Jeremy Kins­man

Ne­go­ti­at­ing With an Ele­phant: NAFTA’s Not for Sissies

Policy - - In This Issue - Jeremy Kins­man

While it may seem as though the NAFTA rene­go­ti­a­tions are about ar­cane clauses and sub-sec­tions at their most ab­stract and the fate of in­dus­tries and jobs at their least, they are also about per­son­al­i­ties. Trade ne­go­ti­a­tions, like any trans-bor­der diplo­matic in­ter­ac­tions, in­volve the per­sonal strengths and weak­nesses of their in­ter­locu­tors. As vet­eran se­nior diplo­mat Jeremy Kins­man writes, there’s a tex­ture to these things.

Cana­di­ans and Amer­i­cans ne­go­ti­ate ef­fec­tively ev­ery day. We en­joy an ease of deal­ing with each other in the pri­vate sec­tor as smooth as any re­la­tions in the world. Trans-bor­der ac­qui­si­tions are agreed on com­pli­cated bar­gains for pipe­lines, banks, prop­erty, waste col­lec­tors, di­a­mond mines and food sup­pli­ers.

Traders set­tle eas­ily on terms for ev­ery­thing that is sold across the bor­der. Deals pro­ceed on the need to agree first on the facts. The gov­ern­ing prin­ci­ple is win/win. Be­haviourally,

the so­ci­ol­ogy is that of cousins: the easy af­ter-work cock­tail ban­ter is in a shared lan­guage about a com­mon sports and en­ter­tain­ment uni­verse.

While some his­to­ri­ans still make the case we’re ba­si­cally the same peo­ple, polling shows that Cana­di­ans in­creas­ingly see U.S. so­ci­ety, and cer­tainly Amer­i­can pol­i­tics, trend­ing dif­fer­ently than Cana­dian in ways that could be­come al­most ex­is­ten­tial if tra­jec­to­ries hold. But deal-mak­ers keep frac­tious po­lit­i­cal de­bate out of day-to-day busi­ness trans­ac­tions.

It was the sense of com­mon bonds at the peo­ple-to-peo­ple level that lifted the idea of a free trade agree­ment among the North Amer­i­can coun­tries be­yond the eco­nomic sphere. It aimed at a higher and wider spa­tial ideal, a sense of North Amer­i­can com­mu­nity, as set out by Ron­ald Rea­gan in his speech when he an­nounced his can­di­dacy for the pres­i­dency. It was about neigh­bour­hood.

“A de­vel­op­ing close­ness among Canada, Mex­ico and the United States —a North Amer­i­can ac­cord—would per­mit achieve­ment of that po­ten­tial in each coun­try be­yond that which I be­lieve any of them—strong as they are—could ac­com­plish in the ab­sence of such co­op­er­a­tion,” Rea­gan said. “In fact, the key to our own fu­ture se­cu­rity may lie in both Mex­ico and Canada be­com­ing much stronger coun­tries than they are to­day.”

But Rea­gan has a na­tion­al­is­tic suc­ces­sor who cam­paigned on a vow to “tear up NAFTA,” who in a myr­iad of ways has in­sulted Mex­i­cans. Don­ald Trump has also jarred a lot of Cana­di­ans with his claims Amer­i­can work­ers were be­ing vic­tim­ized by an un­fair trade deal. He has top ad­vis­ers who are ex­treme na­tivists and sovereign­tists, who deny com­mu­nity ideals, for whom in­ter­na­tional re­la­tions are an ex­er­cise in seek­ing na­tional ad­van­tage when­ever pos­si­ble; “Amer­ica first, al­ways Amer­ica first,” as Trump in­toned in his in­au­gu­ral ad­dress.

Yet, de­spite Trump’s re­cent de­scrip­tion to the Wall Street Jour­nal of NAFTA as “a hor­ri­ble deal… one of the truly bad deals,” the re­cently-re­leased U.S. state­ment of ob­jec­tives for NAFTA re-ne­go­ti­a­tion with Canada is not un­rea­son­able. NAFTA does need up­dat­ing, ad­just­ment and ex­ten­sion into new ar­eas of com­merce that were not fore­seen in the pre-dig­i­tal age.

The three coun­tries have ap­pointed ex­pe­ri­enced, pro­fes­sional, no-drama lead ne­go­tia­tors, in the hope that Trump meant it when he told the Wall Street Jour­nal that NAFTA “may be sal­vage­able.” But, still, it may be too much to hope that ne­go­ti­a­tions pro­ceed the way they do in the pri­vate sec­tor, in a friendly, fact-based and ob­jec­tive way.

The first rea­son is that ne­go­ti­at­ing for your coun­try is dif­fer­ent and pos­si­bly most dif­fer­ent for Amer­i­cans. Maybe there’s some­thing about be­ing a su­per­power that makes ex­cep­tion­al­ist Amer­i­cans (and Rus­sians, by the way) cu­ri­ously un­able to eas­ily digest that things might be done dif­fer­ently and even ef­fec­tively in other coun­tries. For ex­am­ple, Cana­di­ans have a na­tional goods and ser­vices tax (GST); our tim­ber re­sources are mainly on “Crown” lands; our cul­tural in­dus­tries lack the scale to com­pete with all-out con­ti­nen­tal mar­ket forces. For Amer­i­cans, dif­fer­ently aligned poli­cies in­fer an un­fair ad­van­tage, even if they come to un­der­stand why we choose dif­fer­ent ways.

The U.S. sys­tem is cer­tainly unique. The divi­sion of pow­ers means that Amer­i­can ne­go­tia­tors aren’t free agents. They need to an­swer to Congress as well as to the pres­i­dent.

As the se­nior Cana­dian cul­tural of­fi­cial, I went to Los An­ge­les in the 1980s to ex­plain to the pres­i­dent of Dis­ney, Frank Wells, why we needed to sep­a­rate the Cana­dian mar­ket for film dis­tri­bu­tion rights from the stand­ing prac­tice of in­di­vis­i­ble North Amer­i­can rights that by def­i­ni­tion ex­cluded Cana­dian dis­trib­u­tors from earn­ing the rev­enue that could nour­ish a Cana­dian film in­dus­try.

Wells re­ceived us for a work­ing lunch in the cafe­te­ria (al­ways a sign of a put-down). But then Wells stayed for three hours, con­clud­ing with seem­ing em­pa­thy that he “got our rea­son­ing.” He’d think the same way if he were us. Yet, that evening he sent a mes­sage to the White House that these Cana­di­ans were dan­ger­ous to their in­dus­try’s global in­ter­ests and had to be stopped. The is­sue of Cana­dian cor­rec­tive film dis­tri­bu­tion leg­is­la­tion al­most de­railed the FTA talks sev­eral times. But in the end, Prime Min­is­ter Mul­roney ob­tained an ex­emp­tion for Canada’s cul­tural in­dus­tries, af­ter per­suad­ing Rea­gan he couldn’t sell the deal to vot­ers with­out one. This deal-mak­ing ex­emp­tion was granted by a for­mer pres­i­dent of the Screen Ac­tors Guild.

The U.S. sys­tem is cer­tainly unique. The divi­sion of pow­ers means that Amer­i­can ne­go­tia­tors aren’t free agents. They need to an­swer to Congress as well as to the pres­i­dent. “We can’t bind the Congress,” Rea­gan’s Trea­sury Sec­re­tary James A. Baker said in the fi­nal days of ne­go­ti­at­ing the orig­i­nal Canada-U.S. Free Trade Agree­ment, a caveat that is re­peated as doc­trine in ev­ery ne­go­ti­at­ing room for ev­ery work­ing group all the time. It can mean that any agree­ment is ad ref­er­en­dum ad in­fini­tum. “We’ll have to run it past our lawyers” is one of the most fre­quently heard and omi­nous re­torts from the U.S. side in ne­go­ti­a­tions. Even the U.S. Con­sti­tu­tion gets in­voked when the go­ing gets tough.

“`It ain’t over `till it’s over,” Yogi Berra said. And ex-am­bas­sador to the U.S. Al­lan Gotlieb added from

his ex­pe­ri­ence in Wash­ing­ton, “It’s never over.” In 1984, Canada won a court judg­ment that our method of pric­ing tim­ber on Crown lands (“stumpage”) was not a trade ad­van­tage. That sum­mer, at the Demo­cratic con­ven­tion, a con­gress­man friend from a tim­ber dis­trict warned me not to cel­e­brate; they wouldn’t ac­cept the ver­dict. There have been sev­eral such judg­ments in the years since, from neu­tral pan­els set up to ad­ju­di­cate con­flicts un­der NAFTA, all con­firm­ing the ini­tial ver­dict in Canada’s favour. The U.S. au­thor­i­ties still don’t ac­cept it and in­deed, now want the pro­vi­sion for neu­tral bi­na­tional dis­pute set­tle­ment pan­els un­der ar­ti­cle 19 of NAFTA scrapped al­to­gether. How­ever, no Cana­dian gov­ern­ment is go­ing to agree to leave con­clu­sions in the hands of U.S. courts which sel­dom rule in favour of for­eign­ers. Justin Trudeau has al­ready made it clear that this is a deal-breaker for Canada.

No Cana­dian gov­ern­ment is go­ing to agree to leave con­clu­sions in the hands of U.S. courts which sel­dom rule in favour of for­eign­ers. Justin Trudeau has al­ready made it clear that this is a deal-breaker for Canada.

Ne­go­ti­at­ing with the U.S. means, as Gotlieb also said, cop­ing with “a coun­try of a thou­sand play­ers who can de­liver a thou­sand wounds.” It’s easy to un­der­stand how the U.S. film in­dus­try could in­flu­ence Ron­ald Rea­gan. But how come the owner of the crit­i­cal and over-bur­dened Am­bas­sador Bridge be­tween Wind­sor and Detroit could get the U.S. gov­ern­ment un­der Obama to fight the con­struc­tion of a new par­al­lel bridge to re­lieve costly bor­der con­ges­tion? Canada will end up pay­ing the en­tire $4.8 con­struc­tion cost of the new Gordie Howe In­ter­na­tional Bridge, and will even pay $250 mil­lion for the cus­toms plaza on the U.S. (The costs will be re­couped from toll rev­enues and Canada and Michi­gan will be co-own­ers of the bridge.)

Amer­i­can pres­i­dents have to pick when they will make con­ces­sions that might af­fect do­mes­tic play­ers and ju­ris­dic­tions, even U.S. agen­cies. Get­ting Bill Clin­ton to sign on to a land mine agree­ment the U.S. Army de­plored when he was al­ready at dag­gers drawn over his ““Don’t ask, don’t tell” pol­icy au­tho­riz­ing gays to serve, if not openly, in the mil­i­tary was ex­pect­ing too much.

Strate­gi­cally, we should avoid pitch­ing our­selves as solid co-cit­i­zens of sort-of-the- same-place. The U.S. is a very di­vided so­ci­ety. I learned that the fact my mother was born in Los An­ge­les and I went to an Amer­i­can univer­sity may stir a bit of em­pa­thy in Los An­ge­les and New York but not with any­body who went to Texas Chris­tian or Alabama; on the con­trary. More­over, if we try to come across as be­ing just like them, how come we get to claim we can do things dif­fer­ently?

We should never ap­pear too ea­ger for an ac­cord. While we may want to re­frain from mir­ror­ing the Trump tac­tic of threat­en­ing to tear up the deal, Cana­di­ans need pa­tience and dis­ci­plined re­straint com­bined with per­fect tim­ing on when to say across the ta­ble to Amer­i­cans “No way.” As Don­ald S. Mac­don­ald put it, “You have to kick them in the shins from time to time if you want to get any­where.” In 1987, we wrested a five-min­utes-to-mid­night Free Trade Agree­ment from the White House only af­ter PMO Chief of Staff Derek Bur­ney and Chief Ne­go­tia­tor Si­mon Reis­man said “We’re done. It’s over.” It was over the U.S. re­sis­tance to bi-na­tional dis­pute set­tle­ment pan­els. On the phone with U.S. Trea­sury Sec­re­tary Baker on Oc­to­ber 3, 1987, the night Rea­gan’s fast track au­thor­ity to ne­go­ti­ate a deal with­out Con­gres­sional amend­ments would ex­pire at

mid­night, Prime Min­is­ter Mul­roney told Baker he would be calling the pres­i­dent at Camp David, ask­ing just one ques­tion: “How come the United States can make a nu­clear arms deal with its worst en­emy, the Soviet Union, but can’t sign a free trade agree­ment with your best friends, the Cana­di­ans?” Within half an hour, Baker and the U.S. agreed to the dis­pute set­tle­ment mech­a­nism.

Of course, we had in James Baker a rea­son­able, fair-minded, and very in­tel­li­gent pro­fes­sional, work­ing for a pres­i­dent who wanted an ac­cord, who saw ben­e­fits in the whole North Amer­i­can pic­ture, and who adored Brian Mul­roney.

“Justin is do­ing a spec­tac­u­lar job in Canada. Ev­ery­body loves him and they love him for a rea­son,” pro­nounced Don­ald Trump re­cently at the G20 sum­mit in Ger­many. And in a tran­script leaked in Au­gust of a phone call with Mex­i­can Pres­i­dent En­rique Pena Ni­eto a week af­ter he took of­fice in Jan­uary, Trump said Canada was “not the prob­lem,” that the Canada-U.S. trade re­la­tion­ship was “bal­anced and fair,” and that “we do not have to worry about Canada, we do not even think of them.” For ne­go­tia­tors, that’s great to know, pro­vided the pres­i­dent in ques­tion doesn’t change his af­fec­tions as of­ten as the cur­rent one changes his bluffs and in­deed his mind. Most Cana­di­ans de­plore Trump’s be­hav­iour and pol­i­tics, but Prime Min­is­ter Trudeau is right to stay out of U.S. do­mes­tic af­fairs al­to­gether, and to avoid tak­ing easy shots at the pres­i­dent in in­ter­na­tional fora.

We’ll in­evitably have to dis­agree with the U.S. on some in­ter­na­tional and even bi­lat­eral is­sues: how we com­mu­ni­cate that is im­por­tant, in­clud­ing what we say for po­lit­i­cal pur­poses back here. We sure shouldn’t go down there to woo par­ti­san al­lies against the pres­i­dent, as Stephen Harper did in telling a New York au­di­ence that Obama’s choice on Key­stone XL was a “no-brainer,” or in think­ing it was smart for Cana­dian Con­ser­va­tive cabi­net min­is­ters to traipse to Wash­ing­ton for GOP prayer break­fasts.

That be­ing said, we need to con­nect to Amer­i­cans able to see the ben­e­fits in a win/win NAFTA deal, from tens of mil­lions of work­ers, to state gover­nors and leg­is­la­tors, to me­dia and to civil so­ci­ety, to all who have pos­i­tive feel­ings for Canada at a time of un­prece­dented favourable pro­file in the U.S. for our at­trac­tive young prime min­is­ter. We shouldn’t vaunt those con­nec­tions but at the end of the day, they are very per­ti­nent as­sets in a ne­go­tia­tor’s toolkit.

Of course, in hop­ing for even-hand­ed­ness, ob­jec­tiv­ity about the facts, and a bal­anced out­come, we know it has to be one that en­ables the pres­i­dent to de­clare vic­tory. But we need him also to cel­e­brate it as a win for North Amer­ica as a whole, one that we and the Mex­i­cans will en­dorse for our own economies. It would be even bet­ter if we could de­scribe our ac­cord as some­thing ex­em­plary for oth­ers in the world. North Amer­i­cans should re-ig­nite faith in such transna­tional agree­ments at a com­pet­i­tive and even dan­ger­ous time when pro­tec­tion­ism and populism have made a cycli­cal resur­gence.

It would be an ad­e­quate start just to con­vert this phase of taunt­ing and daunt­ing pop­ulist U.S. push-back against North Amer­i­can neigh­bours into an agree­ment that works for all North Amer­i­cans and keeps us all com­pet­i­tive. But it won’t be easy and it’s not for sissies.

Most Cana­di­ans de­plore Trump’s be­hav­iour and pol­i­tics, but Prime Min­is­ter Trudeau is right to stay out of U.S. do­mes­tic af­fairs al­to­gether, and to avoid tak­ing easy shots at the pres­i­dent in in­ter­na­tional fora.

We need to con­nect to Amer­i­cans able to see the ben­e­fits in a win/win NAFTA deal, from tens of mil­lions of work­ers, to state gover­nors and leg­is­la­tors, to me­dia and to civil so­ci­ety, to all who have pos­i­tive feel­ings for Canada at a time of un­prece­dented favourable pro­file in the U.S. for our at­trac­tive young prime min­is­ter.

Adam Scotti photo

Prime Min­is­ter Trudeau and Pres­i­dent Trump walk along the colon­nade at the White House in Wash­ing­ton. Fe­bru­ary 13.

White House photo

Pres­i­dent Trump an­nounces ex­ec­u­tive or­ders on trade on March 31, with Vice Pres­i­dent Mike Pence and Com­merce Sec­re­tary Wil­bur Ross.

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