Canada Strikes Back

Canada is reacting with fury to yesterday’s action by the Federal Maritime Commission to launch a probe into the impact of so-called “diversions” of U.S.- bound container cargo through Canadian ports.

The issue is that the ports of Vancouver and Prince Rupert handle a growing volume of Asia containers bound for Chicago, Memphis and other U.S. points. The shippers of that cargo don’t have to pay an average $137 per container Harbor Maintenance tax assessed on all cargo arriving at U.S. ports, meant to fund dredging.

For Canada, this isn’t a minor inquiry by an obscure U.S. agency, but the prospect of a trade war with its behemoth neighbor to the south. The issue has been elevated to the highest levels of the Canadian government and is now a bona-fide diplomatic issue between the two nations. This article gives some indication of how seriously the issue is being taken north of the border.

How serious is this really? Here’s my view. The FMC will investigate. It will conclude that diversions are occurring and U.S. West Coast ports are losing market share as a result. This will not be news because this is known already. But then it will be up to Congress to do something about it. West Coast ports want to see a new tax imposed on U.S. import containers arriving via Canada ports.

Would the support be there to do something like this? It would seem a move like that would be a highly protectionist move against a country with whom the U.S. enjoys an extremely close relationship, politically, economically, culturally, militarily. Thus it’s hard to see something like this happening.

-- Peter Tirschwell is senior vice president of strategy at UBM Global Trade. Contact him at ptirschwell@joc.com, and follow him at twitter.com/PeterTirschwell.

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