The improbable, unconventional, president-elect Donald Trump is already running true to form, signalling his opening moves on policy before he takes office. While his spontaneous announcements – notably on trade – are jarring, they are essentially consistent with the bombast he expressed during the campaign. Nonetheless, some refinements are already evident and there is no need for panic in Canada – at least not yet.
Mr. Trump’s announcement that he intends to “withdraw” from the Trans-Pacific Partnership comes as no surprise as this part of the Obama legacy was barely on life support in Washington.
Regarding the North American free-trade agreement, keep in mind that Canada has rarely been the target of Mr. Trump’s complaints. American companies are not “exporting” jobs to Canada. Our approximately $760-billion bilateral trade is in healthy balance. Mexico is running a hefty surplus and that is a major concern for the president-elect.
Ripping up NAFTA is unlikely to be high on Mr. Trump’s agenda. Rather, he will likely continue to cajole U.S. firms to stop moving operations to places such as Mexico, just as he seems to have done with Ford on the manufacture of Lincoln models in Kentucky. Together with Congress, he may resort as well to artful new measures of Buy America for the same purpose. Meanwhile, Canada should be on high alert, manoeuvring carefully and marshalling support quietly in Congress and with firms that benefit from the deal. We have trade rights that can be asserted under the WTO that provide a means of defence against wayward protectionism.
We should contemplate as a matter of priority areas of common purpose like expanded energy development and the need to refurbish shared infrastructure on our continent, such as electricity grids.
A formal renegotiation of NAFTA would require the consent of all three parties and any result would be susceptible to Congressional approval – not an outcome anyone should contemplate lightly. Should there be a renegotiation, however, losing the investor state provisions – one of Mr. Trump’s pet peeves – might actually be a plus for Canada since most decisions to-date have gone against us. Supply management for poultry and dairy operations in Canada is a perennial member on the U.S. hit list, but any concessions by Canada would at least be a plus for our consumers. Remember, too, that the United States has “sacred cows” of its own on agriculture that would also be vulnerable to a renegotiation.
Until we know more precisely what the Trump Administration is actually seeking, we should keep our powder dry. Above all, we need to interpret carefully the distinction between the sound and fury of media chatter and tangible, executive action by the new administration.
The softwood lumber impasse merits urgent attention even though it does not, as yet, rank highly on the scale of priorities for the new administration. The choice for Canada is not an easy one. We can either knuckle under, yet again, with a managed trade solution that continues to restrict our lumber exports to the United States, or we can resist new restrictions under various trade tribunals open to us while at the same time accelerating exports to more welcoming Asian markets such as China and Japan.
To offset the loss of TPP, Canada should swiftly accelerate negotiations of a comprehensive trade agreement with China, which is not a party to TPP and, at the same time, negotiate bilaterally elements already agreed in TPP with promising partners such as Japan, Vietnam and Malaysia.
Our basic guide should be to preserve, protect and promote market access vigorously while safe-guarding our competitive edge vis-à-vis the United States on policies not directly related to trade. Regrettably, there is little evidence to suggest that this fundamental premise is conditioning our government’s strategic plan for coping with the new world of Donald Trump.
History demonstrates all too vividly that a trade war of escalating tariffs is not conducive to economic growth, anywhere. House Speaker Paul Ryan, who will play a critical role, asserted bluntly that tax reform, especially major corporate tax reductions – a top Trump priority – would generate many more jobs than tariffs. We should strongly echo his view, which is one many Americans will share. On trade per se, the best guard against protectionist lunges can often be a coherent offence.
Derek H. Burney was Canada’s ambassador to Washington from 1989 to 1993. He was directly involved in concluding negotiations of the free-trade agreement with the United States. Fen Osler Hampson is a distinguished fellow and director of global security at the Centre for International Governance Innovation and Chancellor’s Professor at Carleton University.They are the authors of Brave New Canada: Meeting the Challenge of a Changing World