Canada and the United States are already in a trade war.
Whether NAFTA is ripped up, renegotiated, or remains in limbo, the U.S. wins economically and President Donald Trump, wins politically, while Canada faces economic uncertainty.
That’s the grim but candid message former interim Conservative Party of Canada and opposition leader Rona Ambrose delivered to the Canola Council of Canada’s annual convention here March 7.
“In every scenario that we look at Canada risks long-term economic uncertainty, loss of competitiveness and dropping in business investment and confidence,” Ambrose said. “We’re already feeling it.
“In all three scenarios the U.S. remains more insulated by the size of its own internal markets, and comparatively speaking, it comes out on top in every scenario.”
The North American Free Trade Agreement (NAFTA) has greatly benefited Canada, she said. It has been good for the U.S. and Mexico, she added in a followup text.
But U.S. President Donald Trump calls it the worst deal ever. His staff at the Commerce Department and United States Trade Representative’s (USTR) office believe trade with Canada and Mexico would have increased without NAFTA, she wrote.
“Most of it so far is working for him (Trump) from an economic point of view,” Ambrose told the meeting. “And I would argue it is working for him politically… because in a period of trade uncertainty companies are going to naturally locate to the United States to ensure they have access… to the largest market and access to clients and consumers.”
The White House understands this, she said. What Trump is doing is strategic and deliberate.
“So when we think about the worst thing that could happen for us, we’re experiencing a bit of it already,” Ambrose said. “(T)he Commerce Department and the USTR are forcing the hands of Canadian companies to a very tactical, targeted, regulatory aggressive trade decision. And that’s what they’re doing with softwood lumber, Bombardier (which has moved jobs to Alabama) and now steel and aluminum (tariffs, which for now exempt Canada and Mexico).”
If the U.S. ‘wins’ economically no matter what happens with NAFTA, it doesn’t give Canada much negotiating leverage, she said.
No matter the outcome economic uncertainty “is the new normal,” for Canada, Ambrose said.
“And that’s not great for a country that is so trade exposed and a country that has an economy our size.”
The worst outcome would be if during the upcoming Mexican presidential election Trump is baited into ending the NAFTA agreement.
“That would create a triple whammy for us, and from a continental point of view not only would we see market and currency shocks, we would see long-term economic uncertainty and the creation of a very toxic relationship between the U.S. and Mexico,” Ambrose said. “It couldn’t be any worse… whether it’s public security, continental energy, loss of North American trade — they’re all at risk in that scenario.”
Even if an agreement is reached congressional approval isn’t assured. Canada is unlikely to give up supply management as it’s important in Quebec, a province the federal Liberals need support from to win the next election, Ambrose said.
The U.S. is also seeking concessions on the content percentage of North American-made auto parts. A compromise that boosts the North American content could be good for Canada too, Ambrose said. The trick is finding the “sweet spot.”
Canada’s attempt to include gender and Indigenous issues in the trade deal are not undermining negotiations.
“They’re not using it as an excuse to not get a deal done,” Ambrose said. “I think it’s more politics than anything.”
Ambrose praised Canada’s trade negotiators, saying they are doing the best they can.
Despite the challenges Canada will get through it, she said.
Agriculture has benefited from trade, Ambrose said, adding the sector needs to help promote trade — something that populist leaders increasingly oppose.
If NAFTA wasn’t enough, Ambrose said the rise of populism is keeping her awake at night.
Notwithstanding the good works of past Prairie populists, such as Reform Party founder Preston Manning, today’s populists are dangerous, she said.
“They are inward-thinking, nationalistic people who are not only abandoning the institutions that have made this world a great place and ensured the continued proliferation of rules-based organizations, these are people who are actively pulling these kinds of institutions to the ground,” she said. “You know I worry about that because whether it’s the wars we fought or the multilateral institutions we built around the world, it’s so easy to bash the United Nations and bash the WTO. But these are the world institutions that are in charge of making sure that our rules-based trading system and our rules-based democracies that are based on the principles of freedom continue to exist.”