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Tariffs remain but MacNaughton said deal is a good one

See page A3 for addition coverage of the Canadian Ambassador’s visit

In the three years he has served as the face of Canada’s federal government in the United States, David MacNaughton says he has learned one indelible truth — never trust anyone who tells you they can predict what will happen in Washington, D.C.

During the last U.S. presidential election, “all the smart people in Washington were saying Hillary Clinton would win the presidency and the Democrats would take the Senate,” said MacNaughton during an address at the 17th annual Annual Niagara Leaders Breakfast in St. Catharines Friday morning.

“All the smart people in Washington were wrong.”

The former Ridley College student said that is why, as an ambassador, he advises people to be very careful about how they speak about American elections. The outcome can be very tricky to forecast.

Certainly, he did not predict that the election of Donald Trump would mean the end of the North American Free Trade Agreement, which had determined the trade relationship between the two countries for decades.

Nor could MacNaughton know he would be on the front lines of negotiating a new trade deal with a president who labels Canada a national security risk to justify hefty tariffs on Canadian steel and aluminium.

Ottawa has called the American tariffs unreasonable and ridiculous. MacNaughton said they are also against America’s best interests, particularly on aluminium.

“Even if all the American smelters were running at 100 per cent capacity, the U.S could only produce 25 per cent of its total aluminium needs,” he said. “They have to get that aluminium from somewhere. If not from Canada, they have to go to a nonmarket nation like China or Russia. And if that is how the U.S wants to protect its national security, well, that’s a bit odd.”

The election of Trump threw many assumptions about the two countries’ $2 billion a day trade relationship into doubt, and MacNaughton described the trade talks as “the most difficult period of my life.”

Trump — who labelled NAFTA the worst deal of all time — approached the talks not as negotiating the rules governing the trading ecosystem but rather as a “reallocation of shares” in America’s favour, MacNaughton said.

As shocking as Trump’s “American first” approach may be to Canadians, MacNaughton said it is a re-emergence of an isolationist instinct that has historically been part of the American approach to international affairs.

Understanding that didn’t make the trade talks any easier, he said, particularly when American negotiators painted Canadian proposals as consistently unreasonable and unfair.

Fortunately, he said, internal pressures on the White House from Republicans, Democrats and industry leaders who understood the importance of the Canada-U.S. trade relationship, helped keep the negotiations moving forward.

Although Trump’s tariffs on steel and aluminium are still in place, along with Canada’s reciprocal tariffs, McNaughton said the yet-to-be-ratified MexicoCanada-U.S. trade deal, known as USMCA, is a good one.

He said the deal maintains NAFTA’s trade dispute mechanism, which Canada has used successfully in the past. He said there were critics who said Canada should let the mechanism die and then rely on the World Trade Organization to settle disputes.

But MacNaughton said the dispute resolution rules could end tariffs imposed on Canada, while the WTO merely gives a country permission to impose tariffs of its own.

MacNaughton also said Canada managed to defuse an American proposal that all vehicles made in Canada contain 50 per cent American-made parts.

Instead, he said the agreement protects the Canadian automotive industry from random tariffs. unless the industry grows more than 70 per cent its current size.

“All the smart people in Washington were wrong.” DAVID MACNAUGHTON

Canadian Ambassador to U.S.