There is no point in a trade pact with an untrustworthy partner

It’s difficult for many Canadians to comprehend. But the truth is, it’s time to walk away from NAFTA

Finally, Canada is asking the right question in the North American Free Trade Agreement talks.

That question is: What’s the point? More specifically, what’s the point of entering into a trade agreement with a nation that insists on the right to overrule that pact on a whim?

That’s a question many have asked privately. On Wednesday, Canadian ambassador to the U.S. David MacNaughton asked it publicly.

“If you can’t resolve disputes in a fair and balanced way, then what’s the use of the agreement?” he said. “If you can’t have some curb on the arbitrary use of tariffs under the guise of national security … then I don’t think it’s much of an agreement.”

Here, the ambassador was referring to two major points of contention in the talks between Canada and the U.S. The first is whether there should be some kind of independent system for resolving disputes. Canada wants to stick with the existing so-called Chapter 19 provisions. The U.S. wants to scrap them.

The second is U.S. President Donald Trump’s insistence on being able to override any trade deal — including NAFTA — for reasons of “national security.”

He has used this national security exemption to slap punitive tariffs on Canadian steel and aluminum exports to the U.S. He is threatening to do the same with Canadian-built autos.

The president isn’t required to prove that U.S. national security is endangered before invoking this law. And so far he hasn’t.

Rather, he has boasted that he is using this loophole in U.S. trade law as an excuse to force other nations, including Canada, into making concessions.

As MacNaughton says, what’s the point of making a deal with someone who plays that kind of game?

If Trump could be trusted not to use this national security loophole arbitrarily, a deal certainly could be possible.

Except for the concessions already made by Mexico (that country has agreed that 40 to 45 per cent of NAFTA auto content must be made in plants paying at least US$16 an hour), such a deal wouldn’t be particularly good for Canada.

To win Trump’s approval, Canada would have to make significant concessions in its supply management system for dairy farmers.

Canada would also have to give way to the Americans in areas such as drug patents and intellectual property (thus raising the price of pharmaceuticals in this country).

And it would have to accept that the U.S. won’t exempt Canada from state and local Buy American laws.

Ottawa has said it won’t relax its laws designed to protect Canadian culture. But in the digital era, many of these laws are out of date.

Others — such as measures designed to ensure Canadian ownership of the news media — are simply not enforced by Ottawa.

So I’d be surprised if the Americans cared that much about removing the so-called cultural exemption clause from NAFTA.

Even the dispute resolution impasse could be finessed.

The existing Chapter 19 provision is already weak. It requires only that independent panels determine whether each country is adhering to its own trade laws.

In some cases, most notably those involving softwood lumber, the U.S. has dealt with a loss suffered before a Chapter 19 panel by simply changing the law.

In short, there is probably a way to weaken Chapter 19 further, without eliminating it entirely. That would give the U.S. what it wants without embarrassing the Canadian government too much.

But if Trump insists on keeping intact the U.S. national security loophole, as he almost certainly will, there is simply no point to NAFTA.

A trade pact that can be upended on the whim of the U.S. president is of no use to Canada.

It provides no certainty for those Canadian businesses that hope to export tariff-free to the U.S. It provides no certainty for those who might invest in Canada.

To its credit, the Canadian government is now acknowledging this publicly.

If Ottawa can’t persuade Trump to exempt Canada from the national security loophole, it’s time to end the charade.

It’s time to walk away from these talks.