Drew Fa­gan

Walk­ing on the Ra­zor’s Edge

Policy - - In This Issue - Drew Fa­gan

Trade ne­go­ti­a­tions tend to be a proxy process for the bi­lat­eral re­la­tion­ship sta­tus of the par­ties at the ta­ble. In the case of trade ne­go­ti­a­tions dur­ing the ten­ure of Don­ald Trump as pres­i­dent of the United States, that dy­namic as­sumes a whole new level of del­i­cacy. As the Munk School’s Drew Fa­gan writes, the com­ple­tion of the USMCA ne­go­ti­a­tions of­fers some in­sight into the state of our most im­por­tant bi­lat­eral re­la­tion­ship in a time of ten­sion.

On the shores of Lake On­tario, at the still-op­er­at­ing Cameco Corp. plant in Port Hope, ura­nium was pro­cessed for the United States Army and used in the world’s first atomic bombs that de­stroyed Hiroshima and Na­gasaki in 1945 and brought an end to the Sec­ond World War.

It seems strangely ap­pro­pri­ate, then— if wildly dis­con­cert­ing—that the Trump ad­min­is­tra­tion re­cently ini­ti­ated a trade in­ves­ti­ga­tion of ura­nium im­ports on the grounds of na­tional se­cu­rity un­der Sec­tion 232 of U.S. trade law. Pres­i­dent Don­ald Trump seems de­ter­mined to un­der­mine the post-war Western ar­chi­tec­ture of open trade and mul­ti­lat­eral se­cu­rity with his Amer­ica First ap­proach. So why not take is­sue with the very im­ports that helped end the war and launch al­most 75 years of peace and pros­per­ity; ma­te­rial that now fuels nu­clear re­ac­tors?

In a re­cent con­ver­sa­tion, Al­lan Gotlieb—Canada’s am­bas­sador to the U.S. dur­ing the free trade ne­go­ti­a­tions of the 1980s—ex­pressed shock at the re­cent NAFTA talks, es­pe­cially the vil­i­fi­ca­tion of Canada: “It’s al­most im­pos­si­ble to imag­ine. Since we emerged from the Bri­tish Em­pire, our as­sump­tion al­ways was that we were the United States’ best friend. I’m as­ton­ished.” The im­pact of the new United StatesMex­ico-Canada Agree­ment de­serves to be mea­sured from two per­spec­tives: by look­ing at the deal it­self on the nar­row grounds of trade and in­vest­ment and by look­ing at the im­pact on Canada-U.S. re­la­tions more broadly. On the first mea­sure, all the sturm und drang of the ne­go­ti­a­tions ap­pears to amount to rel­a­tively lit­tle. The deal is not ideal, cer­tainly. The USMCA rep­re­sents a lim­ited turn to­ward mer­can­til­ism with an ex­port ceil­ing on au­tos (sec­ond only to en­ergy by value of Cana­dian ex­ports to the U.S.) and the main­te­nance of “Buy Amer­ica” pro­grams. But NAFTA needed to be up­dated for the dig­i­tal age and the new pact does so to some ex­tent. Cana­dian con­sumers will ben­e­fit from a small open­ing of the do­mes­tic dairy in­dus­try to U.S. com­pe­ti­tion and a small in­crease in the im­port lim­its on duty-free goods. Canada’s cul­tural pro­tec­tions were main­tained, al­though those terms have never re­ally been in­vi­o­late. And the dis­pute set­tle­ment mech­a­nism—which was a Cana­dian “red line” dur­ing the talks 30 years ago and re­mained so this year—was main­tained, rep­re­sent­ing for Ot­tawa the preser­va­tion of rules over power in an asym­met­ri­cal bi­lat­eral re­la­tion­ship.

On the deal it­self, the doc­tor’s creed seems to ap­ply: First, do no harm.

But on the sec­ond mea­sure, the broader state of Canada-U.S. re­la­tions, much ap­pears dif­fer­ent and not for the bet­ter.

Dur­ing a re­cent TV in­ter­view with Pres­i­dent Trump, at­ten­tive view­ers noted in the White House back­ground a kitschy paint­ing of an ide­al­ized scene of Repub­li­can pres­i­dents from Lin­coln to Trump re­lax­ing to­gether as if at a pub­lic gath­er­ing. The two pres­i­dents sit­ting clos­est to Pres­i­dent Trump were pres­i­dents Eisen­hower and Rea­gan. Eisen­hower’s own view of re­la­tions with Canada was re­mark­able given Pres­i­dent Trump’s per­spec­tive: The two coun­tries were so close, Eisen­hower once said, that U.S. of­fi­cials should see the is­sues as much from the Cana­dian view­point as the Amer­i­can. Rea­gan wasn’t quite so mag­nan­i­mous but he found it hard to say no to Canada, es­pe­cially when Prime Min­is­ter Brian Mul­roney called.

With Pres­i­dent Trump, Cana­di­ans are faced with an un­prece­dented chal­lenge: some­one who ac­tu­ally por­trays the U.S. as hav­ing been vic­tim­ized by what he char­ac­ter­izes as Canada’s guile (sharp trad­ing prac­tices) and sloth (se­cu­rity free-rid­ing). Blame Canada—the two-decades old Os­carnom­i­nated song—was meant to be

The im­pact of the new United StatesMex­ico-Canada Agree­ment de­serves to be mea­sured from two per­spec­tives: by look­ing at the deal it­self on the nar­row grounds of trade and in­vest­ment and by look­ing at the im­pact on Canada-U.S. re­la­tions more broadly.

satire. “We must blame them and cause a fuss be­fore some­one thinks of blam­ing us,” was the fi­nal line.

Per­haps we should have seen this com­ing. The salad days of free trade oc­curred in the early years. Trade with the U.S.—in both di­rec­tions—grew at dou­ble-digit rates through the 1990s. Canada’s so-called trade “de­pen­dence” on the U.S. grew sub­stan­tially so that by the turn of the cen­tury about 85 per cent of ev­ery­thing Canada shipped be­yond its bor­ders went di­rectly south.

Then, the ter­ror­ist at­tacks of Septem­ber 11, 2001 oc­curred and noth­ing has been the same since. Bi­lat­eral trade growth slowed markedly as the bor­der thick­ened and the North Amer­i­can econ­omy went into re­ces­sion. Mean­while, China joined the World Trade Or­ga­ni­za­tion and the ben­e­fits of trade in the Amer­i­can mind—even with Canada—got lost to the con­tro­ver­sies over out­sourc­ing and dein­dus­tri­al­iza­tion.

Like the bor­der im­pact post-9/11, the pro­mis­cu­ous use or threat­ened use of Sec­tion 232 trade reme­dies wasn’t con­sid­ered a se­ri­ous prospect by Cana­dian of­fi­cials as far back as the free trade ne­go­ti­a­tions of the mid-eight­ies. Now, Sec­tion 232 must be con­sid­ered a fun­da­men­tal threat to Canada’s eco­nomic se­cu­rity and to its ties with the U.S. Canada did win terms in the USMCA for a 60-day cool­ing off pe­riod when the U.S. threat­ens to im­pose new sec­tion 232 mea­sures but it re­mains to be seen whether this will be ef­fec­tive.

More broadly, the years ahead may seem like walk­ing on the ra­zor’s edge. We must main­tain trade with Wash­ing­ton as best we can, for that is where the mother­lode re­mains. (Cana­dian ex­ports to the U.S. ap­proach the to­tal value of all in­ter­provin­cial trade and are al­most 20 times greater than ex­ports to China.) But we must also build our trade and for­eign re­la­tions else­where in the face of a pow­er­ful neigh­bour with an in­dif­fer­ent or even un­friendly mind­set. This will be made more com­pli­cated still be­cause the neigh­bour also is jeal­ous—wit­ness the terms of the USMCA re­quir­ing close con­sul­ta­tion among the three mem­bers if any chooses to push ahead with a trade pact with a non­mar­ket econ­omy such as China. The Trudeau gov­ern­ment will soon test those terms, given China’s in­ter­est in re-en­gag­ing on trade ne­go­ti­a­tions.

“De­vel­op­ing our own dis­tinc­tive in­ter­na­tional out­look while man­ag­ing our all-per­va­sive bi­lat­eral re­la­tion­ship with the United States are but two di­men­sions of a sin­gle pre­oc­cu­pa­tion that has dom­i­nated our ex­is­tence for half a cen­tury,” Al­lan Gotlieb said in a speech to Ot­tawa diplo­mats in 1991 that de­serves to be dusted off to­day. “Our over­rid­ing na­tional pre­oc­cu­pa­tion has been about how to limit U.S. power over our na­tional des­tiny while de­riv­ing max­i­mum ad­van­tage from our propin­quity.”

In that speech and more re­cent es­says, Gotlieb made a dis­tinc­tion be­tween Canada’s mul­ti­lat­eral vo­ca­tion dur­ing the post-war years ver­sus more re­cent times, which ap­plies to­day as the Trump ad­min­is­tra­tion os­cil­lates be­tween re­treat from the world and sabre rat­tling with friend and foe alike. Canada’s mul­ti­lat­eral ac­tivism in the late 40s and 50s—the golden years of Cana­dian diplo­macy—wasn’t aimed at draw­ing dis­tinc­tions with the United States, as oc­curred more com­monly to­wards the end of the Cold War and in its af­ter­math. Quite the op­po­site, it was aimed at help­ing give birth to and make ef­fec­tive the global or­ga­ni­za­tions—the United Na­tions, the Bretton Woods in­sti­tu­tions, NATO—that kept the United States en­gaged glob­ally and pre­vented an Amer­i­can re­turn to the iso­la­tion­ism of the pre-war years.

And so it should be to­day. No grand­stand­ing or pub­lic piety, for this need­lessly riles Wash­ing­ton. Just the dogged work that Canada ex­celled at two gen­er­a­tions ago when the mod­ern world was cre­ated. One timely ex­am­ple is Canada’s lead­er­ship work­ing with like-minded coun­tries—ab­sent the United States—on WTO re­forms to make it more ef­fi­cient, ef­fec­tive and fair. What could be more wor­thy?

White House Photo

Prime Min­is­ter Mul­roney and Pres­i­dent Rea­gan in the Rose Gar­den of the White House in 1984. “Rea­gan found it hard to say no to Canada,” writes Drew Fa­gan, es­pe­cially when Mul­roney called.

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