National Post (National Edition)
Time for PM to just cut a deal on NAFTA
Imagine throwing a $600-million party and one of the guests leaves in a huff and then Twitter-trashes you all across the Pacific Ocean.
That’s what happened to Prime Minister Justin Trudeau after he hosted the recent G7 extravaganza and was subsequently attacked by U.S. President Donald Trump.
But this isn’t the first of Trudeau’s trade missteps. He went to China and got the cold shoulder from Xi Jinping for a free trade deal, after snubbing Japan and its Trans-pacific Partnership by missing a signing ceremony.
Trudeau’s trifecta, and Trump’s attack, was all the talk at a conference in Montreal attended by U.S. Deputy Attorney General Rod Rosenstein, who has also been Twitter-trashed by Trump.
I asked Rosenstein what he thought Trudeau should do next. After a few seconds, he said merely: “Cut a deal." He’s right. Trudeau must find a back channel to fix this — and soon. Retaliation is not an option because Canada has no leverage. And the emotional and unprofessional blurts coming out of Ottawa that U.S. steel tariffs for “security reasons” are “insulting” or Trudeau’s characterization of tough bargaining as “being pushed around” by Trump are inappropriate and unproductive.
The fact is Canada has been totally tone-deaf when it comes to NAFTA and Trump won’t ever sign because of Mexico’s obscenely low wage rates.
The best Canada can hope for is HAFTA, or half of NAFTA, such as existed between 1989 and 1994 until Mexico lobbied its way in.
Trump’s priority is to reduce America’s $800-billion-a-year trade deficit and Mexico is a big culprit along with China, Germany and Japan.
Canada and the U.S., by contrast, have no trade deficit issue, but Trump is upset at being embarrassed by Trudeau’s unnecessary public pushback, so he refused to sign the G7 communiqué and seized on our protectionist 270 per cent tariffs on milk.
These tariffs are part of Canada’s dairy supply management scheme that should have been phased out years ago. New Zealand and Australia have also stated that Canada cannot enter the Trans-pacific Partnership until it scraps supply management.
So why hasn’t this happened? Because half of Canada’s 11,000 dairy farms are located in Quebec and so are most of our prime ministers.
The other irritant concerns the threat of U.S. tariffs on steel and aluminum for “security reasons,” something that was labelled “insulting.” But that’s totally off-base. Steel is essential to defence and infrastructure sectors and America’s steelmakers have been hollowed out by China.
Lourenco Goncalves, CEO of steel company Cliffs-Cleveland Inc., explained at a recent trade conference in Cleveland that “China makes half the world’s steel, uses most of it, then exports rolled steel to third parties such as France, Britain, South Korea and others who galvanize it then export it to the U.S.”
Canada and others have been slow to prevent such back-door dumping, said Goncalves.
Significantly, it was only in March, because of American re-exporting concerns, that Canada opened a dumping inquiry into steel imported into Canada from China, South Korea and Vietnam.
Frankly, Canada should have been policing its steel and other trade to prevent back-door entry through Canada into NAFTA, promise to do so in the future, and then promise to phase out its supply management system.
The two countries will get along by making compromises and keeping disagreements private. And Canada must accede to the fact that the country sells 70 per cent of its exports to the United States and Trump is a bombastic and often infuriating leader.
Trudeau’s job is to protect Canadian interests.
And like hockey without referees, the toughest guy may not always be right. But he’s never wrong. So cut the outrage and just cut a deal.