What Canada wants, and how to get it

The Globe and Mail (Prairie Edition) - - OPINION -

The rene­go­ti­a­tion of the North Amer­i­can free-trade agree­ment is go­ing to be a long jour­ney, and it’s barely started. But so far, the Trudeau gov­ern­ment has been mak­ing all the right moves in deal­ing with, and ma­noeu­vring around, the Trump ad­min­is­tra­tion. Ottawa has been smart – and per­haps more im­por­tantly, it has been lucky.

Smart: Stu­diously avoid­ing pub­lic dis­agree­ments with a volatile Pres­i­dent Don­ald Trump, while mount­ing a qui­etly ef­fec­tive cam­paign to re­mind other ac­tors in the U.S. po­lit­i­cal sys­tem – mem­bers of Congress, gover­nors, busi­ness lead­ers – how im­por­tant Cana­dian trade is for the U.S. and just how in­ter­con­nected the two economies are.

Lucky: It’s easy to stir up Amer­i­can vot­ers with talk of Mex­i­cans steal­ing their jobs or of ne­far­i­ous Chi­nese trade prac­tices. There’s next to no con­stituency for de­mo­niz­ing Canada. “Ne­far­i­ous Cana­dian trade prac­tices” sounds like a Stephen Col­bert punch­line. Last Jan­uary, ac­cord­ing to a re­cently leaked tran­script, Mr. Trump told the Mex­i­can Pres­i­dent that rene­go­ti­at­ing NAFTA was mostly about Mex­ico. “We do not have to worry about Canada,” he said. “We do not even think about them.” He was prob­a­bly telling the truth.

In fact, if the only coun­tries in NAFTA were Canada and the U.S., it’s un­likely that Mr. Trump would have made re­open­ing the deal a po­lit­i­cal pri­or­ity, or even an is­sue.

But NAFTA is a three-party agree­ment, which puts Canada in the thick of Mr. Trump’s need to be seen re­shap­ing his coun­try’s trade re­la­tion­ship with Mex­ico. And though the U.S. de­mands re­leased last month were re­mark­ably mod­er­ate – com­pared to Mr. Trump’s rhetoric, ev­ery­thing is – there are no guar­an­tees. We might end up with a bet­ter NAFTA. We might end up with one much worse. Talks be­gin Aug. 16.

At those talks, which will last into next year and be­yond, Ottawa has to stand up for Canada’s in­ter­ests – be­hind closed doors. But there’s lit­tle ben­e­fit in mak­ing noise in pub­lic. The Trudeau gov­ern­ment clearly gets this, and has stu­diously avoided per­son­ally an­tag­o­niz­ing Mr. Trump, or dis­agree­ing with him pub­licly. That is pru­dent. It’s also not go­ing to be easy to keep up.

Con­sider the case of Mex­i­can Pres­i­dent En­rique Pena Ni­eto. In pri­vate talks, such as Jan­uary’s leaked con­ver­sa­tion, he and his min­is­ters have re­peat­edly told Wash­ing­ton that, con­trary to Mr. Trump’s ab­surd elec­tion prom­ise, Mex­ico is ob­vi­ously not go­ing to pay for a wall along Amer­ica’s south­ern bor­der. But at the same time, Mex­i­can lead­ers have tried to avoid pub­licly con­tra­dict­ing Mr. Trump, par­tic­u­larly when stand­ing right next to him.

As a re­sult, many Mex­i­cans think Mr. Ni­eto looks weak. Na­tional pride de­mands that Mex­ico’s leader be seen to be clash­ing with his po­lit­i­cal neme­sis, Mr. Trump.

The Trudeau Lib­er­als could eas­ily find them­selves fac­ing sim­i­lar pres­sures. Late last month, af­ter de­mands from the op­po­si­tion to em­u­late the Trump ad­min­is­tra­tion and pub­licly re­lease its ne­go­ti­a­tion ob­jec­tives, Mr. Trudeau said that main­tain­ing what he called a “fair” dis­pute set­tle­ment mech­a­nism is es­sen­tial for Canada.

The Prime Min­is­ter is of course right – this is a long-stand­ing Cana­dian de­mand, and it should be. It’s in the cur­rent treaty be­cause Canada in­sisted on it. With­out an in­de­pen­dent mech­a­nism for as­sess­ing NAFTA trade dis­putes, the Amer­i­cans would be free to act as judge, jury and ex­e­cu­tioner of their own trade com­plaints. NAFTA wouldn’t be a bind­ing con­tract; it would an as­pi­ra­tional wish list, to be vi­o­lated at will. An in­de­pen­dent dis­pute set­tle­ment mech­a­nism is Is­sue No. 1 for Canada. But is there any up­side in the PM say­ing so, pub­licly? As the ne­go­ti­a­tions progress, and Mr. Trump re­peat­edly jumps into the fray on Twitter, Mr. Trudeau will surely feel pushed to re­spond. He should re­sist the im­pulse – even though, in the short run at least, many Cana­di­ans may hold it against him.

In ad­di­tion to pre­serv­ing an in­de­pen­dent dis­pute ad­ju­di­ca­tion mech­a­nism, Canada must also en­sure that the U.S. doesn’t tilt a re­newed NAFTA to its ad­van­tage. That in­cludes moves to ben­e­fit Amer­i­can phar­ma­ceu­ti­cal com­pa­nies in ways that ex­tend patent pro­tec­tions and push up drug costs. It in­cludes a U.S. de­sire to give Amer­i­can on­line re­tail­ers a leg up com­pared to Cana­dian re­tail­ers, by ex­empt­ing sig­nif­i­cant amounts of for­eign on­line pur­chases from du­ties and sales taxes. And then there’s the U.S. goal of cre­at­ing a gi­ant “Buy Amer­ica” ex­cep­tion in­side NAFTA, which goes di­rectly against the whole idea of free trade.

On the other hand, Canada may not want to try to bring soft­wood into the talks. Try­ing to fix that end­less dis­pute through NAFTA might re­duce Cana­dian ne­go­ti­at­ing lever­age else­where.

And as for agri­cul­tural sup­ply man­age­ment, if the Amer­i­cans push the is­sue, Ottawa should be happy to lower the trade bar­ri­ers – and the high prices paid by Cana­dian con­sumers for dairy and other foods.

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