LIES, DAMNED LIES AND NEGOTIATIONS

FIVE POINTS TO BEAR IN MIND AS NAFTA TALKS DRAG ON, WITH LITTLE HOPE OF A SENSIBLE END

Talks on a renegotiated North American Free Trade Agreement, which at various times in the past days, weeks and months have been said to be on the verge of either a deal or collapse, are now reported to be “progressing slowly.” An agreement was not expected by the end of the day Friday. Some reports said it was not expected till the end of the month. Or maybe December.

In other words, business as usual. Had you read none of the several thousand reports on the negotiations since they began more than a year ago you would be scarcely less informed than the most avid trade watcher. Some points to bear in mind as the talks grind toward their next “deadline”:

No one knows anything. Any number of authoritative commentators have weighed in on the failure of the talks, if they are in fact failing, and who is to blame if they are. But the truth is that unless you were in the room with the negotiators you have no idea what is really going on — assuming even they do. This is not because there have been no leaks or official accounts of the proceedings, but because…

Everyone is lying to you. Many a rookie reporter has had the same experience covering a labour negotiation. The talks are said to be coming “down to the wire,” facing a dramatic “midnight deadline.” Sources close to one side or the other confide there will be “no more concessions,” that a “strike is now unavoidable.”

So the deadline comes and goes and nothing happens: they keep talking. Or else the side that had vowed not to give an inch more caves and cuts a deal. Which is to say that while all sides dutifully proclaim their aversion to “negotiating through the media,” everyone negotiates through the media, all the time. The NAFTA talks are no different.

The NAFTA talks are completely different. There has never been a trade negotiation like this, because there has never been a president, or leader of any major country, like Donald Trump. It isn’t just that he lies all the time, or changes his mind on those occasions when he is not lying.

It’s that he cannot even be relied upon not to do something crazy, even suicidal. Some analyses of Trump’s extravagant threats to slap tariffs on Canadian-made cars and otherwise bring about the “ruination” of Canada’s economy assume he’s fundamentally like other leaders: bluffing, playacting, posturing for the public in the expectation that the other side will do the same for theirs, after which they can get down to business. Because that’s what other leaders do — leaders who broadly believe in trade.

But Trump, to the extent he believes in anything, really believes in protectionism. Because he knows so little about the economy, or anything, really, and even more because he rejects on principle the advice of anyone who does know anything about anything, he cannot be expected not to do the crazy thing he threatens to do.

This isn’t hardball so much as Calvinball: a game where one player constantly makes up new rules as he goes along. Therefore…

There is probably no “winwin” deal in the offing. Trade deals typically offer something to both sides, even if the gains are not evenly distributed. But the greater likelihood is these talks will produce a lose-lose deal.

Trump sees the world in exclusively win-lose terms, to begin with, and while the combination of his bullying style and American economic might could be expected to give U.S. negotiators the upper hand, that does not mean the changes he succeeds in making to NAFTA will be good for the United States, any more than for Canada and Mexico.

The more stringent North American content rule for tariff-free trade in automobiles agreed upon with Mexico, for instance, together with the new provision requiring 40 to 45 per cent of auto production to be made by workers earning more than $16 an hour, may or may not be good for U.S. autoworkers.

But the resulting increase in the price of a car will not only cost other workers thousands of dollars — the ones in the market for a car — but will cost still other workers their jobs: the ones making the things the second group of workers might have bought with the money they instead had to burn paying the Trump tax on their new car.

No deal is better than a bad deal, unless it isn’t. The objective for Canadian negotiators is essentially to limit the damage to NAFTA, for example the famous Chapter 19 binational dispute resolution panels. Still, it’s hard to imagine a deal that was so bad that it would not be better than no deal, whatever Trump did.

Why? Because the chief benefit of any trade deal is not how it opens other countries’ markets to our exporters, but how it opens our own markets to theirs: that’s where most of the efficiency gains come from.

The biggest thing we want to avoid, then, is allowing ourselves to be sucked into a trade war. Conversely, the “concessions” we are being urged to make to keep Trump satisfied, such as eliminating supply management, are mostly worth doing in their own right, since they aren’t really concessions at all.

But they will likely have little effect on Trump, except perhaps to whet his appetite for more.

Even so, we probably have more bargaining position than is generally understood. Whatever he may claim, Trump cannot just unilaterally cancel NAFTA or exclude Canada from it. He needs Congress to put either into effect, and Congress is unlikely to cooperate.

And even if they did: losing NAFTA would not be the end of the world. We traded with the U.S. for 120 years before there was a free trade deal. We’d still trade with them after. We just wouldn’t trade as efficiently.

What should we do, then? Same as before: Hang tough, keep talking and stall for time. Every day that passes Trump’s political position grows weaker, and the chances of a return to sanity increase.