Trump, Trade and the Canadian Dimension

By | January 3, 2017

With Mr. Trump’s election as president, every carefully orchestrated American policy (like China and Taiwan) and every nuanced and finely negotiated treaty (like the Iran nuclear deal) is up for grabs. That is equally true for trade agreements like the NAFTA, repeatedly slammed by Mr. Trump as the worst deal every signed by the United States.

One of the first things on the Trump administration’s trade agenda will be to demand (that’s right, demand) that the NAFTA be renegotiated. While Mr. Trump’s arrows are aimed at Mexico, Canada is directly in target range on a variety of fronts.

Even though Canada’s ambassador in Washington, David MacNaughton, made some mollifying comments about dealing with the new administration in a cooperative manner (Globe and Mail, 2 January 2017), my predictions are that the atmosphere around the table will be very stormy.

The trade policy team Mr. Trump is assembling is aggressively skeptical, if not hostile, to trade liberalization, especially if it entails any compromises by the United States.

The new trade policy trio, Wilbur Ross, Dan DiMicco and the new USTR, Robert Lighthizer, a senior partner at Skadden Arps, have been critical of US trade policy under Mr. Trump’s predecessors. China is seen as a particular menace. This is an indication of the kind of collective perspective they bring to the job.

Trade agreements are all about compromise and mutually-balanced concessions – but that means a willingness on all sides to pursue a common objective to emerge with a fair and workable deal. Mr. Trump seems allergic to this kind of arrangement. For him, and presumably his trade team, it’s a zero-sum game.

There has been discussion in Canada over the technical aspects of the US actually withdrawing from the NAFTA and whether Congress would have to approve that step. Whatever the answer, the fact is that the President has full authority to demand any treaty be opened up for re-negotiation.

It’s also illusionary to think that if the US were eventually to withdraw from the NAFTA that the pre-existing Canada-US bilateral Free Trade Agreement of 1988 would then simply take over. If the American administration is hostile to elements in the NAFTA, it seems obvious that the FTA will be on the table as well.

All of this makes for considerable uncertainty in Canada US trade relations. As I said in my 3 January 2017 opinion piece in the Globe and Mail, the times are a-changin’ and many aspects of the established order has been turned upside down. See the piece here.

Until the US agenda is fully fleshed out, the world at large and Canada in particular, will be waiting with some anxiety.