Time for Plan B, Mr. Trudeau
As Justin Trudeau met with Donald Trump in Washington this week, NAFTA’s death and the shock waves it would send through the global economy seemed more likely than ever.
With Canada’s prime minister sitting beside him in the White House, the American president calmly discussed terminating the 23-year-old North American Free Trade Agreement between Canada, the United States and Mexico saying, in defiance of all reason, “it will be fine” if that happens.
While Trudeau kept a brave face through it all, he later admitted: “We have to be ready for anything.”
He’s right. Canada must be prepared for whatever this unpredictable and destructive president will do next.
Trudeau’s Plan A— a charm offensive to win over not just Trump but Congressional and state leaders who could save NAFTA — has been smart and well-executed. The odds for its success, however, are diminishing. It’s time for the Canadian government — and Canadian businesses — to come up with Plan B.
That will be the blueprint for a post-NAFTA Canadian economy. With luck, this contingency measure will never be needed. Perhaps Trump — who once said NAFTA merely needed to be “tweaked” — is bluffing to win the best possible deal for America.
Maybe Congress will stick up for continental free trade if Trump tries to make good on repeated threats to tear up NAFTA. But don’t bet on any of these scenarios. In its latest demands, which were laid out Thursday and Friday, the blatantly protectionist Trump administration seemed bent on sabotaging the trade pact.
In order to travel duty-free between the three countries, newly manufactured vehicles would have to contain at least 85 per cent North American content and 50 per cent U.S. content, the Americans insist.
They also propose a sunset clause that would automatically terminate NAFTA in five years unless all three countries approved it again.
Canadian and Mexican officials vehemently oppose both demands. So what’s next? NAFTA has led to massive growth in Canadian exports and the Canadian economy.
But if NAFTA ends, the new tariffs that would follow would raise prices for consumers and choke off continental trade.
Supply chains that employ workers from each of the member countries would be disrupted.
Faced with these dangers and uncertainties, Canadian businesses need to know whether, if NAFTA is scrapped, they could apply the rules of the Canada-U. S. free trade deal that preceded it.
Is Trudeau willing to cut a bilateral trade deal with the U.S. or will Canada stand with its Mexican trade partner in the days ahead? We need clarity on this. Trudeau should court new trading partners, too. Reviving the Trans-Pacific Partnership, which was derailed by Trump, could open new export markets for Canada in 10 Pacific-rim countries.
A free trade deal with China — which despite its challenges appeals to Trudeau — deserves more serious study.
In addition, the federal government should work harder to get Canadian oil and natural gas to new international markets.
We don’t want NAFTA to die. But Canadians need an insurance policy in case it does.