strengthening Canada’s Trade Laws to Address Emerging Global Threats,” Herman discusses the deficiencies in Canada’s key trade statutes, including the Customs Tariff Act and the Export and Import Permits Act (EIPA). These laws fail to include provisions allowing for countermeasures to imports threatening Canada’s national security.“Given the state of world affairs and the challenges Canada faces from aggressive players like China, Russia, Iran and others, the omissions in these statutes need to be remedied,” Herman said. “This should be acted on immediately.”The Customs Tariff Act, particularly Section 53, allows the federal government to impose unilateral tariff measures but does not include provisions to address imports threatening national security. Herman calls for adding a national security component to Section 53, similar to Section 232 of the US Trade Expansion Act.Herman also highlighted Canada’s reactive stance to recent trade actions by the US, Mexico, and the EU against subsidized Chinese exports.Investigations into Chinese EVs by the EU and US revealed heavy subsidies and massive overcapacity as part of their strategy in the exports of steel, aluminum, and EVs. Herman says this meets the World Trade Organization’s threshold of an “emergency in international relations” that allows trade barriers that the WTO would otherwise oppose.Herman says although Canada applied tariff surcharges on certain Chinese imports, the process exposed critical legislative gaps.Canada’s Export and Import Permits Act, for instance, does control arms and military imports but lacks provisions to regulate goods and technologies that could pose national security threats. “The Act could not have been used, for example, to deal with the effects on national security of imports of Chinese EVs, steel, aluminum or any other goods or technology,” Herman added. “EIPA is thus deficient in this regard.”The Special Economic Measures Act (SEMA), Canada’s most widely used sanctions legislation, is similarly limited, focusing on “international peace and security” but not explicitly addressing Canadian national security. Herman calls for amending SEMA to include provisions that protect national security interests.“Chinese state capitalism and its centrally planned industrial capacity are geared toward dominating world markets in critical goods,” Herman said.With the multilateral trade system strained and the World Trade Organization’s dispute resolution system in paralysis, the report predicts “governments will be resorting to unilateral application of the Article XXI exclusion in their own national security measures.”The report concludes Canada should follow, and “without diminishing Canada’s support for the multilateral rules-based system, the federal government should bring forth measures to add reference to national security interests in the above statutes.”In August, Prime Minister Justin Trudeau announced that the federal government would introduce a 100% tariff on Chinese-made electric vehicles and a 25% tariff on Chinese steel and aluminum. This took effect October 1. However, the federal government partially backtracked in mid-October. The Finance Ministry said Canadian firms could request a temporary remission of tariffs on the imports of Chinese electric vehicles, steel and aluminum products to give companies time to adjust to supply chain issues.
