Justin Trudeau is right that U.S. President Donald Trump doesn’t follow the rules, but he can’t seriously believe, as he said on Wednesday, that the dispute-settlement chapter of the North American free-trade agreement will call the U.S. to order.
The rule-breaking has already damaged the way free trade worked. So even if Canada soon strikes a defensive deal that manages to settle the current NAFTA fight, there’s no way back to the old assumption these will be stable, long-term rules for a North American trade bloc.
A few years ago, Canada could never think someone such as Mr. Trump would come along to do what he did. Now, it can’t afford to think it will never happen again. Canada will be on a more permanent trade alert. After mounting an all-points lobby of congressional leaders, state governors, business leaders and unions, Canada can’t really afford to completely wind it down.
Mr. Trump didn’t just skirt the rules in NAFTA. He brazenly imposed steep tariffs and threatened punishing ones that flew in the face of NAFTA, all to extract concessions in the renegotiation of an agreement he was already violating.
A few years ago, Canadians could expect that could never happen. Sure, Americans imposed tariffs that Canadians would think unfair – on softwood lumber, for example – and there were disputes. It was periodically possible that a protectionist president, or Congress, might try to alter or undo NAFTA. But Mr. Trump used obviously false pretexts such as national security to overtly shake down a trade partner.
That seemed unthinkable when trade deals were treated as less a contract and more a club, which required some gentleman’s rules. Now, we have to assume Mr. Trump or another U.S. president might one day try to extract concessions in the same way or get elected promising gains.
Canada must assume, even with a NAFTA deal, that its trading partner will be faithless again someday. The whole world will have to assume so. Mr. Trump has not just challenged specific free-trade agreements, he has devalued all free-trade agreements.
Mr. Trudeau made it sound as if a newly renegotiated NAFTA will help counter that. He told a radio interview the new NAFTA 2.0 must have a dispute-settlement mechanism such as the one in Chapter 19 of the existing NAFTA.
“That ensures that the rules are followed,” Mr. Trudeau. “I mean, we have a President who doesn’t always follow the rules as they’re laid out.”
If only. Chapter 19 exists now, but Mr. Trump still applied tariffs to steel and threatened to apply them to autos, knowing a lot of damage can be done before cases are litigated, and that threats give him leverage.
That doesn’t mean Chapter 19 is not useful – it allows for disputes to be settled by binational panels, instead of U.S. courts, and domestic courts can display bias. But it won’t stop another presidential strong-arm move.
You’d expect Mr. Trump might relent and claim his new NAFTA is the best trade deal ever. But you never know – he attacks his own Attorney-General, Jeff Sessions, on Twitter.
But there might well be another president who follows a Trump model. Maybe it won’t be a Trump-style aberration, a president who, according to Bob Woodward’s new book, Fear: Trump in the White House, had aides who stole documents off his desk so he wouldn’t do erratic things such as suddenly cancel a free-trade agreement.
But Mr. Trump has riled up a deep vein of anti-trade resentment among U.S. voters. Many of the Democrats in Congress who have said they don’t want a new NAFTA without Canada never liked the old NAFTA, either.
There might well be another president who thinks Mr. Trump was wise to decide the old gentleman’s trade-club rules don’t apply and putting America first makes good politics. It might not matter that the new NAFTA isn’t the sweeping change to trade with Mexico that Mr. Trump promised, and instead he’s seeking a piece of the Canadian dairy market. He wants to claim a win. Maybe another president will, too.
And Mr. Trump did force Canada into a rearguard action, trying to limit damage. We don’t know the precise outcome yet. But one thing has already changed. We used to know that, after trade talks were done, a deal is a deal. Not any more.