TRUDEAU’S CHARM OFFENSIVE PAYS OFF IN TARIFF DISPUTE
LOBBYING EFFORT TARGETING NETWORK OF ALLIES LEADS TO EXEMPTION
When the history of this Liberal government is written, among its major achievements will be the bad things it prevented from happening.
When Finance Minister Bill Morneau negotiated the renewed health accord with the provinces, Ottawa secured deals limiting funding increases to growth in the size of the economy, rather than the 5.2 per cent escalator demanded by the premiers. The cumulative savings to the federal government amount to $50-70 billion over a decade.
On Donald Trump’s threatened steel and aluminum tariffs, the Trudeau government has skilfully leveraged the network of contacts and allies built up over the past 18 months to secure Canada an exemption.
Last week, Trump suggested the 25 per cent tariff on steel and 10 per cent levy on aluminum would apply to all countries in order to protect national security. He was apparently convinced by Trade Secretary Wilbur Ross and Trade Director Peter Navarro that U.S. industry could only be protected by building a fortress around America to block trans-shipped Chinese metals.
Over the weekend, Trudeau and his ministers set out to counter that message. The prime minister called close Trump ally, Blackstone Group CEO Steve Schwartzman, while Defence Minister Harjit Sajjan held conversations with his American counterpart James Mattis, pointing out that far from being a national security threat, Canada supplies the U.S. with much of the aluminum used in its fighter jets.
That call is said to have been important because, while national security was viewed as a bargaining chip by Navarro and Ross, it is taken far more seriously by veterans like Mattis, who appreciate the military supply chain links with Canada.
The case for Canada was also made by former prime minister Brian Mulroney to his friend Ross, while Trudeau reached out to opponents of tariffs like Tom Donohue, the chief executive of the U.S. Chamber of Commerce; Mitch McConnell, the U.S. Senate Majority Leader, and Paul Ryan, the Speaker of the U.S. House of Representatives.
However, the pivotal intervention seems to have been Trudeau’s call to Trump on Monday night. Trudeau told the president that he is planning to visit every steel town in Canada in the coming week, where he will reinforce the message that Canadian steel is made in Canada by Canadians.
For whatever reasons, Trump listens to Trudeau and the two have an easygoing, unthreatening relationship reminiscent of the school bully and class dweeb. The prime minister has shown admirable self-restraint in his exchanges with the mercurial Trump and Thursday was the pay-off for abasing himself before the alpha dog president at the White House last October.
Perhaps as important as Trudeau’s argument that Canada is a steadfast ally, integrated tightly into civilian and military supply chains, were American concerns about the impact of tariffs and the breakdown of NAFTA on the Mexican economy. Mexico may not be a national security threat now but it could well become one if its economy collapses.
The temporary exemptions for Canada and Mexico are renewable after 30 days and contingent on progress on NAFTA. But it seems hard to envisage national security provisions being enacted, after they have been waived.
In his press conference, Trump said he has “a feeling we’re going to make a deal on NAFTA”.
Still, this will all prove a pyrrhic victory if a global trade war ensues.
Trump lauded the protective tariff policies of previous Republican presidents, quoting William McKinley (president from 1897-1901) as saying tariffs have “made the lives of the masses of our countrymen sweeter and brighter”.
Trump believes in protectionism from the tips of his polished oxfords to the top of his unique combover — and he made clear that the steel and aluminum levies are just the “first stop”.
That is in stark contrast with the move toward freer trade spreading elsewhere around the world. Trump was speaking just hours after 11 countries, including Canada, signed the TransPacific Partnership deal in Chile.
Trudeau spoke with French President Emmanuel Macron Thursday and also talked with Japanese Prime Minister Shinzo Abe and German Chancellor Angela Merkel.
The leaders agreed on the importance of the rulesbased multi-lateral trading system that Trump is now threatening to blow up.
The problem is particularly acute for Canada because the venue at which the whole global trading edifice might crumble could be the G7 Summit in Charlevoix, Que., in early June.
After three disastrous forays onto the world stage in Vietnam, China and India, it would not be good news for Trudeau if Charlevoix became synonymous with an economic crash.
The success of his diplomatic efforts in gaining Canada an exemption suggests he has Trump’s ear.
The stage is now set for him play the role of interlocutor in Charlevoix — a pivotal role in the bid to prevent the biggest bad thing of all from happening.