Trade Minister Ed Fast got a question about the future of the North American free-trade agreement, now that both Canada and the United States are negotiating trade arrangements with the European Union.
Mr. Fast responded that NAFTA will continue to be an important bilateral arrangement between Canada and the United States. Then he caught himself. “Excuse me, trilateral agreement,” he said Thursday in front of an audience of about 20 trade experts and lawyers at the Peterson Institute for International Economics in Washington.
When leaders talk about trade from the script, it’s all kumbaya and let’s get together.
But on occasion, the me-first imperative of trade relationships comes through loud and clear. Mexico is one of the few places on the planet where Canada actually has gained market share in recent years. Yet Canada never has stopped seeing the country as an add-on to the Canada-U.S. trade agreement.
I have seen Mr. Fast come through Washington a few times now. Freudian slips aside, this was his most hawkish appearance.
Gone were the diplomatic suggestions that the Doha round of global trade talks could be saved. Instead, he predicted that countries such as India will follow Canada and other countries in pursuing bilateral and regional trade agreements. (“They recognize that they cannot be left behind,” he said.)
Could China eventually join the Trans Pacific Partnership? Only if it gets serious about lowering non-tariff barriers, he said. Asked by reporters what he thought of suggestions that Canada, the U.S. and Mexico form a common negotiating position in talks over the TPP, Mr. Fast said that would be difficult, since all three countries had their own interests to protect.
The shift in Mr. Fast’s rhetoric reflects the global shift in governments’ approach to trade. For years, trade ministers, to a great extent, allowed themselves to be guided by economic theory, which argues for the broadest free-trade agreement possible. So governments put most of their efforts into improving the World Trade Organization. This was especially beneficial for a country like Canada. In bilateral talks with massive economies such as the U.S. and the EU, Canada lacks leverage. In multilateral negotiations, smaller economies have a better chance of scoring some wins against the biggest players.
That commitment to making the WTO the locus for expanding free trade is gone. As result, global trade talks will become more Darwinian. Only the strongest and the fittest will survive.
In this brave new world, the United States is as much a rival as a partner. One need look no further than the Obama administration’s decision to start free-trade talks with the EU, even as Canada struggles to clear the final hurdles in its own negotiations with European bloc.
Gary Hufbauer, a senior fellow at the Peterson Institute, told Mr. Fast that he had heard that the Europeans had offered to extend to Canada anything they end up giving the U.S. that goes beyond the Canada-EU agreement. Mr. Hufbauer asked whether the U.S. had made the same commitment. Mr. Fast declined to comment.
The evolution of the Canadian and U.S. negotiations with Europe will say a lot about the world’s commitment to multilateralism. Logic suggests that if the EU is negotiating with the U.S. and Canada, and Canada and the U.S. already have agreed a free-trade agreement, that it only makes sense to avoid creating a snarl of overlapping regulations.
Mr. Fast damped the dreamers who long for a trans-Atlantic free-trade agreement. Maybe some day, Mr. Fast said, but definitely not immediately.
Still, Canada’s Trade Minister said he is paying close attention to the U.S.-EU talks. “We recognize that the North American economy is highly integrated,” Mr. Fast told me in an interview. “We want to make sure that in fact if down the road there is an agreement between the United States and the EU, that the integrated nature of our economies is taken into account, and more specifically as it relates to the auto sector, which is fully integrated in North America.”