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After NAFTA comes the politics of uncertainty

Barry Campbell, a former MP, is president of Campbell Strategies.

The first time that the United States tore up a continental trade treaty was in 1866. That trade deal had been negotiated in the 1850s and was cancelled to punish Great Britain's remaining colonies in North America for Britain's support of the Southern States in the U.S. Civil War. Trade relations with the U.S. have bedeviled Canadians ever since.

"There will be no more pilgrimages to Washington" a frustrated Sir Wilfrid Laurier said in 1897. After years of protracted trade talks with the United States, the Prime Minister had had enough.

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In 1911, that same frustrated Prime Minister Laurier was back on the trade file (notwithstanding his earlier vow), trying to sell Canadians on "trade reciprocity" with the Yankees. The deal was accepted by U.S. Congress, but Canadians rejected it and sent Laurier packing. "No truck or trade with the Yankees" was the battle cry from the Conservatives.

In the 1980s and 1990s, Liberals, the original free-traders, fought against the Canada-U.S. free-trade agreement and the North American free-trade agreement. Now, it is the Liberals fighting to preserve NAFTA. Staying away from the U.S., as the left-wing NDP has warned for decades, has proved to be a very tricky prospect for Canadian governments given the reality of our trade relationship. Repelled by, or attracted to America – and often at the same time – it takes a deft hand to manage this relationship.

Canada has fared well in bilateral negotiations with the U.S. Because outcomes are more important to us than to them, we put our best and brightest on the file, pursue narrow goals and stay focused. But this time the outcome could be different. Productive negotiations in the past have featured pragmatic players on both sides (at least rational ones), each with a coherent set of achievable goals and prepared to engage in the give and take that gets sovereign nations to YES. A negotiation where one party believes its best available alternative to a negotiated settlement is "no deal" and the other party believes that "no deal" is better than the deal being offered, is most certainly doomed.

Canada has not been idle. While not abandoning its belief in the multilateral, rules-based, global trading system represented by the World Trade Organization, Canada has been working outside that system chasing that elusive "third option": not the status quo, not increased integration with the U.S., but steps to lessen dependency on the U.S., including more trade with the world (as first suggested by Secretary of State for External Affairs Mitchell Sharp in 1972).

A free-trade deal with Europe is done and Canada is reaching out to China, India, South America, the Association of Southeast Asian Nations (ASEAN) and the entire Pacific Rim. But the intersection of all these multilateral and regional deals is complex (the hiccup over auto trade that nearly scuppered the Trans-Pacific Partnership talks is a case in point) and Canada's trade with the world (excluding the U.S.) still only amounts to 30 per cent of Canada's overall trade. It will remain critically important to manage the U.S. relationship somehow.

Ongoing uncertainty over the survival of NAFTA can seriously damage the Canadian economy every bit as much as the U.S. tearing it up. Anyone who thinks that abrogation of the NAFTA treaty by the U.S. will "clear the air" only has to look to the post-Brexit fiasco in the U.K. An attempt by the U.S. President to unilaterally terminate NAFTA will most certainly be challenged in U.S. courts and Congress. And legislative action will be required to gut the deal and put new regulations in place to govern trade in North America. This will quickly devolve into arguments on Capitol Hill on the meaning of "repeal" or is it to be "repeal and replace."

No one can predict how the current negotiations with the U.S. will play out.

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What can be predicted is that uncertainty over our future trading relationship will persist long past the six-month termination period in NAFTA and well into the next Canadian federal election season. Trade with the United States will once again upend Canadian politics as it has for more than a hundred years. Over the decades, it has been hard to keep track of who has been on what side of the debate. Liberals and Conservatives have flipped between "pro" and "con" as political winds and electoral prospects dictated.

If the NAFTA talks fail, the governing Liberals who have been so invested in these negotiations will wear the mess. The opposition Conservatives will pounce and accuse the Liberals of wrecking the Canadian economy. The Conservatives will take that all the way into the next federal election promising to repair Canada's relations with the United States when they are elected. Debate will rage over "who lost NAFTA" and "where do we go from here." Smiling like Cheshire cats, the New Democrats will remind us that their enduring knee-jerk anti-Americanism has been vindicated.

It's not just that we cannot find common ground on trade. Different perspectives on climate, immigration, marijuana and China (not to mention guns, gender and abortion) will be brought into sharper focus in the next federal election. Get too close to the Americans and you may touch that electrified "third rail," as Laurier learned more than a hundred years ago. The same lesson may be in store for another Liberal prime minister.

The interesting thing about the 1866 abrogation is that it served as an impetus for the birth of Canada. The end of NAFTA (should that occur) can be another defining moment for Canada and not just a national trauma – but only if we survive our own politics.

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