By: Chuck Andary, University of Windsor law student
Upon receiving complaints from American ports, the Federal Maritime Commission will hold an inquiry on Canadian ports and whether they are being unfairly subsidized. The ports in question are off the coast of British Columbia and are seeing increased business compared to their American competitors.
The central issues behind the complaint are that the government subsidized 35% of the building cost of the port in Prince Rupert, BC, and that the Canadian ports do not charge ships any harbour taxes. The Canadian response is that the Canadian ports are the most efficient ports of entry for ships travelling from Asia; it would take several extra days to dock at the major American ports in California.
Interestingly, there is no allegation of ongoing government subsidies to the Canadian ports. The allegation relates to a building subsidy only. Additionally, the lack of a tax doesn’t seem to be a valid argument with regards to unfair trade practices. Of course, the Federal Maritime Commission does not have jurisdiction over Canadian laws and policies, but the Prince Rupert Port Authority will still make submissions to the inquiry.
It is difficult to see how an argument can be made before an international body such as the World Trade Organization’s Dispute Settlement Body. The lack of a tax on imported goods is a domestic issue; there isn’t a General Agreement on Tariffs and Trade argument to be made here.
Where it gets tricky is with respect to the $60 million subsidy that was given towards the building of the port. It is argued by persons in the U.S. that the subsidy provides the Canadian port with an unfair advantage over the Canadian port. Indeed, certain subsidies are prohibited under the Agreement on Subsidies and Countervailing Measures (ASCM). An “actionable subsidy” may arguably occur where, under article 6, where the effect of the subsidy is to “displace or impede the imports of a like product of another Member into the market of the subsidizing Member”.
Here, however, it can be strongly argued that the subsidy has had nothing to do with the increased traffic on the Canadian port. The simple facts are that the Canadian port is geographically closer to the exporting countries and the lack of a harbour tax makes it cheaper for ships to dock. Furthermore, there aren’t ongoing subsidies to cover any losses that the port incurs. These are factors that are outside of the realm of international trade regulation, and it is unlikely that the United States’ claim will be successful. During a recession, it is popular for politicians to challenge issues such as this one, and this is what several senators in the United States are doing. Regardless of whether or not a claim has merit, it is politically adventageous to at least try.