Canada will impose 35% tariffs on Russian and Belarusian products, Canadian Deputy Prime Minister Chrystia Freeland announced Thursday.
Canada is thus the first country to revoke their “most favored nation” status as a trading partner, a basic principle of international economic law. This principle allows all members of the World Trade Organization, as well as other selected trading partners, to benefit from equal treatment at the border.
“We will do everything in our power so that President Putin, his accomplices […] and the Russian economy are paying the price for this serious historical error”, justified Mr.me Freeland, also announcing sanctions against ten leaders of Rosneft and Gazprom, Russian state enterprises in the oil and natural gas sector.
“The economic costs of the Kremlin’s barbaric war are already high and they will continue to mount,” warned Mr.me Freeland, referring in particular to the fall in the price of the ruble and the closure of the Moscow Stock Exchange for the whole week.
After imposing significant financial sanctions, Canada is directly attacking trade, affecting all Russian companies, points out Geneviève Dufour, professor at the Faculty of Law at the University of Sherbrooke.
“Currently, when Canada imports products, it is generally between 0 and 3%, says Ms.me From the oven. Thirty-five percent is very high compared to our average [de droits de douane]. This is enough to push companies to source their supplies elsewhere. I don’t have the impression that Canada will continue to receive a lot of Russian products. »
Avoid the backwash
According to the lawyer, Canada had to assess that these measures would not hurt Canadian companies too much, which are the ones who must pay the tariffs if they choose to buy Russian products anyway. Indeed, the share of imports of goods from Russia is low in Canada. In 2021, they represented $2.1 billion, compared to a total import value of $610 billion. The industries that import the most are in the fertilizer and oil sector.
On the other hand, Russia is the country of destination for approximately 0.1% of Canadian exports. The situation could therefore not be catastrophic if Moscow imposed a similar measure in return. Some Canadian companies, such as Bombardier Recreational Products (BRP), have already temporarily stopped sending their products to Russia. “Since the conflict in Crimea and the international sanctions that followed, BRP’s sales in Russia now represent less than 5% of our total sales,” the company’s media relations managers said by email.
Furthermore, Canada is in contravention of the rules of the World Trade Organization. To justify this, however, the government could invoke Article XXI(b)(iii) of the General Agreement on Tariffs and Trade, which provides an exception when a country must “take any measures that[il] deems necessary for the protection of its essential security interests”, and this, “in time of war or in the event of serious international tension”.
Mme Freeland said it is working with its “partners and allies to encourage them to take the same steps.” In the United States, a Democratic senator tabled a bill to this effect this week. According to the Bloomberg media, the European Union is also studying this possibility. These countries will have to assess the effects that such a measure could have on their own economy, depending on their dependence on Russian products.
Military exports to Russia
Between 2010 and 2020, Canadian manufacturers sent nearly $1 million worth of military goods and technology to Russia, according to a compilation by The duty based on data found in military goods export reports on the Global Affairs Canada website.
A peak of over half a million dollars was reached in 2014, when Russia invaded Crimea. But Canada then imposed sanctions on the country, which explains why exports fell considerably in the following years, points out Srdjan Vucetic, professor at the Graduate School of Public and International Affairs at the University of Ottawa. The expert studies Canadian military exports closely, and it is mainly firearms and software that were sold to Russia before 2015.
In 2020, six licenses were authorized by the federal government to manufacturers who are not identified. A value of $1361.97 in firearms with a caliber of less than 20 mm and accessories was sent to Russia.
Ottawa has the power to block the sale of arms to countries, especially if there is a risk of serious violation of human rights. Of 58 license applications that were denied in 2020, one was to Russia on the basis that it was not “consistent with Canada’s foreign and defense policy interests.”
Global Affairs Canada had not yet responded to questions from the Homework at the time these lines were written.