The plan was to wait to comment on how the Trump administration will be affecting Canada until things settle down in Washington. The “settle down” part doesn’t look like it will happen anytime soon. So, here goes.
We have had a lot of comforting voices from American officials, such as the new Commerce Secretary Wilbur Ross, stating that U.S. President Donald Trump’s demands for a renegotiated North American Free Trade Agreement (NAFTA) will mostly affect Mexico, not Canada. And Anthony Scaramucci, a Trump economic advisor, calmed everybody down at the recent World Economic Forum in Davos, Switzerland, with his assurance that Washington still believes in trade.
Justin Trudeau’s government, by just about every review, is handling the situation well with a crisis-management playbook that appears to be keeping Canadians as calm as possible. In addition, Canada’s ambassador in Washington, David MacNaughton, is an insider’s insider who knows the anatomy of power well.
Prime Minister Trudeau’s apparatchiks knew enough on this file to get out and in front of the issue and begin laying down a credible narrative rather than let events in Washington manage the story.
Still, NAFTA is hanging over our government like an ominous albatross. And maybe that’s the point, just like the Second World War German battleship Tirpitz was used not to fight but to force the British to tie up precious naval resources in the North Sea to keep the ship contained.
Naval strategists call this “fleet in being”: a naval force doesn’t have to leave port to cause the enemies a headache. NAFTA may be the diplomatic equivalent. Global Affairs Canada is tied up with free trade talks with India and China already and soon will be with Japan.
Trump’s book, The Art of the Deal, discusses the strategy of getting rivals excited at the beginning of negotiations, then zeroing in on the real prize.
With NAFTA being reopened, Canada’s trade negotiating talent is going to be stretched very thin. In fact, it may already be stretched, NAFTA reopening or not.
There have already been signs that Washington intends to test Ottawa’s stamina. Just after New Year’s Day, the Office of the U.S. Trade Representative didn’t bother waiting for Trump’s inauguration to launch a trade action against British Columbia on behalf of California wine producers.
In the dairy sector, the International Dairy Foods Association, which represents U.S. producers, is lobbying Trump to launch a trade action against Ontario for keeping unfiltered milk imports such as cheese out of the province. And the dispute between Canada and the U.S. over softwood lumber exports is about to start up again.
All of these disputes would be getting far more attention if NAFTA weren’t sucking up our attention.
Complicating things is the fact that it is not yet clear who in the U.S. will actually be in charge of the NAFTA file. Will it be the Commerce Secretary, who has been making the reassuring noises? Or will it be Trade Representative Robert Lighthizer, who has said nothing about Canada? Or will it be Peter Navarro, head of the National Trade Council, a new branch of the White House?
Or will it actually be Trump, the Twitter president who is about as mercurial as Hugo Chávez, the late Venezuelan dictator?
Former Quebec premier Jean Charest has reminded us that the U.S. will reserve the right to interpret treaty language in its favour: “It’s called ‘power’,” he said in a CBC interview.
Gordon Ritchie, former trade ambassador for Canada, warned us in the past that the Americans are bullies at the negotiating table. In fact, we have seen how Americans will say nice things when the public is listening, but behave like colonial bosses in private.
A colonial mentality is likely the reason the Trump administration didn’t bother giving Ottawa a heads-up before the executive order was signed to revive Keystone.
Ritchie advised Canada to bargain hard with its own demands, lest we be sideswiped by action against Mexico. That makes sense. A trade war with the U.S. may have begun already. But it may not be too late to keep the dispute closer to the Cold War category, instead of a full-blown one.
So far, Canada has been managing this file well. Now, it is time to turn things to our advantage.
© 2017 Investment Executive. All rights reserved.
Quebec to drop withdrawal limit for LIFs in 2025
Move will give clients more flexibility for retirement income and tax planning