Trump exposes failed trade policy for Canada

If Ottawa doesn’t cave in, U.S. will do dire damage to Canada’s steel, aluminum industries

There’s one upside to Donald Trump’s use of bully-boy tactics against Canada. They may force us to rethink our failed trade strategy with the U.S.

Since the first Canada-U.S. free trade deal of 1988, this country has concentrated on integrating itself seamlessly into the American economy.

Any attempt to foster an independent manufacturing capability was abandoned. Instead, industry was rationalized.

Canadian plants no longer existed to serve the Canadian market. Instead, they were part of a continent-wide production process that rewarded low costs and low wages.

Those that didn’t fit in with the new reality were forced out of business.

Things that Canada used to make, from toasters to furniture to canned fruit, were replaced by imports.

By the time China began flooding the world with cheap goods, the damage to Canadian manufacturers had already been done.

But more than manufacturing was affected.

Every Canadian government policy, including those dealing with national security and defence, focused on keeping the border open so that goods and parts could traverse North America effortlessly.

Canada sent troops into the losing Afghan War to persuade the Americans to keep the border open to trade.

Maher Arar’s torture ordeal occurred because a borderobsessed Canadian government ordered its intelligence services to share all security information, no matter how flimsy, with the U.S.

Some Canadians were wrongly barred from air travel in large part because Ottawa was unwilling to challenge America’s deeply flawed no-fly list.

The assumption behind this drastic restructuring of Canada’s political economy was that America would keep its word — that it would grant special status to Canada (and to Mexico when that country joined what is now called the North American Free Trade Agreement).

And with some notable exceptions, such as softwood lumber, America did keep its word.

But Trump has changed all of that.

His decision to threaten Canada and Mexico with steep tariffs on two metals unless they give him everything he wants in the NAFTA negotiations is essentially blackmail.

In effect, he’s telling Ottawa that if it doesn’t cave in, he will do dire damage to Canada’s steel and aluminum industries.

Foreign Affairs Minister Chrystia Freeland gamely insists that the tariff issue has no bearing on the NAFTA talks, that the two are unrelated.

She’s wrong. The U.S. president has linked them and, in doing so, placed Canada in a terrible bind.

Either it gives in and agrees to an asymmetrical deal that benefits only the U.S. or Trump will shoot the hostages.

It’s a classic example of badfaith bargaining. More to the point, it indicates that the U.S. cannot be trusted — that if it fails to get its way through normal channels, it will invent an excuse.

I suspect that if Canada had been presented with this ultimatum when the first free trade deal with the U.S. was being negotiated in the 1980s, it would have walked out.

It’s not so easy for Canada to do that today. The entire economy has been restructured around the U.S. market.

The federal Liberal government would also face heat from business if it walked out of the NAFTA talks. It’s politically safer to let Trump walk out first.

Still, some boldness is needed here. An end to NAFTA would not mean an end to Canada-U.S. trade. Most would continue unabated.

It would, however, mean an end to the charade. NAFTA was never a good deal for Canada. Trump has made it impossible.