Will fixing NAFTA work for Canada?

The inauguration of Donald Trump marks the beginning of a change in direction for America on a number of important fronts that will resonate outside their borders with implications for allies and trading partners in particular.   While we wait to see how his agenda is translated into action, there is no doubt that many of Trump’s plans will have a big impact on Canada.  Whether it is the environment, military defence, a shared border, or any number of common interests, Canada will be forced to deal with a leadership style that is unprecedented in our joint history.  So many issues will be important, but perhaps the most defining for Canada will be the President’s intention to renegotiate the North American Free Trade Agreement (NAFTA).

What remains to be seen is how the President views Canada’s role in the trade deal which he continuously claims works against American interests.  What should help with our positioning is that the trade imbalance that already exists favours America.  That is to say, Canada imports more than it exports to the United States.  This may work in our favour in terms of how the Trump Administration views us, but it offers no guarantee that we won’t be hit by ‘collateral damage’ as our Ambassador to the United States put it recently.

We do know that Trump has specifically targeted Mexico in this exercise, but pretty much everything else amounts to best guess scenarios.  Rules of origin will likely be strengthened which bad news for parts that are sourced from outside the NAFTA.  In this instance the Americans will want to make sure that Canada and Mexico do not become back-doors for goods and parts from countries outside the deal - think China in particular.

This will be an interesting exercise.  On one hand it offers a chance to improve the NAFTA, but it is unlikely it will be improved in ways that actually benefit workers.  New Democrats have been critical of labour and environmental standards in the original deal, but the overwhelming corporate makeup of the Trump cabinet makes it unlikely they will share those criticisms. This is despite being elected to stick up for the American workers who took a beating under the NAFTA.  Without empowering workers to protect themselves in their workplaces and bargain for fair wages, any trade concessions will be an incomplete response to the real plight of the American workforce.

But it may also be that trade deals in general will become a thing of the past.  The President ripped up the Trans Pacific Partnership (TPP) which effectively kills that agreement.  How Canada will respond to that development is unclear, but a TPP without the USA has to be reconsidered at the very least.  The same can be said for the Canada European Trade Agreement which sports a big question mark on it now that Britain will be leaving the European Union. 

For all the criticism that can be levelled on the trade agreements, we cannot forget that there have been benefits as well.  Trade opens up economies and creates greater economic security which goes a long way to promoting global security as well.  Countries with interdependent economies are far more likely to find peaceful solutions to disputes than they might if they shared nothing in common.  Let’s hope that is not lost on the new American administration as they work to address their trade agenda.