Trudeau’s tac­ti­cal trade war

National Post (Latest Edition) - - FP COMMENT - Lawrence SoLomon Lawrence Solomon is pol­icy di­rec­tor for Toron­to­based Probe In­ter­na­tional. LawrenceSolomon @nextc­ity.com

Cana­di­ans who think Prime Min­is­ter Justin Trudeau is stand­ing up for Cana­di­ans against U.S. Pres­i­dent Don­ald Trump over dairy tar­iffs have it wrong. Trudeau is stand­ing up for Que­bec against the Rest of Canada. It is Trump who is stand­ing up for Cana­di­ans.

Cana­di­ans are also wrong to think the U.S. has been un­rea­son­able in the NAFTA ne­go­ti­a­tions, as would be ev­i­dent if not for our sense of en­ti­tle­ment. Amer­i­cans don’t owe us a liv­ing and they do owe it to them­selves to look af­ter their own.

If Canada’s ne­go­tia­tors want to do what’s best for Canada, they should stop pos­tur­ing be­fore they do more dam­age to our in­dus­tries. For starters, they should stop mis­rep­re­sent­ing the U.S. po­si­tion on steel and alu­minum tar­iffs. The U.S. never claimed that Canada rep­re­sents a na­tional se­cu­rity threat, as Trudeau keeps re­peat­ing. To the con­trary, the U.S. has specif­i­cally said these tar­iffs are not aimed at any one coun­try: with­out tar­iffs to pro­tect Amer­i­can steel and alu­minum from for­eign sup­pli­ers, these in­dus­tries, which Amer­ica needs for na­tional de­fence, would go bank­rupt.

The U.S. was de­lay­ing steel and alu­minum tar­iffs on our in­dus­tries pend­ing the NAFTA ne­go­ti­a­tions but, in­stead of mak­ing our case straight-up at the ne­go­ti­at­ing ta­ble, Canada de­cided to lobby the U.S. Congress and U.S. me­dia and to try to run out the clock on the Trump ad­min­is­tra­tion. For good mea­sure, Trudeau called the U.S. re­quest for a sun­set clause that would re­quire NAFTA to be re­newed ev­ery five years “to­tally un­ac­cept­able” and in late May, Trudeau high-hand­edly scrapped a plan to meet with Trump be­cause of it. The strat­egy back­fired, dam­ag­ing our steel and alu­minum in­dus­tries. See­ing the stalling, the U.S. im­posed the tar­iffs.

But what is so un­rea­son­able about build­ing into trade deals set re­newals that re­quire the par­ties to rene­go­ti­ate pro­vi­sions that may have be­come out­dated, par­tic­u­larly since we’ve seen game-chang­ing in­dus­tries such as so­cial me­dia and shale oil emerge from nowhere? Coun­tries in Eu­rope, Asia and Africa em­ploy sun­set clauses of var­i­ous kinds in their trade deals, of­ten with pro­tec­tions that grand­fa­ther in­vest­ments should an agree­ment not be re­newed (the Nether­lands-Poland Bi­lat­eral In­vest­ment Treaty is just one ex­am­ple). In­stead of em­ploy­ing “my way or the high­way” tac­tics, Trudeau could have ac­cepted a sun­set clause that grand­fa­thered the pro­tec­tions Cana­dian in­dus­try would need in the event a fu­ture U.S. ad­min­is­tra­tion de­cided to walk away from NAFTA.

There is also noth­ing un­rea­son­able about Trump’s de­sire to let U.S. dairy farm­ers sell their goods into Canada — what is un­rea­son­able, even out­ra­geous, is the 270 per cent tar­iff Canada im­poses.

Trump is a dereg­u­la­tor who wants to dereg­u­late agri­cul­ture in the same way he is dereg­u­lat­ing en­ergy, min­ing and other nat­u­ral re­source sec­tors. By low­er­ing our dairy tar­iffs and ac­cept­ing Trump’s doc­trine of re­cip­ro­cal trade, our dairy in­dus­try — which has been stag­nant for decades — would have ac­cess to the vast Amer­i­can mar­ket and re­turn to be­ing an ex­port in­dus­try, as it was be­fore Canada adopted sup­ply man­age­ment. Cana­dian con­sumers would win from a mar­ket­based dairy in­dus­try, too. As de­tailed this week in a Wash­ing­ton Post col­umn show­ing the ab­sur­dity of Canada’s sup­ply man­age­ment sys­tem, B.C. res­i­dents in bor­der towns make milk runs into Wash­ing­ton State to ob­tain dairy prod­ucts at half the cost of those in B.C. su­per­mar­kets, which un­der sup­ply man­age­ment ob­tain dairy prod­ucts from Que­bec, 5,000 kilo­me­tres away.

In truth, Trudeau is the pro­tec­tion­ist, not Trump, and the way things are go­ing, it will be Trudeau, not Trump, who wor­ries about trade deficits. Pro­tec­tion­ism and the stag­na­tion it brings haven’t served Canada well.

A decade ago, Canada had a US$78-bil­lion trade sur­plus with the U.S. That sur­plus was more than halved to US$32 bil­lion five years ago and it was halved again to US$17 bil­lion last year. Five years from now, our ever-shrink­ing sur­plus with the U.S. may start to be­come an ever-grow­ing deficit, par­tic­u­larly since the U.S. has blown past us as a pro­ducer of en­ergy — our main ex­ports to the U.S. We are not only at risk of los­ing this fi­nan­cial main­stay, with the U.S. no longer need­ing us for en­ergy se­cu­rity, we are also at risk of be­com­ing strate­gi­cally unim­por­tant.

None of that mat­ters much to Trudeau, who faces a tough re-elec­tion next year. NAFTA nec­es­sar­ily thus be­comes not an eco­nomic ex­er­cise but a po­lit­i­cal one. How to re­tain the dairy quo­tas needed for the Que­bec vote in the face of U.S. pres­sure? How to re­verse his sag­ging pop­u­lar­ity among Cana­di­ans on the whole as the econ­omy fades? The an­swer is a no-brainer: De­clare war on Canada’s Pub­lic En­emy No. 1 — Don­ald J. Trump. For max­i­mum ef­fect, start right af­ter ge­nial dis­cus­sions at the G7 meet­ings dur­ing which an un­sus­pect­ing Trump had even re­port­edly agreed to drop his re­quest for that five-year sun­set clause.

“Cana­di­ans are po­lite, we’re rea­son­able, but we also will not be pushed around,” Trudeau grand­standed as soon as Trump turned his back. It’s a bril­liant po­lit­i­cal strat­egy. By play­ing to the Cana­dian pub­lic at Trump’s ex­pense, Trudeau’s pop­u­lar­ity has soared. But al­though Trudeau may be win­ning in the polls, Cana­di­ans are wrong to think Trudeau is win­ning for them. For Cana­di­ans to win, Trump must pre­vail and the Cana­dian mar­ket must open up.

BY PLAY­ING TO THE CANA­DIAN PUB­LIC AT TRUMP’S EX­PENSE, TRUDEAU’S POP­U­LAR­ITY HAS SOARED.

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