Canada will be just fine

Trump doesn’t hold all the cards in NAFTA talks

The Hamilton Spectator - - COMMENT - THOMAS WALKOM Thomas Walkom ap­pears in Torstar news­pa­pers.

Prime Min­is­ter Justin Trudeau’s ill-con­sid­ered ef­forts to mol­lify Don­ald Trump con­tinue apace. The de­ci­sion to keep send­ing Cana­dian sol­diers to the war in Iraq is just the lat­est version.

The fed­eral gov­ern­ment’s en­tire de­fence pos­ture and much of its for­eign pol­icy is fo­cused on con­vinc­ing the U.S. pres­i­dent that Canada is a loyal Amer­i­can ally.

Ot­tawa’s hope is that if Trump thinks Canada is pulling its weight mil­i­tar­ily, he will or­der his ne­go­tia­tors to go easy on this coun­try dur­ing the up­com­ing North Amer­i­can Free Trade Agree­ment talks.

Last month’s de­fence re­view won ku­dos from Wash­ing­ton be­cause it promised that Canada would sig­nif­i­cantly in­crease its mil­i­tary spend­ing, an im­por­tant Trump goal.

Last week’s de­ci­sion to ex­tend Canada’s mil­i­tary mis­sion in Iraq for an­other two years prom­ises to be equally well-re­ceived by Trump.

Iron­i­cally, even as NAFTA dom­i­nates al­most ev­ery as­pect of Trudeau’s for­eign pol­icy, a new study cal­cu­lates that the Cana­dian econ­omy could sur­vive quite hand­ily with­out the trade and in­vest­ment pact. But first, the war in Iraq. The lat­est version be­gan in 2014, af­ter then U.S. pres­i­dent Barack Obama be­lat­edly re­al­ized that Daesh, also known as ISIS, posed a real threat to the Iraqi gov­ern­ment.

Canada joined dur­ing the fall of that year, com­mit­ting six fighter jets and a few dozen special-forces troops to act as ad­vis­ers.

Al­though these ad­vis­ers ac­tively take part in the shoot­ing war, the gov­ern­ment in­sists — against all logic — that they are not en­gaged in com­bat.

Last week’s an­nounce­ment is not ex­pected to in­crease the num­ber of on-the-ground ad­vis­ers. But they could be de­ployed any­where in Iraq. The an­nounce­ment also com­mits a trans­port air­craft to the fight.

Up to now, Canada’s fo­cus has been on train­ing Kur­dish fighters. But Iraq’s Kurds are prepar­ing for an in­de­pen­dence ref­er­en­dum in the fall that could put them at odds with the cen­tral gov­ern­ment in Bagh­dad.

All of which is to say that this part of play­ing nice to Trump has its com­pli­ca­tions.

But is it nec­es­sary for Ot­tawa to be so Trump-fo­cused? Does it mat­ter if he trashes NAFTA?

The con­ven­tional wis­dom holds that Canada’s econ­omy would be dev­as­tated if the pact were scrapped. But a new study done by the Cana­dian Cen­tre for Pol­icy Al­ter­na­tives ar­gues oth­er­wise.

Writ­ten by econ­o­mist Pierre Lal­ib­erté and re­search fel­low Scott Sin­clair, the study — en­ti­tled “What is the NAFTA ad­van­tage?” — says that even with­out the pact, trade bar­ri­ers be­tween Canada and the U.S. would be rel­a­tively mi­nor.

That’s be­cause both coun­tries ad­here to rules set by the World Trade Or­ga­ni­za­tion that man­date min­i­mal tar­iffs be­tween mem­ber states.

With­out NAFTA, 41 per cent of Cana­dian ex­ports to the U.S. would still face no tar­iffs at all.

The re­main­ing 59 per cent would face, on av­er­age, ex­tremely mod­est tar­iffs. The au­thors cal­cu­late that the value of these ex­tra tar­iffs would to­tal roughly $4 bil­lion a year — a rel­a­tively small amount when com­pared to an­nual ex­ports of roughly $279 bil­lion.

The au­thors also point out that Canada’s main aim in ne­go­ti­at­ing a deal with the U.S. — which was to ob­tain an ex­emp­tion from that coun­try’s of­ten ar­bi­trary trade laws — never ma­te­ri­al­ized. The eter­nally re­cur­ring soft­wood lum­ber dis­pute is a tes­ta­ment to that.

The study doesn’t try to pre­tend that end­ing NAFTA would be cost­less. Some in­dus­tries, such as agri­cul­ture, would be hit hard. Oth­ers, such as petroleum, would be barely af­fected.

But it does demon­strate that, for the most part, Canada’s econ­omy could purr on quite con­tent­edly with­out the pact.

That, in turn, means two things. First, Ot­tawa can safely walk out of the NAFTA talks if Trump’s de­mands are too ou­tra­geous. Sec­ond, Canada’s gov­ern­ment need not twist its for­eign and de­fence poli­cies out of shape just to candy up to him.

It is pos­si­ble to be in­de­pen­dent.

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