Trudeau will need colossal nerve to defy Trump on NAFTA

The North American Free Trade talks are at an impasse. Washington is insistent on winning concessions that Ottawa has so far refused to make. Prime Minister Justin Trudeau said again Wednesday that he won’t sign “an unfavourable deal.”

Will he keep that promise? Can he keep it?

And what does he mean by “unfavourable?”

The NAFTA renegotiations were initially characterized by Canada as a way to “modernize” the 24-year-old pact. It was generally assumed in those innocent days that U.S. President Donald Trump would focus most of his demands on Mexico and largely leave Canada alone.

In order to prevent Trump from carrying through with his threat to tear up the pact, Ottawa mounted a sophisticated campaign to convince U.S. national and state legislators that NAFTA served American interests.

In this, the Canadians were largely successful.

But by reminding the Americans how key NAFTA is to their economy, Ottawa highlighted something else: The free trade agreement is even more important to Canada. When Trump eventually turned his baleful gaze northward, he kept that firmly in mind.

Using the age-old strategy of divide and conquer, U.S. negotiators outmanoeuvred the Canadians by striking a separate deal with Mexico. Then they offered to let Ottawa sign onto this deal on a take-it-or-leave-it basis.

If Canada acceded, its autoworkers would gain the same protection from lowwage Mexican operations that the Americans won.

But Canada would also have to cross what Trudeau had called his red lines.

First, it would have to agree to a socalled sunset clause that sets a time limit for the pact (Ottawa quickly did that).

Second, it would have to give up the Chapter 19 dispute-resolution system that exists in the current NAFTA.

Third, it would have to either eliminate or significantly change the supply management system that protects Canadian dairy farmers.

Somewhere along the line, the Americans also resurrected their long-standing demand that Canada stop protecting its cultural industries.

As well, they called on Ottawa to concede to an array of patent and intellectual property demands that, among other things, would make the delivery of a national pharmacare plan more expensive and difficult.

This week, Foreign Affairs Minister Chrystia Freeland left the talks to brief the prime minister in person. That’s usually a sign that important political decisions are in the offing.

The prime minister has long said that no deal is better than a bad deal and that he won’t sign a renewed NAFTA pact unless it’s good for Canada. What Trump’s ultimatum presents him with, it seems, is a mixed deal which, while potentially good for Canadian auto workers, otherwise falls woefully short.

Will he sign on anyway?

He need not do so. Regardless of NAFTA, trade will continue between Canada and the U.S. In most cases, this trade will be either tariff-free or subject to minimal tariffs set by the World Trade Organization.

Trump’s threat to impose 25 per cent tariffs on autos, which would hurt U.S. workers as much as Canadian ones, may come to naught.

In theory, Ottawa could begin to reorient the economy away from the existing system of continental integration created by NAFTA.

Politically, given Trump’s unpopularity in Canada, a decision to confront the U.S. president’s NAFTA demands might work out well for the Liberals.

But abandoning even a fatally flawed NAFTA carries great risk. Does Trudeau have the nerve to take that risk and defy Trump? Does any Canadian political leader?