Are multinational free trade agreements a thing of the past? It's beginning to look that way.
In one 24-hour period this week, the U.S. President effectively killed the Trans-Pacific Partnership by pulling his country out of the 12-nation deal, and Canada signalled that it is prepared to abandon NAFTA, the 23-year-old continental trade agreement it signed with the United States and Mexico.
David MacNaughton, Canada's ambassador to the U.S., says Canada's priority has to be its trade with America. "It's essential that we get a better Canada-U.S. trade and economic and security relationship. Whether that's within an overall NAFTA arrangement, part of that is going to depend on obviously what Mexico's reaction is to what they put on the table."
If President Donald Trump is going to attack NAFTA because he's mad at Mexico, it's a wise move for Ottawa to hedge its bets in favour of its trade with the U.S. – by far the largest single trading partner this country has. The total value of goods and services that crossed the border in both directions in 2015 was $663-billion, according to the Office of the U.S. Trade Representative, and was virtually in balance.
There is no valid economic reason for the U.S. to upset its trade with Canada, but there is equally no reason for Canada to risk its relationship with the U.S. by being overly loyal to NAFTA.
At the same time, this latest shift in the trade winds signals once again that the world is moving away from complicated multinational deals in favour of one-on-one pacts. Led by Mr. Trump's "America First" ethos, and by Britain's impending exit from the European Union, the old idea of continental and regional free-trade zones is under withering attack.
Canada was caught in these shifting winds last year, when it had to scramble to save its free-trade pact with the EU. The Comprehensive Economic and Trade Agreement (CETA) had the approval of all 28 EU member states but almost collapsed when one small region of Belgium threatened to block passage.
Ottawa was able to salvage the deal, but CETA still needs to be ratified by each of the 28 EU counties. If one of them pulls out at the last minute in defence of its greater interests, Canada will have to acknowledge that it was willing to do the same with NAFTA.