Derek H. Bur­ney and Fen Hamp­son

With global trade as with so many other el­e­ments of the ex­ist­ing world or­der, the Trump ad­min­is­tra­tion seems de­ter­mined to over­turn prece­dent, dis­rupt ex­ist­ing al­liances and re­verse trends. Ap­proach­ing a cru­cial set of ne­go­ti­a­tions un­der such cir­cum­stance

Policy - - In This Issue - Derek H. Bur­ney and Fen Hamp­son

Canada: A Trad­ing Na­tion in the World of Trump

“Let chaos storm! Let cloud shapes swarm, I wait for form,” the Amer­i­can poet Robert Frost once wrote. The on­go­ing saga en­gulf­ing Amer­ica’s 45th pres­i­dent is even more tur­bu­lent and un­pre­dictable than Frost’s storm clouds and Cana­di­ans, like Frost, are go­ing to have to wait for some sem­blance of or­der to emerge.

As a trad­ing na­tion that ex­ports nearly 32 per cent in goods and ser­vices of its GDP, about 75 per cent of it to the US, Canada counts on Amer­ica as a re­li­able and sta­ble trad­ing part­ner. But Don­ald

Trump thrives in an at­mos­phere of chaos, one in which he dom­i­nates the me­dia spotlight, of­ten with in­dul­gences via Twit­ter that do not al­ways serve his own best in­ter­ests.

Trump clearly be­lieves that the world (in­clud­ing Canada) is tak­ing ad­van­tage of the U.S. on trade, on se­cu­rity and on the en­vi­ron­ment. He de­clared that the Paris Ac­cord is a “mas­sive re­dis­tri­bu­tion of U.S. wealth to other coun­tries”, adding bluntly that he was elected to serve the cit­i­zens of Pitts­burgh, not Paris. While his crit­i­cism of NATO al­lies’ spend­ing has merit, his avoid­ance of the cus­tom­ary re­as­sur­ing state­ment about Ar­ti­cle 5—mu­tual de­fence—at the May 2017 NATO sum­mit was trou­bling. His rants about trade deficits may be good pol­i­tics but they are bad eco­nom­ics. His man­ner and rhetoric in­di­cate omi­nously that self-in­ter­est, not lead­er­ship of the western al­liance, is the prime mo­ti­va­tor for this pres­i­dent, which is jan­gling nerves in many Western cap­i­tals.

“Stop the World I want to Get Off” is not a clar­ion call wor­thy of the world’s great­est su­per­power, nor is it an at­ti­tude shared by all Amer­i­cans, but it is one Canada will have to adapt to or in­dulge nim­bly while min­i­miz­ing di­rect reper­cus­sions.

One po­ten­tial pos­i­tive is that, since Trump’s twin pri­or­i­ties are eco­nomic growth and na­tional se­cu­rity, there is no coun­try bet­ter po­si­tioned to bol­ster both than Canada. There is gen­uine scope for mu­tu­ally ben­e­fi­cial co­op­er­a­tion on in­fra­struc­ture, like the out­dated elec­tric­ity grids that strad­dle our shared bor­der, on cy­ber­se­cu­rity and de­fense— af­ter all, NO­RAD is older than NAFTA—and on en­ergy de­vel­op­ment for an “en­ergy in­de­pen­dent North Amer­ica”.

For much of Canada’s 150 years as a con­fed­er­a­tion, and even be­fore 1867, trade re­la­tions with the U.S. have been a re­cur­ring, of­ten riv­et­ing is­sue —a roller­coaster of sorts, with highs and lows of op­ti­mism and con­cern. The suc­cess­ful ne­go­ti­a­tion of the Canada-U.S. Free Trade Agree­ment in 1987, and sub­se­quently the NAFTA, in­clud­ing Mex­ico, in 1992, were land­mark ac­com­plish­ments of the Mul­roney gov­ern­ment.

Con­cern is up­per­most to­day and the main ques­tion is whether Canada can weather the as­saults trig­gered by the elec­tion of Don­ald Trump and keep the roller­coaster on its rails.

Trump’s er­ratic at­ti­tude on trade with Canada is trou­bling. When he first met our prime min­is­ter last Fe­bru­ary, the tone was pos­i­tive. Trump said then that he only wanted to “tweak” NAFTA, prompt­ing sighs of re­lief in Ot­tawa. Soon af­ter, how­ever, he de­scribed NAFTA as the “worst trade deal ever” and threat­ened to scrap it al­to­gether. His Com­merce Sec­re­tary, Wil­bur Ross, added to the drama by talk­ing about us­ing “bazookas” to ex­tract trade con­ces­sions from Canada.

Trump may see him­self as a pa­tri­otic pop­ulist but his “Buy Amer­i­can; Hire Amer­i­can” procla­ma­tions are just unadul­ter­ated pro­tec­tion­ism wrapped in the stars and stripes. His “Amer­ica First” rhetoric is desta­bi­liz­ing and gen­er­at­ing cau­tion, if not un­ease, for Cana­dian pro­duc­ers and in­vestors.

The re­al­ity of what will hap­pen on trade is an open ques­tion.

The op­ti­mistic sce­nario is that Canada, the U.S., and Mex­ico quickly con­clude a rel­a­tively pain­less agree­ment that would mod­ern­ize NAFTA, adding el­e­ments on e-com­merce, on stan­dards and reg­u­la­tions and on 21st cen­tury is­sues ne­go­ti­ated un­der the Trans Pa­cific Part­ner­ship (TPP). This would be sub­ject to rat­i­fi­ca­tion by Congress—by no means cer­tain— and the Par­lia­ment of Canada and Mex­ico’s Congress. The ad­van­tage of this ap­proach is that it would serve Pres­i­dent Trump’s pen­chant for an “early win”—some­thing he des­per­ately needs. The down­side is that a mod­est up­grade will not re­solve the neg­a­tive per­cep­tions nor the ex­pec­ta­tions of who­lescale re­form he promised Amer­i­cans. It cer­tainly would not re­turn jobs to Amer­ica’s in­dus­trial heart­land though it is not clear any­thing will.

The more daunt­ing prospect is that ne­go­ti­a­tions be­come em­broiled over sub­stan­tive dif­fer­ences on thorny is­sues and drag on in­con­clu­sively into the Mex­i­can elec­tion and U.S. midterms next year, the re­sults of which may sim­ply com­pli­cate mat­ters more. In this sce­nario, ir­rec­on­cil­able dif­fer­ences could prompt one of the par­ties to with­draw abruptly from the ne­go­ti­at­ing ta­ble, dash­ing the hopes for any kind of set­tle­ment. Re­gard­less of what evolves, a pro­longed pe­riod of un­cer­tainty seems un­avoid­able.

The cal­en­dar is very tight. The Trump ad­min­is­tra­tion is roughly half­way through its 90-day con­sul­ta­tion pe­riod seek­ing author­ity from Congress to re-ne­go­ti­ate NAFTA. How­ever, Congress, not the ad­min­is­tra­tion, ul­ti­mately de­ter­mines the out­come on any trade ne­go­ti­a­tion. In mid-July, the ad­min­is­tra­tion will sig­nal a de­tailed list of its ob­jec­tives en­abling ne­go­ti­a­tions to be­gin in mid- Au­gust and hope­fully con­clude early in 2018, well ahead of the pres­i­den­tial elec­tions in Mex­ico and the midterms in the U.S. Trump may want some­thing fast on NAFTA—but he says that on most things. So far he has been un­able to get much trac­tion on any leg­is­la­tion in Congress, even though his party has a ma­jor­ity in both cham­bers.

For much of Canada’s 150 years as a con­fed­er­a­tion, and even be­fore 1867, trade re­la­tions with the U.S. have been a re­cur­ring, of­ten riv­et­ing is­sue—a roller­coaster of sorts, with highs and lows of op­ti­mism and con­cern.

Given the ex­tent to which the heated rhetoric has pol­luted pub­lic at­ti­tudes on trade in Amer­ica, there is no cer­tainty that any trade agree­ment would pass muster with this Congress.

For Canada, overt, capri­cious ac­tions against soft­wood lum­ber and steel along with con­cerns about Buy Amer­ica ten­den­cies are al­ready front and centre. Trump has openly ex­pressed un­hap­pi­ness about sup­ply-man­aged dairy prod­ucts, among other Cana­dian sins. With Mex­ico, the prob­lem is sugar. We, of course, have a list of our own about ne­far­i­ous U.S. in­ten­tions, like a dis­man­tling of the dis­pute set­tle­ment pro­vi­sions. So any ne­go­ti­a­tion could quickly get testy.

So what Should Canada do in the mean­time?

Canada can­not ne­go­ti­ate with a chimera, nor un­der de­mands for uni­lat­eral con­ces­sions. We need to stay calm and dis­ci­plined, con­sult broadly and de­fine pre­cisely and prag­mat­i­cally what we want and do not want on a re­vised or re­freshed NAFTA. We also need to clar­ify what the U.S. in­tends to ne­go­ti­ate and we need to de­fine what would con­sti­tute suc­cess for Canada. The re­sult must serve Cana­dian in­ter­ests, pre­serv­ing and strength­en­ing ac­cess to our most vi­tal mar­ket.

The cur­rent cli­mate of un­cer­tainty is def­i­nitely damp­en­ing busi­ness con­fi­dence and in­vest­ment. It will def­i­nitely be bet­ter to move be­yond bom­bas­tic blus­ter and start ne­go­ti­at­ing, rec­og­niz­ing above all that, to be suc­cess­ful, any trade ne­go­ti­a­tion must con­vey mu­tual ben­e­fit. Uni­lat­eral de­mands or uni­lat­eral con­ces­sions can­not be part of the bar­gain. And the sooner we can get to a ne­go­ti­at­ing ta­ble, the bet­ter.

We should also keep the fol­low­ing eight points in mind:

1. Trade agree­ments have be­come whip­ping boys for all that ails de­vel­oped coun­tries, but the em­ploy­ment dis­lo­ca­tion in our economies stems more from dra­matic tech­no­log­i­cal changes—au­to­ma­tion, ro­bot­ics, ar­ti­fi­cial in­tel­li­gence, etc.— and the shift from man­u­fac­tur­ing to ser­vices like e-com­merce than from the im­pact of tar­iff redi­rec­tions in­tro­duced more than 20 years ago. The re­al­ity is that more peo­ple than ever en­joy new so­cial and eco­nomic op­por­tu­ni­ties due to the com­bi­na­tion of more lib­er­al­ized trade and tech­no­log­i­cal change. But few politi­cians are will­ing to state this sim­ple truth to a cyn­i­cal pub­lic. 2. The most se­ri­ous wounds are self­in­flicted. The U.S. Coun­cil on For­eign re­la­tions study “How Amer­ica Stacks Up” con­cluded that “the slow eco­nomic growth in the U.S. over the past decade has re­sulted not from what the world has done to Amer­ica but what Amer­ica has done to it­self”, es­pe­cially in terms of tax rates and sti­fling anti-busi­ness reg­u­la­tions.

3. His­tory demon­strates clearly that pro­tec­tion­ism and closed mar­kets of­fer no panacea for growth.

4. There is scope for im­prove­ments to NAFTA that would serve our col­lec­tive in­ter­est as in the case of e-com­merce, where there is al­ready ma­jor growth, in­clud­ing Mex­ico where large num­bers of Mex­ico’s rapidly grow­ing mid­dle class are now shop­ping on­line.

5. We must pre­pare strate­gi­cally and tac­ti­cally, work­ing the U.S. po­lit­i­cal sys­tem as never be­fore, mo­bi­liz­ing key con­stituen­cies in sup­port of our ob­jec­tives and ex­plain­ing to Amer­i­cans pre­cisely why a good trade re­la­tion­ship with Canada is very much in our mu­tual in­ter­est. Nine mil­lion Amer­i­can jobs de­pend on ex­ports to Canada, still the U.S.’s largest ex­port mar­ket, a fact known by too few Amer­i­cans but one that should be our “trump card” or lever­age in any ne­go­ti­a­tion.

6. Canada’s team must keep a close eye on Congress given its ul­ti­mate author­ity for trade agree­ments, es­pe­cially those rep­re­sen­ta­tives whose dis­tricts and states rely heav­ily on trade with Canada. We are the num­ber one ex­port des­ti­na­tion for 35 states.

7. For any ne­go­ti­a­tion to suc­ceed, there has to be some po­lit­i­cal con­sen­sus and com­mit­ment at the top lead­er­ship level about what is achiev­able.

8. We need to pre­pare thor­oughly for all contin­gen­cies and be ex­plicit up front about what is not ne­go­tiable. The Amer­i­cans will have a sim­i­lar, no-go-zone list. When it comes to trade, there is no mo­nop­oly on virtue any­where in the world.

9. Al­ways keep in mind that “No deal is prefer­able to a bad deal.” That was the ba­sic prin­ci­ple that guided us in the first free trade ne­go­ti­a­tion. We need to know when and how to say “No”.

So, fas­ten your seat belts. It will not be easy and it could get very bumpy but there is no rea­son to panic or pull the emer­gency switch. Mu­tual self-in­ter­est is the most sober­ing tonic of all in any trade ne­go­ti­a­tion.

Nine mil­lion Amer­i­can jobs de­pend on ex­ports to Canada, still the U.S.’s largest ex­port mar­ket, a fact known by too few Amer­i­cans but one that should be our “trump card” or lever­age in any ne­go­ti­a­tion.

Pres­i­den­tial Li­brary Cour­tesy of the Ge­orge Bush

Mex­i­can Pres­i­dent Car­los Sali­nas, U.S. Pres­i­dent Ge­orge Bush and Prime Min­is­ter Brian Mul­roney watch as trade min­is­ters Jaime Serra Puche, Carla Hills, and Michael Wil­son sign­ing the NAFTA for their three coun­tries in San An­to­nio, Texas in Oc­to­ber 1992.

Newspapers in English

Newspapers from Canada

© PressReader. All rights reserved.