NAFTA talks fraught with perils for Trudeau: Watt

NAFTA talks fraught with perils for Trudeau: Watt

Jaime Watt

A number of things happened last week that underscore the challenges ahead in Canada’s relationship with the United States.

Former U.S. president Barack Obama visited Toronto, just one day after failed candidate Hillary Clinton made an appearance here during her Canadian book tour.

It would be hard to blame Prime Minister Justin Trudeau for thinking wistfully about what might have been under President Hillary Clinton. Obama has long been an advocate of free trade; he moved to expand trading opportunities in the Pacific Rim. Similarly, Clinton has embraced free trade over the course of her career.

Even though she made half-hearted attempts to appeal to the protectionist constituency in American politics during her campaign, it is hard to imagine that, had Clinton won, a major Canadian company would be hit with a 219 per cent tariff and accused of cheating the system.

The announcement that the Bombardier C Series would be taxed at a level of 219 per cent landed like a bombshell, but we shouldn’t have been surprised — it has become a part of a broader pattern for the U.S.

A report produced by the Centre for Economic Policy Research’s Global Trade Alert found that U.S. policy had moved “sharply in favour of domestic firms,” with punitive tariffs up 26 per cent over the last year. Seen in this light, the Bombardier decision is not a mere one-off. It’s part of a broader attack on America’s trading commitments.

In fact, it appears with every passing day that U.S. President Donald Trump’s “America first” policy was more than just rhetoric, but a real threat to all of America’s trading partners.

It is even more difficult to imagine that Clinton as president would have threatened the fundamental trade deal that has underpinned the success of the North American economy for more than two decades.

But instead we have President Trump who has just overseen the third round of the renegotiation of NAFTA. By all indications, things are not going as swimmingly as hoped.

Talks officially kicked off on Aug. 16, and a, 2017 after much preparation on all three sides. As of last week, there has been agreement among the United States, Canada and Mexico on only one relatively innocuous chapter, in a document filled with policy both meaningful and symbolic.

When the Liberals won the 2015 election, no one could have predicted that these negotiations would even be happening. But prime ministers must play the hands they are dealt, and it is now Trudeau’s responsibility to preserve Canada’s economic interests and its access to the American markets as best he can.

That, of course, is easier said than done. October 2019 is closer than it appears, and the government has officially entered the latter half of its mandate — a time when the pressure to consider domestic politics and optics grows.

Trade negotiations are lengthy, complex and often turn on minute policy details. Moreover, in order to get a deal, governments often have to concede points they would rather not concede.

It is no secret that right now Canada and the U.S. are oceans apart on a variety of policy issues, including labour regulation, the environment and tariffs. These are more than mere disagreements; they are fundamental differences that underpin each government’s domestic position.

These differences have the potential to cause major political headaches for Trudeau on the home front. Should the prime minister be perceived as not pushing hard enough on progressive causes, the NDP would happily step up to fill that void. If he pushes for inclusion of progressive policies, he risks losing the deal that underpins the Canadian economy.

Perhaps most notably, Unifor has formally called on the Canadian government to demand that the United States present legislation to rescind the right of states to implement “right-to-work” legislation. Right-to-work laws, which stipulate that union dues cannot be mandatory, are in effect in 28 U.S. states. Unions say this “right-to-work” is just another name for union-busting, while advocates of the laws argue they create a pro-business environment.

The emergence of this issue shows just how fraught with political peril the NAFTA negotiations are for Trudeau. Other issues on the prime minister’s left flank include Indigenous rights, environmental regulations, wages and government subsidies.

Trudeau’s position is not enviable. However, the danger of not signing a deal is far greater than the danger of signing one that angers more progressive Liberal supporters. Should a deal not proceed, or should the intemperate Trump decide the United States should simply pull out of NAFTA, the economic havoc that would ensue would be just one of the prime minister’s problems.

The political consequences would be far greater. No doubt, the prime minister, and his very astute advisers, are more than well aware of that.

Jaime Watt is the executive chairman of Navigator Ltd. and a Conservative strategist.

(As published in The Toronto Star on October 1, 2017)