In Position: How Canada can win in a NAFTA renegotiation
by Sarah Goldfeder
February 14, 2017
Despite the storm clouds on the horizon, a new stage in the development of the Trump administration has begun. More members of cabinet are in office and appointments in the second tier (not subject to Senate confirmation) are falling into place. The bureaucracy is slowly starting to adapt to a new administration and the White House is slowly starting to see the benefits of working with its public service. The fallout from some of the early executive actions has begun to settle, and the talking points are building in consistency. If and how this trajectory progresses is still unclear.
Canada came to Washington this past Monday prepared to talk about specific areas of interest. One of the priorities was trade, including what the renegotiation of NAFTA may entail. The preparation clearly paid off in a visit that went off without a hitch. Chrystia Freeland, in particular, has been preparing, first as the Minister of International Trade and now as the Minister of Foreign Affairs, for what is coming. But the reality is that governments don’t trade. People and businesses do. Is Canada ready for a renegotiation of NAFTA? Even if Ms. Freeland and the government of Canada are, the answer for business is an overwhelming no.
The private sector, both businesses and individuals, should be taking inventory of its requirements for a free-trade agreement with the United States, with Mexico, and trilaterally. NAFTA has fulfilled some of these requirements, the Transpacific Partnership was slated to fill others and some are as yet missing from the free-trade agenda. When assessing trade with continental partners, the private sector should be prepared to list and quantify not just what it brings to the table, but what it wants to open for discussion.
The United States is at a disadvantage heading into trade negotiations. Mexico and Canada are working with established negotiating teams, with proven leadership and experience on successfully obtaining bilateral and multilateral agreements. The White House has already indicated that it intends to move the trade team from the United States Trade Representative (USTR) office to the Department of Commerce. Compounding the new alignment within the executive branch, the leadership of the trade team has yet to be installed. President Trump may be tweeting that he wants the NAFTA renegotiation to begin yesterday, but the reality is that the United States is simply not ready.
The proposed Secretary of Commerce, Wilbur Ross, has yet to be confirmed, and Robert Lighthizer, the nominee for USTR, is still awaiting a waiver before he can begin his hearings in committee. Peter Navarro, the head of the newly minted (and White House housed) National Trade Council, is not subject to Senate confirmation and presumably is on the job. All three members of the trade trifecta have substantial experience in trade actions and litigation but very little in negotiating. Not a one has expertise in the North American relationship and the implications for NAFTA on immigration, human rights, and continental security.
This could be an opportunity for Canada. Mexico has already realized the potential for its national interests and has begun a white paper incorporating its negotiating position. Canada, rather than be consumed with what the United States will want to renegotiate, should focus on building the trilateral framework that will benefit its national interest. Canada needs an offensive playbook right now, in addition to a defensive one. Lobbying its partners in business throughout the states and reminding local U.S. politicians of how many of their jobs rely on NAFTA, and specifically on Canada, does not constitute an offense. Canada should prepare a technical, granular analysis of how the trade relationship works and where it could work better and share that with its allies on the southern side of the border, beginning that work in the private sector here in Canada.
The government is in the process of examining the Canadian economy and looking to sectors are affected by the rules laid out in NAFTA. Businesses and their leadership are on the front lines of trade and have the information on how changes could be particularly beneficial to the Canadian economy and how they could be detrimental. They additionally have the ability to quantify exactly why. Minister Freeland has already demonstrated that she understands the role that businesses can play as advocates. Now, as she moves into preparing for this trade negotiations, the detail work begins — sector by sector, regional impacts and employment/GDP importance. The government will want to be clear about the most desirable possible outcomes and the red lines that are deal breakers. Improvements that Canada might want to seek to NAFTA exist not just in broad terms, but in very specific ways — including entire sectors of the economy that did not exist at the genesis of NAFTA that now need to be included in the conversation.
We should not be lulled into false confidence by the suggestion that there may only be “tweaks” in the trade relationship between the United States and Canada. The private sector must become involved in these impending negotiations and it is the business community which should be driving this conversation with government, not the other way around. Businesses should remind government who, in the end, is responsible for providing jobs and maintaining growth in a market-based economy like Canada’s. There is no reason that Canada, coming into negotiations demonstrating the command of the vocabulary, process and details of the negotiating process that its trade team has honed on agreements like TPP and CETA, should not have the upper hand.
Sarah Goldfeder is a principal at Earnscliffe Strategy Group and a fellow at the Canadian Global Affairs Institute. A former U.S. diplomat, she served as special assistant to two U.S. ambassadors to Canada.
Image: Martin Deutsch