New NAFTA Deal Could Shape Canada for a Generation, So Best Hope Trump Ignores Us

Let’s get ready to ruuuuuumbleeeeeeeeeeee (politely, over the dispute resolution mechanism for softwood lumber exports)

Drew Brown

Drew Brown

via wikipedia commons

It's been a long road, friends, but finally all the high-octane political drama since Donald Trump's election has led us to the climax: the renegotiation of the North American Free Trade Agreement. The brass tacks of international trade policy might not be a sexy or terrifying as the culture war vortex presently engulfing The Discourse, but the deals that get hammered out across the boardroom tables of Ottawa, Washington, and Mexico City over the next 18 months will shape the contours of our economic destiny for a generation.

The first round of negotiations kick off tomorrow, and the stakes are fairly high for Canada. So here is a brief overview of what we can expect, and what it means.

Justin Trudeau's government has been aggressively enthusiastic about trade liberalization since coming into office in 2015. They've been sent into a bit of a panic since the American election last November, when US voters bucked a 30-year trend towards free trade by putting an economic nationalist in the White House. Contrary to both his Democratic and even Republican predecessors, Trump is looking to erect new barriers to foreign economic competition in order to make buying American products and hiring American workers more attractive to American companies.

Trudeau and the Liberals, meanwhile, are interested in exactly the opposite. Our government has accordingly spent the last ten months assembling a pan-Canadian war machine to run the Trumpian gauntlet, alongside a full-scale charm offensive not only in Washington but to businesses and governments at the state and municipal levels. Speaking to the National Governors Association in July, Trudeau stressed the value of free trade between the US and Canada, and that "if anything, we'd like a thinner border for trade, not a thicker one."

So far, the Canadian strategy seems to be modest and soft-spoken in the face of Trump's thunderous bluster. Foreign Affairs Minister Chrystia Freeland, fresh on the heels of salvaging the Canada-European Union Trade Agreement, has unveiled a reasonably short list of ten demands headed into this week's negotiations.

Some of them are unlikely to rock the boat, such as looking to toughen up labour laws in Mexico to level out manufacturing competitiveness in all three North American states, or expanding work visa eligibility for professionals to streamline the movement of skilled labour back and forth over the border.

Others will prove a tougher sell. Adding stronger environmental protection provisions to NAFTA may be difficult given that the White House's official position is that climate change is a non-issue. Canada is also intent on keeping its own agricultural protection scheme intact, despite our supply-management system being one of the few points of contention singled out by The Donald himself. It will also be difficult to square America's insistence that Canada open up government contract bidding to US companies while blocking Canadian companies from doing the same. And, of course, Canada and the US will inevitably come to blows over Chapter 19 of NAFTA, a dispute resolution mechanism devised primarily to arbitrate the acrimony over Canada's softwood lumber exports that almost blew up the first free trade negotiations 30 years ago.

Freeland has also stressed that the Canadian government will also insist on including new chapters on gender equality and Indigenous rights. But it's not particularly clear what this would look like in practice, as is often the case with the Trudeau government's ostensibly "progressive" initiatives. Still, Canada has a reputation as an international Dudley Do-Right to uphold, and a little goes a long way.

As if the complexity of re-negotiating a trilateral trade agreement between three uneven economies wasn't enough, there are also three major factors that could complicate Canada's game plan. The first is a Republican-controlled Congress that wants to take a much more active role in the NAFTA talks than its predecessors did back in the 1980s and 90s.

The second is the actual negotiation timeline itself. The NAFTA talks are expected to run for as many as seven to nine rounds of negotiation, which could take up to 18 months to complete. Within that timeframe, there will be a presidential election in Mexico and midterm congressional elections in the United States, either of which could shift national trade priorities rather wildly. The far end of that timeline could also mean that a new NAFTA remains unratified before the 2019 Canadian election, which could upset either the domestic campaign or the trade talks or both, depending on how everything goes.

Last but not least, there is of course the problem of Donald Trump himself. There is a very real possibility that the man could derail months of delicate hemming and hawing with a single tweet in the middle of the night for no real reason whatsoever, and that would be that. It is also unlikely that Trump is interested in negotiating in good faith for either Canada or Mexico, either. There is almost no precedent in the postwar era for Canada to be negotiating with such a bullish administration, save the time we briefly had to tangle with Richard Nixon over currency reform in the 1970s.

Our best hope is that the president is too distracted by some other nonsense to bother himself too much with the NAFTA talks. But given that lead US negotiator John Melle is allegedly a shrewd cynic with an encyclopedic knowledge of North American trade policy who is impervious to the Canadian charm campaign, we might have met our match there too.

We may also want to worry that the Canadian government, from Trudeau's own admission, doesn't have a "Plan B" prepared in the event the NAFTA talks go south and Trump scraps the deal altogether as he has repeatedly threatened to do. About 75 percent of all Canadian exports go to the United States, while by contrast Canada is 18 percent of the American export market. The negotiations could go south very quickly if the Trump administration decides Canada need them more than they need Canada.

But beyond this, the Trudeau government believes that more than just the country's balance sheet is at stake; a failure to improve (or even salvage) NAFTA arrangements could prove disastrous for Canadian society as a whole.

"If we don't act now," Freeland said in her speech at the University of Ottawa on Monday, "Canadians may lose faith in the open society, in immigration and in free trade—just as many have across the Western industrialized world."

It's hard to name stakes higher than the preservation of the liberal order. And from the looks of things, they've got their work cut out for them when Round 1 of the NAFTA negotiations begin on August 16.

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