Canada-U.S. Relations: Tweet Storms, Fault Lines and Seismic Shifts

Canada-U.S. Relations: Tweet Storms, Fault Lines and Seismic Shifts

John Delacourt

On a day when those who follow federal politics closely on both sides of the border are no doubt scrambling for their hardcover copy of Fire and Fury, Michael Wolff’s instant bestseller on the Trump administration, it is a fitting moment to look ahead and identify the true, emerging issues that will have the greatest impact on the Canadian economy for 2018. So much media attention is focused on the unfolding drama within the West Wing that it is easy to presume that the geopolitical implications of Trump’s tweets represent the greatest risk for economic stability, never mind world peace. But the Trudeau government will have to contend with far greater concerns than the President’s taunting of North Korea (and/or Steve Bannon) in the year ahead, as it grapples with the defining issue of its mandate: the fate of NAFTA.

In 2018, Trudeau’s team is not going to deviate from what’s working; they have launched the second phase of the “doughnut strategy,” literally going around Washington to focus on high level meetings with their interlocutors at the state level to talk up the advantages of strong trade relations. A strategy that has Public Safety Minister Ralph Goodale in Kentucky and Environment Minister Catherine McKenna in California currently. These are wise moves planned in advance of the next round of talks on January 23rd in Montreal.

The one trip down south to pay the closest attention to, however, is Agriculture Minister Lawrence MacAulay’s to the American Farm Bureau Federation’s annual convention in Tennessee – from today until Monday.

The agricultural sector’s export potential deserves more coverage and strategic focus; as the second Barton report from the Prime Minister’s Advisory Council on Economic Growth affirmed, one in eight Canadian jobs depends on its growth and innovation. Also, the strong tone of accord on agricultural issues has stood out among the NAFTA negotiations, providing hope that we can build on these incremental successes. And yet the Trudeau government’s steadfast resistance to sacrificing supply management could emerge as one of a few key deal breakers in the negotiations. Consider that Trump himself will be in Tennessee for this convention in Tennessee, shoring up support with his base, and it is easy to imagine that a clarion call from the podium – followed up with a tweet in full caps decrying Canadian farmers of course – could mark the beginning of the end for NAFTA.

In the meantime, there are other key decision points in Canada-US relations that have the potential to create a significant impact on the economic picture here. With the passing of the Tax Cuts and Jobs Act in Washington in December, the federal corporate tax rate has dropped from 35 to 20 percent in the US. Canadian manufacturers have warned of the effects of such a scenario; investment flows, especially in machinery and equipment, could start to move southward very quickly. Knock-on decision points with the America First agenda, embodied in NAFTA, also include a hinge point for Canadian steel producers on January 15th; the US investigation into the potential risks that steel imports pose to national security, known as the Section 232 probe, will announce its findings, and there are serious implications here – not least with, say pipeline construction across our shared border. Stories on these developments don’t get the ink or provoke the Tweet storms (or should we say ‘bomb cyclones’) of the House of Cards plot line in Washington, but, taken together, they provide a composite, nuanced overview of where the fault lines are truly emerging with our most important trading relationship. And from fault lines one can best read where a seismic shift emerges.

A former director of communications for the Liberal Research Bureau, John Delacourt is Vice President of Ensight.