BY PETER MCKENNA
“One way or another we have a deal with Canada. It will either be a tariff on cars, or it will be a negotiated deal,” says an impatient U.S. President Donald Trump.
He then went on to add: “A tariff on cars is a much easier way to go. But perhaps the other would be much better for Canada.” Hardly.
There’s no mistaking what The Donald is up to. He’s trying to put major pressure on the Canadian government by pointing to his “call it anything but NAFTA” deal with Mexico. And with his divide-and-conquer strategy in hand, he hopes to squeeze Ottawa for massive trade concessions. At this point, we shouldn’t blink.
In fact, I just can’t see how Canada can sign on to the newly-minted U.S.-Mexican trade pact. Clearly, there’s precious little here to Canada’s liking.
Chrystia Freeland, Canada’s point-person on NAFTA and our global affairs minister, is now in Washington exchanging notes with her difficult American counterpart, U.S. Trade Representative Robert Lighthizer. She needs to hang tough and insist on a fair and reciprocal trade pact.
But if it contains what is being widely reported in the press, and the U.S. position is rock solid, Canada should pick up its NAFTA marbles and leave the bargaining table. Significantly, the deal on offer is all one-sided and overwhelmingly favours the U.S.
To begin, I’m sure that Canada can live with the changes on total North American auto content (moving from 63 per cent to 75 per cent to take advantage of duty-free access) and the wage requirements for Mexican auto workers. It is also possible that Ottawa, with some minor tinkering here and there, could work with adjustments to intellectual property rights, amendments to Chapter 11 protections for corporate entities and the amount of U.S. goods that Canadians could purchase online without paying duties.
But most of the other pieces to the deal just don’t fit with Canada’s trade objectives. Take, for instance, the included sunset clause. Mexico has agreed to regular six-year NAFTA reviews and a 16-year termination provision unless all parties agree to continue to operate under the pact.
Canada has said repeatedly that a sunset clause is not on the table. And the reason it said so was that foreign investors need the security and permanency of a trade arrangement that can’t just end because one country wants to pull the plug after a set period of time.
It would put Canada’s standing as an attractive investment destination in obvious jeopardy. It’s simply a non-starter for us.
Reportedly, the Mexicans have also agreed to accept “Buy America” provisions or restrictions on whether Mexican (and thus Canadian) companies can bid on U.S. government procurement/infrastructure projects. Canada has pushed hard to limit such outright U.S. protectionism because it clearly undermines the core ideal of “free” trade. Moreover, this is not the kind of deal that warrants Canada dismantling its supply management system and basically selling out Canadian farmers.
Finally, and most importantly, if it’s true that the Mexicans have bowed to the U.S. demand to scrap the Chapter 19 dispute-settlement provisions, then Canada has to walk away. Without a fair and impartial process of arbitration, Canada will have no defences against U.S trade remedy laws (countervailing duties and anti-dumping, etc.).
It’s unequivocally a red line for Canada that can’t be crossed.
Just because two of the parties have said yes to this revised North American free trade arrangement does not mean that Canada should automatically agree to its contents. Additionally, trying to cobble together a comprehensive trade pact by Friday is a tall order. It also bears repeating: No trade deal is better for Canada than a bad deal.
Indeed, it would be politically difficult to sell such a package as a truly modernized NAFTA that advances Canada’s vital economic interests. And, more significantly, it would be portrayed by opponents as a political loser in the October 2019 federal election.
The Trudeau government — unless something dramatically changes in terms of the tenor of the trade negotiations — should collect up its papers and go home. As it stands, this is flat-out a bad deal for Canadians and even worse electoral politics for federal Liberals.
- Peter McKenna is professor and chair of political science at the University of Prince Edward Island in Charlottetown.