Donald Trump is about to trigger a time bomb with a six-month fuse, once again putting the Canadian economy at risk. And so, one more time, the Trudeau government will have to throw everything it has at protecting this country from the American President’s latest threat of willful destruction.
On Saturday night, aboard Air Force One, Mr. Trump told reporters he will soon declare that the United States is formally terminating the North American free-trade agreement involving the United States, Canada and Mexico.
Six months after he makes that announcement, NAFTA as we know it will cease to exist. Lawyers will doubtless argue in court over what that actually means: Does the implementing legislation remain valid? Does the old Canada-U.S. agreement of 1989 come back into effect? But what is certain is that the North American economy will be in a dark place.
That shouldn’t matter, because Mr. Trump, outgoing Mexican president Enrique Pena Nieto (a day before his successor was sworn in) and Prime Minister Justin Trudeau signed a new trade agreement in Buenos Aires on Friday that goes by many names, but is probably best called the New NAFTA. That agreement preserves most of the old agreement, while adding some stuff that mostly favours the United States.
The negotiations were fraught, took months and almost collapsed. But the New NAFTA needs only the consent of Congress (and of the Mexican and Canadian legislatures) to be ratified and come into effect. And that’s a thing.
In the next Congress, the House of Representatives will be controlled by the Democrats. They are not happy about General Motors' decision to close several plants in the United States and Canada.
Nancy Pelosi, who is expected to be House majority leader, says the new deal is “a work in progress.” Democrats want to see tougher environmental and labour protections in the accord.
By announcing he is terminating NAFTA, Mr. Trump is saying to House Democrats and Republicans who control the Senate: Ratify the new agreement before June or face the consequences of no trade agreement at all.
Drew Fagan, a professor at the University of Toronto’s Munk School of Global Affairs and Public Policy, believes losing NAFTA without the new deal already in place could be “almost as bad as Britain crashing out of Brexit” – that is, the U.K. leaving the European Union without a transition agreement.
For Canada, a no-old-NAFTA/no-New-NAFTA scenario would mean tariffs on the border, legal fights over what aspects of the trading relationship remained in effect, tremendous business uncertainty, possibly a recession.
But as Prof. Fagan (who is a former Globe and Mail journalist) observes: “Canada has always understood the importance of working both ends of Pennsylvania Avenue:” The White House and Capitol Hill are equally powerful.
Mr. Trudeau, Foreign Affairs Minister Chrystia Freeland, and senior officials in Ottawa and at the Canadian embassy in Washington worked tirelessly during the New NAFTA talks to keep both Republicans and Democrats in Congress onside.
That work, as it turns out, is not over. Although the text of the new agreement is supposed to be set in stone, we have all learned that, with the New NAFTA, nothing is ever final. Deadlines are never what they seem.
Canada and Mexico may need to embark on talks to tweak the text in ways that will satisfy the concerns of Democrats and Republicans without angering the Trump administration. From now until ratification, everyone on the original New NAFTA team will need to be either in Washington, or on the phone to it.
With a bit of luck and good will, all three countries will ratify the New NAFTA between now and June, protecting the continental economy and providing business with some much-needed predictability.
Although, nothing is ever predictable with Donald Trump. He thrives on chaos. He is never happier than when bullying someone.
Canada has suffered at the hands of this President, who has imposed tariffs on steel and aluminum, threatened worse and publicly insulted the country’s Prime Minister.
But what matters most – what always matters most – is protecting the Canadian economy, which means protecting the Canada-U.S. trading relationship.
Congress must ratify the New NAFTA. The Trudeau government must do everything it can to help.
John Ibbitson