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The ONW Salon:  Mr. Trudeau Goes To Davos

Susanna Kelley (Moderator): Does Justin Trudeau's attendance in Davos for the World Economic Forum benefit Canada, and how can it impact NAFTA talks that are going on concurrently? Richard Mahoney, Will Stewart and Tom Parkin weigh in.


Will Stewart: 

There are really two parts to the question that our esteemed moderator has presented us with today. The first is a question about the importance of Davos. I believe that it’s very important for Canada to be well represented there. The second is on the importance of Davos against the back drop of a critical meeting on the NAFTA negotiations. I believe that nothing is more important than NAFTA at this point in time.

So I will answer the first question in this round, and explain the second answer in the next round.

Most years, the World Economic Forum provides another opportunity for Canada to influence some of the greatest challenges humanity faces on a world stage, allowing Canada to continue to demonstrate its leadership on social and economic issues.

This is an important task in and of itself and it's integral that the leader of our nation, who ever it may be (Stephen Harper attended several Forums during his time in office), represents the strength of Canada on the world stage among the world's most powerful and influential individuals.

This year's Forum, however, provides a unique opportunity for Prime Minister Trudeau to make a tangible impact on Canada and its economy, and reposition it in a time of increased uncertainty.

As we all know, under the Trump administration the U.S. has become far more protectionist, threatening trade deals and taking a far more aggressive stance on immigration. This has altered the landscape of international trade and forced Canada to rethink its relationship with its greatest ally and its global trade strategy.

Just Tuesday, Canada announced it has reached a revised version of the TPP following the U.S. withdrawal after President Trump assumed office.

Thus, the Forum can serve two purposes; first, Canada can use it, as it always has, as a marketing tool to encourage Canadian investment opportunities and partnerships while building on relationship with business and world leaders.

Second, and perhaps more importantly, it can use the Forum as an opportunity to regain some standing in the NAFTA negotiations.

It's quite obvious that Canada and Mexico's economies are far more reliant on the U.S. than the U.S. is on them, and this has been evident throughout the NAFTA negotiations. The U.S., negotiating from a position of strength, seems to be driving the talks, demanding more and more concessions from its two neighbours.

However, Canada can, to some extent, take this bargaining tool out of the U.S.’ hands if it demonstrates that it isn’t as reliant on the U.S. economy as the Americans might hope. The Forum provides yet another opportunity for Canada to continue to show it can and will look elsewhere to diversify its investment streams and reduce its reliance on the U.S., effectively minimizing the U.S. position in the NAFTA negotiations.

Therefore, Trudeau's attendance at the World Economic Forum is perhaps more important this year than it has been for a Prime Minister in recent memory.


Richard Mahoney: 

While some of the Prime Minister’s political opponents occasionally chide him on his attendance at conferences such as the World Economic Forum, mostly due to the fact that the denizens of these conferences are world leaders and major industrialists discussing the economic and social challenges that the world faces, and that those folks are elites, and therefore the Prime Minister is spending time with elites etc., important work can get done there.

First of all, as Will ably points out above, all countries in the world face economic headwinds, and there is an opportunity for Canadian leaders at Davos to encourage new investment in Canada, creating quality jobs etc. 

Will’s point about NAFTA is also a good one. As President Trump bounces around threatening to kill NAFTA one day, promising to renegotiate it the next, Canada has just stepped into a position of global leadership on the new progressive TPP, a role that would have naturally fallen to the Americans in the past, but Trump’s abrupt withdrawal from the discussions put an end to that. 

Just as NAFTA negotiations get even more difficult, Canada has emerged as a new global leader. First, many criticized the Prime Minister for resisting earlier calls from countries like Australia and Japan to sign a previous version. Now, a new version appears that seems to incorporate many of Canada’s demands to have more progressive trade rules, ones that take into account issues like labour, environmental and gender standards in each country. So a new vision is emerging, and Canada is playing a leadership role in shaping that vision.

Secondly, the new progressive TPP gives us increased access to the world’s fastest growing markets. That will help increase our leverage in NAFTA negotiations, and will serve us well if the U.S. decides to walk.

Thirdly, it creates an evolving new model for trade that Canada can push at conferences like this, and in all of its trade dealings and negotiations.


Tom Parkin: 

With over 1,000 private jets parked at it’s airport, world leaders took to the stage in the global political version of the Oscars.

Prime Minister Justin Trudeau, who arms the misogynistic Saudi princes, won’t pursue national childcare and opposes hiking minimum wages, told an enrapt audience about his personal embrace of feminism and the importance of fighting inequality.

But the real buzz—certainly with respect to how NAFTA plays out—was news the Trudeau government had agreed to sign the “progressive” Trans Pacific Partnership. Strangely, it wasn’t news the government confirmed but did not announce.

Shortly after the confirmation came some worrying signals. The president of the union representing workers in the auto sector said he met with the Trade Minister on Monday and it was not mentioned that a deal had been struck. Similarly, the president of the company association representing parts manufacturers indicated he was completely unaware of a deal.

It is amazing that key players in Canada’s manufacturing economy were kept in the dark. But we can now see why.

Both auto unions and auto parts companies had strong language—in particular raising concerns about how Trudeau’s deal on TPP would undermine NAFTA negotiations, a round of which will be held next week.

Currently, NAFTA has a 62.5% auto content rule—that is, 62.5% of the value of the vehicle must be manufactured within NAFTA. But TPP will have a 45% auto content rule—this mostly applies to Japan, Mexico and Canada, which are the auto manufacturers in the group.

For Japanese manufacturers, 55% of the vehicles can come from China and then be exported to Canada or another TPP nation, tariff-free. Or they can be built in at Toyota or Honda plants in Ontario with 55% Chinese parts and sold in Canada, tariff-free. But those vehicles cannot be exported to the United States, so the value of the Ontario plants are in question. There is no market gain for Ontario auto parts or assembly.

From the U.S. perspective—and this matters in context of NAFTA—Detroit Three vehicles assembled to meet NAFTA content requirements have lost market share in Canada to Japanese companies—with China in the background. Protection from Canada making these sorts of deals (and Canada already did a similar one with Korea) gives added logic to the U.S. insistence on 50% U.S. content in all NAFTA vehicles—a demand Canada calls a deal-breaker.

So by signing TPP, Trudeau may have undermined himself at NAFTA—on auto, anyway. Which might explain why no one told the auto union or company association. And why the news was confirmed, not announced.


Will Stewart: 

The real question here is not if Davos is important, but rather is it THE most important item that requires the PM's attention right now, and can the government begin to turn around its rather complicated and convoluted efforts on the international stage that have plagued it since taking office? The answer to that question is more difficult to answer, but certainly more important. And I suspect that, despite Richard's kind words above agreeing with me, he will have more difficulties agreeing with me on this post.

Yes, we have to give credit to the government for finally, it seems, getting a deal on TPP. But we are also right to ask what the cost of that deal was. As everyone knows, Trudeau was the holdout. We are still unclear on whether his absence at the last signing ceremony was an intentional negotiating tactic, or as the government itself stated, just Trudeau's difficulty in reading his agenda.

If it was a negotiating tactic, and we now have the right deal, then I think Canadians are right to ask what we had to give up, or what we got, in this round. We have already seen Unifor come out and question the deal as well as other groups specifically concerned about auto parts as Tom rightly points out.

At a time when our NAFTA discussions are hung up on auto parts from Asia, auto parts makers are rightly asking why we are planning on bringing in more to Canada, for cars built here, when the U.S. may not let the finished product into their country as they move to prevent auto parts from Asia. Prompting the head of the auto parts manufacturing association here in Canada to say "This could not be a dumber move at a more important time.”

We know the U.S. is against TPP, which does not mean we have to be, but it seems odd to announce this agreement the same day as the NAFTA talks are at a critical point here at home. In fact, we have seen just Tuesday that the Trump reaction to the TPP news and the NAFTA talks was to slap new duties on solar panels and washing machines made here and sold into the U.S.

These things are all related. And we have yet to discuss China and its feeling on this. As the PM is embarrassed in China with no talks on free trade, we also know China is against TPP.

It would appear to observers that Trudeau made compromises on TPP just to get a deal, not necessarily the best deal, while both China free trade and NAFTA are on life support.

I would argue that these trade deals mean more to the prosperity of our country and those middle-class families that the government always talks about than jetting off to Davos for a meeting of billionaires. 

Again, to restate my original comment, Davos is important, just not as important as other items right now.


Richard Mahoney:

It was right for Canada to hold out on TPP to get a better deal, and to cement our leadership position. You cannot argue both sides of this argument—it either makes sense or it does not. Conservatives criticized the PM for hanging tough, now they argue maybe he should have given in earlier? That does not make a lot of sense…

While the points made above about the critical timing of this conference, and the potential leverage that may give Prime Minister Trudeau are important ones, there is one other reason why it is important for the PM to go. 

Understanding that there are many political viewpoints in Canada, and that the Prime Minister has his share of detractors (name a world leader who doesn’t!), I think it is uniquely important that this Prime Minister attend events like the World Economic Forum.

Justin Trudeau is, by far, the most admired and well-known Canadian leader in history. That will sound like the ravings of a fan, but it is demonstrably true and measured—this is what world public opinion surveys tell us. The only other Canadian Prime Minister who had a reasonably wide following in world public opinion was Pierre Elliott Trudeau and Justin Trudeau is already much better known and, frankly, more widely admired around the world.

Canadians need Justin Trudeau to use this to our advantage. Any time he is out there, wooing investors to create good jobs here, inveigling other world leaders to hue to a more progressive but open trade agenda, or urging global action on the environment, he is helping shape a world more in our image, and more to our benefit. If he uses that power and authority to convince the world to do good things, or at least do good things for Canada, the country benefits.

There is evidence that this is working to our benefit all over the place. Here is one story that sets it out, but a fearless Googler can find many more to support this view:

So his critics can take shots at the PM for hobnobbing with world leaders and the heads of the world's largest companies, but the reality is we need the PM to use this unprecedented global standing he has as a force for good in the world. The Canadian model, in all its imperfections, is still the world's best example of an open, tolerant society that gives a great standard of living to most of its citizens. The PM can and does use that standing to get better trade arrangements for Canada, deal with the challenges presented by the irrational behaviour from the U.S. and to help convince people in other countries that the world does in fact need more Canada.


Tom Parkin: 

Richard says it was right for Canada to hold out for a better deal but doesn’t mention any way in which this is a better deal than the one Trudeau scotched last November.

No one would deny Trudeau is great on image—but image doesn’t have a domestic content rule. You can't eat it. It doesn't pay a mortgage.

It continues to amaze me how any “free trade” deal is automatically celebrated by my two friends. As we can see from the ginning-up of content requirements, this isn’t free trade whatsoever. It is, was and maybe always will be about managed trade. And geopolitics.

TPP was created by the United States as a strategy to economically encircle China. The idea was to increase U.S.-Pacific trade, dollarize it, build Pacific trade into Wall Street finance and then expand the scope to include China—on TPP terms. Trump killed that strategy.

Now Australia and Japan have taken the lead. Almost 40% of Australia’s exports are to China and they want to ship more iron ore and coal. Japan sees China as its reserve of auto workers—really in the same way that Germany uses cheap labour in Eastern Europe to assemble those BWMs, Audis and Mercedes.

Unlike Will, I don’t believe this is now an anti-China deal. China wants this deal. And, after Trudeau damaged the TPP talks without explanation last fall, it makes sense that China embarrassed Trudeau in December and refused to start Canada-China talks because they wanted to push Trudeau back to the TPP table to sign terms that undermine NAFTA. All of that is consistent with China’s interests and the theory explains behaviour that no other theory seems to be able to explain.

We’re in it now, my friends. Domestically, Trudeau is about to lose a key ally in Unifor and manufacturers and economic questions will arise about the wisdom of TPP terms. And all that is just revving up as the NAFTA talks restart in Montreal next week. Strap in!


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. Will Stewart is Managing Principal at Navigator, served as Chief of Staff to several Ontario Ministers and often appears as a national affairs commentator.  Tom Parking is a veteran NDP strategist, columnist and a frequent commentator on national issues.  













































































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