Canada should brace for a tougher, hardline approach to trade negotiations with the U.S. under Donald Trump’s new pick to front the trade file, experts warn.
Saul Klein, dean of the Gustavson School of Business at the University of Victoria, said he wasn’t surprised by today’s appointment of “trade hawk” Robert Lighthizer as U.S. trade representative because he is aligned with the president-elect’s protectionist views.
Lighthizer served as deputy trade representative under former president Ronald Reagan, and has worked as a leading corporate trade lawyer representing companies in various sectors seeking access to foreign markets.
Klein expects Lighthizer won’t be very willing to make concessions to resolve disputes such as dairy and softwood lumber.
“I think his mindset is to support U.S. firms’ benefit by taking a hard line on trade,” Klein said. “So I don’t think you’re going to see a lot of compromise. I think you’re going to see a strong view that this is the U.S. interest, and if you don’t like it, too bad.”
During the presidential campaign, Trump promised to renegotiate the North American Free Trade Agreement (NAFTA) and spike the Trans-Pacific Partnership (TPP). Klein does not see a massive immediate impact on Canada as the new U.S. administration trains its focus first on Mexico and China.
“Where we run the risk of getting hurt is in the slipstream on the Mexico front,” he said.
But he doesn’t expect NAFTA will be the first target, and because China is such a “big, messy problem” it could push NAFTA even further to the back burner. Trump would also risk a backlash from Republicans, especially those in bordering states to Canada, who support the free trade deal.
Lighthizer has accused China of unfair trade practices in the past, a critical view in line with that of Peter Navarro, who Trump tapped last month to head the White House National Trade Council.
Meantime, Ottawa is moving to deepen trade ties with Beijing. During a September 2016 visit to Ottawa, Chinese Premier Li Keqiang and Prime Minister Justin Trudeau announced “exploratory talks” on free trade between the two countries, with the goal of doubling trade between the two countries by 2025.
Klein said escalating trade friction between the U.S. and China could actually work to Canada’s advantage.
“To the extent that the U.S. is seen as a much more difficult trade partner, Canada in contrast seems much more attractive,” he said.
“There may be some markets where we will benefit; things like tourism where people might prefer to go to Canada than to the U.S. If the U.S. is less welcoming to foreign students, Canada could get a benefit from that. More generally, to the extent Canada is seen as a more stable player and more interest in free trade, we could benefit as the U.S. becomes harder.”
‘We have to up our game’
Mark Warner, a Toronto-based trade lawyer, expects the biggest shift in the Canada-U.S. trade relationship under Lighthizer will be a more aggressive enforcement of trade laws.
Warner said he’s “reassured” by Trump’s choice in the sense that Lighthizer is a smart, knowledgeable lawyer with deep expertise in the file.
“He will make arguments that are protectionist, but they will be strong, well-made arguments,” he said. “He’s a very sophisticated lawyer who understands legal nuance. And to my mind, that’s at least something that’s knowable and something you can negotiate with. It just means we have to up our game on this side of the border.”
But Warner warned that because Lighthizer has developed a keen understanding of the Canadian market and steel and softwood lumber issues through his corporate work, he won’t be easily swayed by some of Canada’s bargaining points.
That could mean more protracted legal battles rather than negotiated resolutions, he said.
“You’re going to have to make an argument not just on technical legal ins and outs but on fundamental fairness with someone like him. So that doesn’t augur well for some of those traditional trade irritants that prevail on technical legal grounds,” Warner said, pointing to the ongoing softwood lumber dispute.
In a release issued by the transition team, Trump said Lighthizer will fight for trade deals that “put the American worker first.”
“He has extensive experience striking agreements that protect some of the most important sectors of our economy, and has repeatedly fought in the private sector to prevent bad deals from hurting Americans. He will do an amazing job helping them turn around the failed trade policies which have robbed so many Americans of prosperity,” reads the Trump statement.
Canada-U.S. trade ties
International Trade Minister Chrystia Freeland is scheduled to hold a media availability in Halifax Wednesday.
Her press secretary Alex Lawrence said the minister looks forward to working with the new U.S. administration and Congress on issues related to trade and investment.
“As the minister has said, Canada has no closer friend, partner, and ally than the United States,” he said in an email. “Thirty-five states count Canada as their No. 1 customer. We do over $2.4 billion in trade every day. The relationship between our two countries serves as a model for the world.”