Time to tread carefully
By most accounts, the NAFTA negotiations are getting down to crunch time.
But there is a long way to go before this revamped trade pact can be signed, sealed and delivered.
Still, we are hearing positive noises from all three parties on the NAFTA front. U.S. President Donald Trump has been sounding encouraging for a change, recently remarking: “We’ll have something, I think, fairly soon.”
U.S. Trade Representative Robert Lighthizer chimed in by noting: “I think we are making progress. I think that all three parties want to move forward. We have a short window. I’m optimistic that we can get something done in principle in the next little bit.”
While the Mexicans are generally remaining cautiously optimistic, the Canadian side is operating under a favourable mindset as well. Global Affairs Minister Chrystia Freeland observed: “We’ve entered a new, more intensive stage of engagement. That always happens around now in a trade agreement…The pace of progress increases as you get closer to the end.”
The U.S. side is clearly getting nervous as it stares at the forthcoming Mexican presidential election on July 1st, the U.S. mid-term congressional elections in early November and, most importantly, the congressional timetable for seeking legislative approval of any new trade pact.
Though the drop-dead date is debatable, many trade experts suggest that a completed deal needs to be made before the middle of May to have sufficient time to make its way through the various administrative and legislative hurdles that await.
It is obvious that a lot of work remains to be completed. And it is highly unlikely that a comprehensive trade deal can be put to bed in the next two weeks.
There are just too many areas of contention and bracketed text that remain outstanding and unresolved.
Disputes around government procurement (especially Buy America), Canada’s agricultural supply management system, dispute resolution and a sunset clause could easily trip up the best of trade negotiators.
So, while what we are seeing now unfold is encouraging, it is more about symbolism and less about substance. Therefore, Canada should not be in any rush to do Washington’s bidding.
For one thing, Canada now has more NAFTA cards to play and thus has some critical leverage over the negotiations. Ottawa should not squander that advantage by accepting less. That would be tantamount to ceding advantage to the Americans.
After all, accepting an interim deal without including major concessions to Canada effectively gets the U.S. off the hook. We saw this play out in the bargaining sessions for the 1988 Canada-U.S. Free Trade Agreement when the U.S. side played us by dragging the negotiations out.
What Canada does not want to see happen is finding itself in a similar position of wanting a trade pact infinitely more than the Americans do.
Because right now, it is the U.S. side that desperately wants a NAFTA 2.0.
All this trade smoke and mirrors may be partially about the U.S. clearing the trade decks to make way for a full-court press on the protectionist Chinese. But this is more likely about giving the U.S. a symbolic victory at a hemispheric gathering and sending a positive signal to Washington’s Latin American neighbours.
To be sure, the White House badly wants something significant to put in the domestic policy window, to send a comforting message to the slumping financial markets and to make a major splash at the Summit of the Americas.
Canada should be focused like a laser on extracting its own trade concessions from the U.S. for going along with this spectacle.
In fact, the Trudeau government may not get a better chance to secure its central NAFTA aims. This is no time, then, to settle for a provisional deal that could easily be altered or even fall apart some time down the road.
The time is now for Ottawa to squeeze the Americans for whatever we can at the negotiating table.