Canada has less leverage than Mexico in a possible NAFTA renegotiation, experts warn
by Marie Danielle-Smith (feat. CGAI generally, Sarah Goldfeder, Ian Brodie, and Laura Dawson)
May 2, 2017
OTTAWA — Canada has a worse hand than Mexico going into Donald Trump’s proposed renegotiation of the North American Free Trade Agreement, experts say.
Talks could take years, and there is little to threaten the United States administration with that wouldn’t hurt Canada much more, a panel of trade experts said in Ottawa Tuesday at an event organized by the Canadian Global Affairs Institute.
Their warning comes after Trump renewed a promise to renegotiate NAFTA last week, claiming he was on the verge of cancelling the tripartite agreement until receiving calls from the Mexican president and Canadian prime minister.
Canada has no nuclear option
Laura Dawson, director of the Canada Institute in D.C.’s Wilson Center, said Tuesday there is no “coherent agenda” coming out of Washington, and there’s a lack of understanding on what Trump’s desired “tweaks” will be.
Mexico can threaten the U.S. in specific areas — it could levy an enormous tariff on American corn, a suggestion that is driving Americans “nuts,” Dawson said, or conveniently stop the good management of its southern border, allowing a greater flow of migrants from Central America..
But “Canada has no nuclear option” and any lever Canada could use to threaten harm to the U.S. would “hurt Canada much, much more,” she said. That puts Canada in a “defensive” position.
Meanwhile, “clever lobbyists” are getting an ear from officials, she said. If a leaked letter from the acting trade representative in March is anything to go by (a permanent rep is not yet in place) some elements of the Trans-Pacific Partnership, such as currency manipulation rules, could make their way into a renegotiated NAFTA.
Dawson said some auto companies want the provisions to be included even though Canada and Mexico are not currency manipulators, because if they are present in a current trade agreement, it may be possible to “springboard” the measures into agreements elsewhere in the world.
Ian Brodie, a former chief of staff to Conservative prime minister Stephen Harper, said Canada doesn’t have a clear picture of what target is being aimed at.
“We tell ourselves the story,” he said, that it’s possible to “rip off parts of the TPP” to add to NAFTA, or that the president isn’t really serious about his free trade bashing.
But if the U.S. position is that NAFTA is the worst trade deal ever signed in history — something Trump has articulated more than once — how can Canada prepare? Who at Global Affairs Canada is working on the file from that perspective, Brodie wondered?
Whatever happens with negotiations, the key “get” will be “certainty,” he said. “Can we come to a trade agreement that is actually permanent?”
Sarah Goldfeder, a principal at Earnscliffe Strategy Group she said she has “absolutely no confidence” there’s an end in sight for NAFTA negotiations.
Domestic issues remain more prominent in the U.S. and inside Congress, said Goldfeder, who spent 15 years in the American federal government.
She said trade remains at the bottom of the agenda for many, especially as lawmakers have given themselves until September to come up with a budget and tax plan — a deadline Goldfeder expects they’ll miss.
Dawson said her “biggest fear” is that voters who elected Trump on promises of job growth will be disappointed by whatever eventually happens with NAFTA — because she said she believes “Trump is not going to get what he wants.”
Any perceived failures on the NAFTA renegotiation could then cause Trump to take “more extreme and radical positions,” she said, on the Canada-U.S. relationship.