It’s time to do a deal

Two things caught my eye a few days ago:

I agree with the premise of both articles. The Economist, quotes former New Brunswick premier and ambassador to the USA Frank McKenna who says, and I agree, that “Mr Trump appears to want a trophy rather than a treaty … [and, the article goes on to suggest] … The Canadians seem prepared to accommodate his vanity.” Barrie McKenna says that “A friend of mine suggested recently that Ottawa should call Mr. Trump’s bluff and walk away from NAFTA. Forget making concessions on dairy, culture and anything else. No doubt, many Canadians share that sentiment as the clock ticks down to a U.S.-imposed deadline to reach a deal by the end of September … [and] … It is a tempting response to the Trump administration’s relentless threats and trash talk. U.S. Commerce Secretary Wilbur Ross huffed recently that Canada wouldn’t “survive very well” without NAFTA. Mr. Trump likewise warned that life “would not be fine” for Canada if it was cut adrift by the United States … [but, Mr McKenna says] … That’s not true. Yes, there would be economic pain and dislocation, at least initially. Untold numbers of jobs would be lost and investments delayed or cancelled if the world no longer perceived Canada as a gateway to the vast U.S. market. Complex supply chains, particularly in the auto sector, would be disrupted or dismantled … [but, he adds] … it would not be a disaster for Canada.

So why do a deal? Why not, as Prime Minister Trudeau blusters, just “not sign a deal that is bad for Canadians?”

Both The Economist and Barrie McKenna fill several paragraphs with data about trade values and tariff rates and so on but Mr McKenna gets it: “The most compelling reason for staying at the negotiating table and getting a deal,” he says “is that trade is a long game. At best, Mr. Trump has six more years in the White House. Depending on his political and legal fortunes, his tenure could be significantly shorter. Canada needs a framework to navigate the current wave of U.S. protectionism, but also the post-Trump era … [and] … What’s more, the chance of getting U.S. tariffs on steel and aluminum lifted, and avoiding threatened duties on cars, is much better inside NAFTA than outside it … [but] … The reverse is also true: Leaving the trade pact won’t free Canada of these penalties … [and, he adds] … NAFTA is less about tariff-free trade than it is about the rules and regulations that govern commerce between the three countries … [and] … There are a number of non-tariff perks of NAFTA membership, including special visas that allow Canadian professionals to work in the U.S. and vital border crossing privileges for shippers.” None of those things, individually, is a ‘game changer’ but taken together they tell us that a bad NAFTA is better than no NAFTA at all.

I think it is time for Global Affairs Minister Chrystia Freeland to walk away from the table and leave the negotiating to seasoned professionals like Steve Verheul and Kirsten Hillman; they can deal with Robert Lighthizer and his team. I do not know if Minister Freeland ‘poisoned relationships’ with her June 2018 speech in Washington, but some perceive that she did. Also, Prime Minister Trudeau must stop negotiating in public. I understand that, as The Economist says, “Mr Trudeau would have trouble getting an unpopular accord through Parliament. Even were it to pass, the opposition would lambast Mr Trudeau’s Liberals in an election campaign next year. The cross-party coalition the prime minister stitched together to fight for NAFTA is beginning to fray.” I’m pretty sure parliament wouldn’t be able to block a bad NAFTA deal, not unless a lot of Liberals rebelled, but I know the Conservative and NDP will both attack Trudeau on NAFTA in the next election, whether it is in 2018 or 2019. But getting a deal, even a less than good and fair deal, is more important then getting another Liberal government.

The challenge, of course,” Barrie McKenna concludes, “is to identify what reasonable concessions Canada can make to salvage all that, while also allowing Mr. Trump to claim a victory … [and] … Perhaps finding common ground with an erratic White House and President turns out to be impossible. But we’ll never know if we walk away now.” Canada needs NAFTA more than America does … we can live, for the next few years, with a poor NAFTA better than we can live with no NAFTA at all.

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