The new trade deal with the U.S. hasn’t been nailed down, and there have been signs that some in the new, Democratic-controlled Congress might block it. But Canada doesn’t have to fret about that. It has other trade problems.
Beating back U.S. President Donald Trump’s trade threats was a big deal for Canada, and that’s why Prime Minister Justin Trudeau’s Liberal government figured they had to sign a new trade deal. But ratifying it in the Congress? That’s somebody else’s problem.
Foreign Affairs Minister Chrysia Freeland said nearly as much last week but she wasn’t frank about the reasons.
Ms. Freeland claimed that it would be inappropriate for Canada to get involved in the U.S. ratification process − never mind that Canadian officials spent the past 18 months lobbying U.S. legislators on trade.
No, the real reasons Ms. Freeland isn’t worrying about ratification are (a) the Canadian government doesn’t really think Democrats will block the USMCA, and (b) it’s no big problem if they do.
The step the Canadian government will be eager to complete is the actual signing of the agreement by all three governments.
That’s because the side agreements in which the U.S. gives guarantees that it wont apply Section 232 tariffs on the auto industry go into effect when the deal is signed − even if it is not ratified.
That makes the signing, scheduled for Nov. 30, a key hurdle, while ratification is an American issue.
There are influential Democrats in Congress suggesting that now that the party controls the House of Representatives, they want changes, notably to enforce labour provisions with Mexico.
The Democrats’ objections mean it might be a while before the Trump administration sends USMCA legislation to Congress. But when push comes to shove, the rules require a yes-or-no vote, and Democrats are unlikely to want to defeat it.
The USMCA includes several changes from the old NAFTA, including a $16-an-hour wage clause for some Mexican exports and the elimination of investor-state litigation, that Midwest unions in the Democratic base should prefer.
And if Democrats in Congress vote down the USMCA, Mr. Trump can use it in the 2020 election campaign − arguing that Democrats voted for the old, hated NAFTA.
In the meantime, Mr. Trudeau’s government will be happy to have the old NAFTA stay in place. It is a better deal, and Canada does not have to make good on USMCA concessions until that deal is ratified.
But signing is another matter. The objections of a group of Republicans who oppose a clause on LGBTQ rights could be cause for more concern because it means a chunk of Mr. Trump’s own political base is pressing him to change things before he signs.
And the Canadian government is facing its own pressure from unions to delay the signing if it can’t get the U.S. to lift the tariffs on steel and aluminum that it imposed back in June.
The Canadian government’s public line is that those steel tariffs are separate from the broader trade agreement. But that’s not really true.
Mr. Trump acknowledged that he imposed those tariffs to press Canada and Mexico to strike the USMCA deal. Now that that is done, Canadian officials argue, the tariffs should go.
U.S. officials have proposed replacing tariffs with quotas that would cap Canadian exports. Canada accepted quotas in the auto sector, but they were so high that they weren’t expected to have a big impact. So far, the Canadian steel industry does not want the U.S. quota deal.
The Canadian government and the industry don’t want to accept quotas that would hold back investment. Ken Neumann, the United Steelworkers national director for Canada, noted that Stelco Holdings Inc. is considering the reopening of idle works in Hamilton. His union is adamant that the Liberal government should not sign the USMCA unless there is a deal to lift steel tariffs.
There might be a window of opportunity for that. It is less politically sensitive in the U.S. now that midterm elections have passed. The U.S. has wanted to to strike a deal with Mexico before it gives Canada an exemption, and a U.S.-Mexico deal is rumoured to be close.
Once the USMCA is signed, ratifying it won’t be Mr. Trudeau’s worry. It’s getting to that signing, and a steel deal, that matters.