Not the time to lose nerve
Canada is being treated to Donald Trump’s trademark knife-to-the-throat style of negotiating: sign a deal on trade right now or I’ll gut your economy. It makes for dramatic headlines and a lot of nervous commentary to the effect that Canada has been stranded in the wake of this week’s agreement between Washington and Mexico City.
But this is no time for Canada to lose its nerve or sign on to a bad deal. Certainly, Canada is under intense pressure to reach agreement by Trump’s deadline of Friday. But it’s equally true that, behind all his bluster, the president faces his own pressures and limitations on what he can actually do, as opposed to what he can tweet.
It’s far from clear, for example, that Trump can carry out his threat to scrap the North American Free Trade Agreement (NAFTA) entirely and just sign a bilateral agreement with Mexico, leaving Canada out in the cold.
Congress granted the president socalled “fast track” power specifically to renegotiate NAFTA as a three-way pact, and Trump can’t just turn around and cut Canada out. Many members of Congress know how important Canadian trade is to their states, and want NAFTA actually renegotiated, not simply junked.
And of course the reason for Trump’s insistence on getting agreement by Friday is that he has to send a new agreement to Congress by then to ensure passage this year. To make things even more complicated, the Mexicans want a deal now so it can be done before their new president takes office.
All this puts pressure on Trump and his negotiators to make sure Canada is part of any final deal, despite all the aggressive rhetoric from Trump directed our way.
On the key issues, as well, there’s reason to believe the elements are there to reach an agreement that Canada will be able to sign with honour.
The Mexicans did Canada a big favour by compromising on one of their most important issues — the cost of labour in the auto industry. Under the deal they reached with the U.S., at least 40 per cent of the value of North American cars will have to be made by workers earning at least $16 an hour.
That will reduce Mexico’s cheaplabour advantage and incent auto makers to keep more jobs in the U.S. and Canada. It will make any new deal a lot easier to sell to the auto unions and anyone concerned about the threat to good manufacturing jobs.
At the same time, the Americans compromised on one of their key issues — Trump’s insistence on a sunset clause for any new deal. He wanted a NAFTA replacement to expire in five years, but Washington and Mexico agreed on a 16-year pact with a review after six years. That isn’t ideal from Canada’s point of view, but 16 years is a whole lot better than five.
On the issue of supply management, which supports Canada’s dairy and poultry farmers at the expense of consumers, there’s also ample room for compromise.
Trump would no doubt like Canada to scrap the whole system, but it’s quite possible for Ottawa to throw him a bone by easing the rules in favour of American producers. We’ve already done that to reach trade deals with Europe and the Pacific nations and, after all, dairy makes up a tiny sliver of Canada-U.S. trade — a fraction of 1 per cent. Protecting Ontario’s auto industry is vastly more important.
The hardest point may end up being Canada’s insistence on keeping a so-called dispute resolution mechanism, a way to arbitrate trade disputes in a reasonably independent manner. But if Canada keeps its head, it can still weather the Trump storm. Premature panic serves no good purpose.
In that vein, the federal Conservatives’ decision to break ranks and blame Prime Minister Justin Trudeau for botching the talks while they’re still ongoing certainly won’t wear well if Canada and the U.S. do reach a decent agreement.
There’s no guarantee of success when you’re dealing with someone as erratic and irrational as Trump. But it doesn’t make things any easier when you also have to fend off potshots from your own side.
An editorial from the Toronto Star