The ONW Salon: Canada And A Trump Presidency
From NAFTA to the Keystone XL pipeline to climate change, a lot of questions are being asked about Canada's relationship with the U.S. now that Donald Trump is the President-elect. What does a Trump presidency mean to Canada, and what will be the hot issues between the two countries? Richard Mahoney, John Capobianco and Tom Parkin are in the Salon.
Well, we have a Trump presidency, which many U.S. pundits, mainstream media and those whom Trump calls “elites” never thought – nay, imagined – would have occurred.
I recall in a submission I made to this group in mid-October just before the election that what Trump had going was a movement and that it could very well push him over the top, which it did in spades in electoral college votes but not so much in the popular vote.
Nonetheless, Donald Trump will be the President of the U.S. and we in Canada will need to adjust accordingly. So what does that mean for Canada, since our Prime Minister Justin Trudeau made one of his first political moves to positively align in a very public way with current President Obama?
It was what many in the media called a "bromance" - in fact, I think the PM himself called it as such. I get that, and I get why the PM wanted to make that move, but we all knew President Obama was a lame duck President with, at the time, less than a year before he was going to be replaced. Now Trudeau has a different President to deal with from a completely different political party and with new sets of rules he wants to play by.
Canada is the second largest trading partner to the USA, exporting $295 billion in goods in 2015, and Canada imported $280 billion in goods in the same year, for a total (two way) goods trade of $570 billon, according to the United States Trade Representative. The sheer level of integration of Canadian and American economic, political and security realms places Canada in a position that is extremely sensitive to American policy - always has been. So there is no wonder that many Canadians, including and especially our political officials, are nervous or concerned about how this new normal will take form.
During the U.S. election and since, Donald Trump made trade one of his top priorities under the message umbrella of "making America Great Again" and putting America first - and the two trade deals he discussed were NAFTA and the TPP.
He campaigned on tearing up NAFTA and he recently announced via a two and a half minute video his 100-day agenda, and that included pulling the U.S. out of the TPP.
So trade is the number one issue we will be dealing with this new President. Other important issues are the Keystone XL pipeline, NATO, climate change/energy and immigration - all issues of incredible importance to Canada.
So many hot issues, so little time! Seriously, though, the opening question lists the hot issues effectively.
Probably the most important guiding principle to Canada-US relations is that we are each other's closest trading partner and friend. Our economic, cultural and family ties are so intertwined that no one administration or leader can cast those asunder, so to speak.
The relationship is complex and full: $2.4 billion in trade every day, nearly nine million U.S. jobs depend on trade and investment in Canada, and many Canadian jobs are on the line, too.
This is why it is important to build the relationship. It's why Prime Minister Trudeau was so focused on improving the relationship as soon as he was elected, which he did with great result. It's also why he resisted the calls of many, including the NDP, to criticize Trump during the campaign. Turns out that was a pretty smart move to avoid needlessly antagonizing your biggest trading partner before he is even elected!
But now the rubber hits the road. Trump has signalled he will seek changes to NAFTA - we need to deal with this. Part of it is to recognize two things.
First: we are not the problem the U.S. will seek to fix in a potential NAFTA negotiation - Mexico is.
Secondly, if NAFTA is to be opened up, we will need to articulate our own list of demands for improvement and ideas for progress. This may mean some quick bilateral solutions to avoid getting hurt by a protectionist President and Congress.
Finally, the biggest challenge may be on climate change. We simply see the world and priorities differently and the potential exists for serious damage to the global efforts to address this, which Canada has been leading on. Finding common ground will not be easy there, but we will have to seek it.
In my mind there are three big risks for Canada in a Trump Presidency: that a trade war results amidst the unravelling of the existing globalization model; that there will either be a trade war over carbon pricing or pull-back from action to control it; and that the right-populism of Trump will infect Canada.
I am not at all unhappy that Trump has killed TPP. Nobel prize-winning economists Joseph Stiglitz called it "the worst deal ever."
I am not unhappy - but somewhat worried - about how NAFTA unravels. You can't reverse time. Establishing new North American supply chains and economic partnerships was painful. Breaking them may also be painful. I think it is critically important that Prime Minister Trudeau is very transparent with Canadians about our national goals in reaching a revised agreement.
On pipelines - Keystone XL should be a non-starter for Canada, though it might be the easy way out for Trudeau. If there is to be a new pipeline from Alberta, it should unlock their crude from the U.S. market price and open it to global markets. It should allow Canadian refinery jobs, not create them in the United States. The work should be done here where we are pushing industries to be clean, not in the United State where it seems they are about to capitulate to Big Carbon.
We heard former French President Sarkozy muse about a tariff on U.S. goods if they refuse to meet international carbon agreements. There was a news report this week that Canadians are thinking about the same. I wouldn't say I oppose the thinking behind it, but we are playing with fire. We must go about anything - everything - with caution and with allies.
The challenge with President-elect Trump's desire to tear up NAFTA is more of a play against Mexico than it is against us - as Richard says above, we are not the problem. However, there are some who question why the PM would have jumped on this so early and suggest to the President-elect that he would be more than happy to open up discussions.
The problem with this is that the PM isn't dealing with an equal here, or someone who has been trained in the political theatre of war - he is dealing with a world-class dealmaker who just won by campaigning on building walls around the country for both immigration purposes and, to some extent, to fix trade imbalances.
Experts all agree that NAFTA needs to be renegotiated, or at the very least updated to reflect the reality of the new economy. How this is done and what we hold onto or give up will have a significant impact on our already fragile economy.
Speaking of the economy, the other major topic of mutual interest is energy and not just the pipeline, which mercifully President-elect Trump had the courage to do what president Obama couldn't and that is to make the pipeline happen - so he says. I am talking about cap and trade. Our PM has made this a significant policy issue and it seems some of the provinces are coming on board, but the President-elect has made it clear he is not going there.
That will be a problem for us and something our PM will need to be extremely careful as the program develops is the potential loss of jobs if the U.S. starts to take advantage of lower energy costs for doing business.
These are but a few issues. The real focus will be on what President-elect Trump decides was just campaign rhetoric or what he and his administration believe will be the policies that need to be implemented.
I think there is much in what both Tom and John say here - we are playing with fire, and this dude, er, President-elect, will not play by the normal rules. And no one is completely ready for what he will do, and he cherishes that unpredictability. That said, three things:
1. We will need to move with allies. There is no point and too much risk in going our own way.
2. The PM has been smart not to needlessly antagonize him but we will also need to find a way to carve ourselves out from his trade aggressions. Maybe Canada, so important to the U.S. economically, and not the problem folks who voted for him in Pennsylvania are focused on, can carve out some bilateral solutions which keep the supply chains flowing and trade flows going. This could allow Trump to point to progress without creating huge harm to growth and jobs
3. Finally, remember the advice we heard again last week from former Vermont Governor Howard Dean and former U.S. Ambassador Gordon Giffin. Canadians often complain that the U.S. and its government don’t know enough about Canada, and don’t pay enough attention to Canada. While that is undoubtedly true in terms of the size and importance of the relationship, it also means we are not the big "problem" the U.S. government and its new President-elect are trying to fix on Day One.
We should fly below the radar a little bit, like we often do: picking our spots, securing access to the market where we need it, avoiding the protectionist "walls" going up via smart, bilateral diplomacy and trade moves. We should be so lucky.
Indeed we should be so lucky.
With the election of Trump and with the Brexit vote, we are heading from an era of globalism to neo-nationalism. In a way, Trump and Brexit are rebellions against the system in which, say, U.S.-based companies could set up factories in a low-wage economy, abandon U.S. plants and import back to the U.S. Good for investors, but not good for people. I think Trump and Brexit - and Corbyn and Sanders, for that matter - show that model is defective and dead.
Bilateral, managed trade agreements, possibly with sector-based solutions, are the path forward. Canada is a trading nation - as a big country and a resource economy - but globalism wasn't working for us any better than the U.S. economy.
A fear I have is that the Liberals won't understand this paradigm shift. That they will continue to play our cards as if the old rules existed. When you're playing the wrong game, you lose.
A second problem is Mr. Trudeau's fascination with China. Just today we read about a pay-to-play fundraising meeting back in May with billionaires - yes, plural - in attendance. And only two weeks after the event, one of these billionaires donated $200,000 to the Trudeau Foundation and $50,000 for a statue of Pierre Trudeau. This stinks.
Canada has a huge trade deficit with China. And now Trudeau and company bring us the globalist nonsense about how great it will be if we can negotiate a trade deal to open their market. The reason it is nonsense is that trade deals are not one-way streets. We are already losing 3:1 in our trade relationship - what analysis do we have that a trade deal with China will help money from flooding out of our economy? Perhaps it will make it worse.
It makes no evident sense to say when a Canadian company sets up a manufacturing site in China and sells its goods back to Canada that this is some sort of win for our country. It might be - or not. But my fear is that Justin Trudeau just believes in the perfection of corporate Canada so much he doesn't even do the analysis - that he is a through-and-through globalist who thinks that if it is good for a Canadian company it is good for Canadians.
This is a time of realpolitik. I sincerely hope Mr. Trudeau is visionary and tough enough for it. I hope he, like the U.S. Democrats, isn't captured and enthralled by a corporate vision of globalism.
Richard Mahoney is a lawyer with deep experience in politics and governance. He is a former senior advisor to the Rt. Hon Paul Martin, a former Campaign Chair and President of the Ontario Liberal Party. John Capobianco is a Senior Partner and National Public Affairs Lead at FleishmanHillard. He has been a Conservative strategist with over 30 years of political activism at all three levels, including as a former federal Conservative candidate. Tom Parkin is a veteran NDP strategist and a frequent commentator on national issues.