It comes down to this: A new North American trade agreement that includes Canada is possible, even likely. But the Americans are going to have to bend on Chapter 19.
There are good arguments for Canada abandoning Chapter 19 of the original North American free-trade agreement, in which panels of arbitrators chosen by both countries rule on complaints. But those arguments are technical, not political, and in trade, politics is half the game.
If the Trudeau government were to return from Washington with a new agreement in which Canada gave on everything and rescued nothing, domestic reaction would be fierce. Foreign Affairs Minister Chrystia Freeland promised that any agreement would be "good for Canada and good for the middle class.” How will she be able to support that promise if the most important protection against American bullying, neutral arbitration, is gone?
So when the negotiators' children are sent off to school and the talks resume, Wednesday, the fundamental question will be: Is Chapter 19 in or out? Because that’s just another way of saying: Do the Americans want a deal or don’t they?
In recent months, Canadian negotiators have not so much shown flexibility as they have had flexibility thrust upon them. In the bilateral talks from which Canada was excluded, the Mexicans made numerous concessions to the Americans that the Canadians have decided they can live with, such as a provision permitting the accord to be reviewed after six years.
Critics maintain that the Canadian side should never have permitted any talks that Canada was not a part of, and in hindsight it appears those critics were right.
But the Mexicans also surrendered on Chapter 19, abandoning dispute resolution. For all Canadians − progressive or conservative, pro-trade or anti-trade − that won’t pass. If the American side knows anything at all about Canadian public opinion, it must know this.
That doesn’t mean that no further concessions lie ahead for our side. We can expect to see Canada bending on the question of dairy quotas, because Canada made a similar compromise to secure a trade agreement with the European Union and in the Trans-Pacific Partnership talks.
Will Canadian negotiators go further with the U.S. than it went with the EU or Pacific countries on dairy concessions? Faced with the possibility of President Donald Trump imposing revenge tariffs on Canadian autos exports, yes, they probably will.
But dispute resolution is a tool the Liberal team can’t surrender, even though some experts point out that the Americans have found ways to get around the panel rulings, and it might be more reliable to trust U.S. courts.
Having a way to stand up to an economy ten times our size was the take-it-or-leave-it last stand during the original Canada-U.S. free-trade talks back in 1988. If the Canadian team comes home without Chapter 19, the opposition will be waiting with the knives out.
The good news is that, by all accounts, United States Trade Representative Robert Lighthizer and his team seem genuinely committed to reaching an agreement, and with good reason. Just about every American with a stake in the talks wants Canada to be part of this deal, including labour leaders, business leaders, Republicans in Congress, and the automotive industry. Those who don’t seem to care include Mr. Trump and − actually, that’s just about it.
Mr. Trump has bent to the will of Congress and his own cabinet in the past, such as on the issue of sanctions against Russia. If Mr. Lighthizer urges the President to endorse whatever agreement is reached, backed by Senate Majority Leader Mitch McConnell and House Speaker Paul Ryan, as well as other senior Republicans and business leaders, he’ll sign, hold a rally, declare victory, then go golfing.
If the talks do fail, the Liberals will have to explain that failure to Parliament and the Canadian people. The Trump administration will have to explain that failure to Congress and the American people. There is only one difference: Canada will not be smack in the middle of midterm elections.
For all those reasons, odds favour a deal. The wildcard, of course, is a President who appears determined to undermine his own negotiators on Twitter.
But that was ever thus with Mr. Trump. With good will on both sides, the talks will succeed, despite the President’s tweets.