by Thomas Walkom
In a strange way, Donald Trump’s disdain for the North American Free Trade Agreement may do Canada a favour.
He may end up forcing this country to reduce its dependence on the United States.
We know that the U.S. president doesn’t like NAFTA. It is one of the few consistent positions he holds.
He routinely calls it the worst trade deal the U.S. has ever signed. From time to time, he threatens to abrogate it.
He accuses Canada and Mexico, the two other signatories to the agreement, of hosing the U.S. He promises they won’t get away with this anymore.
His intemperate remarks have earned a harsh reaction from Mexico. But Ottawa has been far more sanguine.
The Canadian government appears to think that Trump doesn’t mean what he says, that he is just engaging in some kind of good-cop-bad-cop game in order to enhance America’s bargaining position during the three-party NAFTA renegotiations.
But what if he does mean it? What if, through his negotiators, he insists on changes that Canada cannot
– or at least should not – accept?
We know that Canada and the U.S. are already at daggers drawn over a provision in the current deal that gives each member state a limited right to challenge one another’s trade practices before an independent tribunal.
Trump wants the provision scrapped altogether while Prime Minister Justin Trudeau has said he won’t
sign a deal without it.
The two countries also disagree vigorously over U.S. Buy America policies as well as Trump’s insistence that manufactured goods sold in the U.S. contain a specific amount of U.S. content.
Mexico’s government, also at loggerheads with Trump, is already working on alternative plans for trade diversification should the NAFTA talks fail. Trudeau would be wise to do the same.
Indeed, some diversification has already begun. The recently negotiated trade deal between Canada and the European Union, while fatally flawed in its details, is at least the right idea. So is the long-simmering
but never-acted-upon plan to negotiate a trade agreement with Japan.
Canada has already signed a foreign investment pact with China and started work on a comprehensive trade deal. The foreign investment pact is lopsided in China’s favour. With luck, Ottawa will do better on any trade deal.
None of this means Canada should give up on trading with the U.S. It is a big country that sits right next door.
But we should remember two things. First, Canada traded quite handily with the U.S. before signing a formal free trade agreement with that country. It could do so again.
A recent study done for the Canadian Centre for Policy Alternatives points out that even without NAFTA or its predecessor, the Canada-U.S. Free Trade Agreement of 1989, most Canadian exports to the U.S. would face either zero or moderate tariffs.
Second, there are other nations eager to buy the goods and services Canada produces. Canadian governments have tried before to make the country’s economy less reliant on the U.S. Pierre Trudeau’s so-called Third Option, including his brief dalliance with economic nationalism, was an expression of this idea.
But such attempts always foundered on the fact that integration with the U.S. was easier and, for those occupying the commanding heights of the economy, far more profitable.
That fact gave us both the original Canada-U.S. free trade agreement and its successor, NAFTA.
Now, Trump has changed the calculus. He is insisting not only that America must win from the NAFTA talks but that Canada and Mexico must lose.
His is an aggressive form of nationalism that borders on jingoism. But it could spark a new, practical and more productive form of Canadian nationalism in response. And that wouldn’t be so bad.
Thomas Walkom usually appears Monday, Wednesday and Friday.
Copyright 2017-Torstar Syndication Services