Barry Campbell is president of Campbell Strategies. He is a government-relations adviser and trade counsel.
Those of us who worked on the North American free-trade agreement, in my case as an outside legal adviser, are dusting off our old files and thinking about what Canada-U.S. trade relations would look like if president-elect Donald Trump follows through on his promise to tear up “the worst trade deal in history.” That prominent pledge will be high on the new leader’s to-do list.
Happily for Canada, the cancellation of NAFTA would resurrect the pre-existing free-trade agreement (FTA) between Canada and the United States. Yes, in this case, Mr. Trump is correct: The Americans were outnegotiated. Our side was clever enough to foresee that NAFTA, with Mexico added into the mix, might be problematic and ultimately fail. By an exchange of notes between Canada and the United States at the time NAFTA was negotiated, it was formally agreed that in the event of NAFTA’s demise, the FTA would revive. Mr. Trump’s target is Mexico and his need for leverage to force Mexico to pay for that damn wall. He can accomplish that by abrogating NAFTA and leaving Canada-U.S. trade relations intact.
Don’t breathe a sigh of relief just yet, though. The FTA had many detractors in the United States, and Canada could indeed come into focus. Some Americans argued that the FTA facilitated the movement of manufacturing jobs to Canada. Funny, this is the same argument that Canadian critics of NAFTA have been making, but in reverse. Liberalized trade may not be a zero-sum game after all. It is just possible that technological change, tax incentives, currency fluctuation and, yes, health-care costs, have everything to do with jobs shifting one way or the other.
It’s not too soon to take a look at what our trade relations with the United States would look like if the FTA were to be revived, or worse – if both NAFTA and the FTA were to be cancelled and we reverted to a world of tariffs and other non-tariff barriers. NAFTA spilled an enormous amount of ink defining the rules of origin for goods and on esoteric things such as “phytosanitary” standards. The eyes well up at the prospect of renegotiating provisions like these.
Canadian businesses will want to closely monitor the evolving trade agenda.
For the energy sector, Mr. Trump’s election is good news. The president-elect was vocal about his support for the Keystone XL pipeline. He also spoke about making the United States “energy independent,” hopefully referring to decreasing oil imports from the Middle East. A North American energy security initiative might benefit Canada, but the Canadian government’s energy policy (a carbon tax!) does not exactly dovetail with Mr. Trump’s.
The North American automobile-manufacturing sector is fully integrated and has been since the days of the Auto Pact, which preceded the FTA. Canada’s auto manufacturers and the auto-parts sector will need to carefully monitor and engage Canadian and U.S. officials to prevent the great unravelling.
Softwood lumber exports have been a trade irritant between Canada and the United States for decades. These exports are currently the subject of negotiations after the expiry of the most recent Canada-U.S. softwood lumber agreement. U.S. willingness to enter into new sectoral trade agreements will be impacted by Mr. Trump’s presidency.
If NAFTA and the FTA were to be cancelled, expect severe disruption in the import and export of agricultural products. Remember, farmers vote in Iowa and Wisconsin. They also vote in Quebec and the Prairies. In agricultural trade, the “art of the deal” may mean “no deal” at all.
Free trade in financial services and the free movement of financial-sector personnel has supported the foreign expansion of Canadian insurers, banks and other financial institutions and benefited leading financial centres such as Toronto. Any disruption to trade in financial services and the free movement of personnel could have significant impacts on the expansion plans and existing operations of Canada’s financial-services players in the United States and Mexico.
Facilitating the movement of goods and people at land crossings has been a focus of Canadian governments of every stripe. To get things moving at the Windsor-Detroit choke point, Canada had to undertake funding necessary infrastructure on both sides of the border. Mr. Trump’s administration will be delighted to let Canada continue to pay. The big winner: Manuel Moroun, who owns the existing bridge and has fought against a new crossing every step of the way.
With the admonition in mind to “never overlook the role of stupidity in world affairs,” an all-out trade war with the United States (and everyone else) is not beyond contemplation. Canada’s recently concluded trade pact with the European Union is a good insurance policy, provided the EU doesn’t implode. There is a further caveat: Canada has tried this “third way” before, but geography is destiny, as they say, and there is no shaking the fact that the United States is our biggest trading partner.
Who knows what movie will be playing at the drive-in when America is great again. But in trade relations, it could be Back to the Future or Groundhog Day. Stay tuned.Report Typo/Error
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