Reports emanating from Washington suggest the White House will announce a proposal for renegotiating the North American Free Trade Agreement in mid-March.
Congressional leaders say they will consider it but want to see the reasoning behind the initiative before giving their support. There’s a lot of doubt about whether the administration is actually ready to begin trade talks with its neighbours.
Little if anything is said in the reports about agriculture and food issues other than occasional references to dairy quotas and country-of-origin meat labelling.
The main concern of the new administration seems to be restoring manufacturing jobs, the loss of which it blames on nefarious foreign policies while ignoring the massive impact of automation. Content rules for North American-built vehicles command far more attention than agri-food.
Canada and Mexico will be looking for a lot more substance from Washington than the first version of the new administration’s first stab at a trade policy. In it, the administration complains about the rules of the World Trade Organization, which the U.S. played a major role in shaping. It also lamented “our combined trade deficit in goods with Canada and Mexico was more than $74 billion (all figures U.S. funds) in 2016.”
There was no explanation of where the $74-billion number came from. The U.S. Trade Representative’s Office only had statistics on its website for 2015. They showed Canada had a $15-billion surplus in goods trade but a $27.1-billion deficit in services trade. At the same time, Mexico had a $58-billion surplus in goods trade with the U.S. in 2015 while the U.S. posted a $9.2-billion surplus in services. Canada and Mexico were among the U.S.’s largest trading partners.
The first step in launching a renegotiation of NAFTA is for the White House to provide Congress with a written notification that will trigger a 90-day consultation period before negotiations start. The notice must include specific U.S. objectives for the negotiations and 30 days before negotiations commence the White House has to make public a detailed summary of its goals in the negotiations.
Before the notification is sent, it’s expected the administration will try to get Robert Lighthizer, the nominee for the new U.S. trade representative, confirmed by Congress.
While the president made a renegotiation of NAFTA a theme of the election campaign, he has never spelled out his objectives in doing so.
The Trudeau government has sent numerous delegations to Washington and elsewhere to make the point that the North American economy is highly integrated. Canadian business groups have been doing the same.
Meanwhile trade expert Peter Clark says the White House complaints about the WTO rules could be a much bigger threat to Canada because they could seriously weaken the rules that Canada used to end COOL a couple of years ago.
Clark said the new administration could introduce a combination of new taxes or tariffs at the border, which would be devastating for Canada. “Canada needs to be able to employ and rely on the rules-based WTO system to defend its rights and export markets.” Many of the policies being mooted in Washington “will be in breach of its WTO obligations.
“If the normal rules that we have been relying on no longer apply, Canada will need to adapt to the law of the jungle. As we are Bambi to the U.S. Godzilla, we will need to be very nimble, strategic and smart.”
In an article for National Newswatch, Clark said, “The administration will hold its trading partners to higher standards and will not hesitate to use all possible legal means in response to trading partners that continue to engage in unfair activities. Clearly, fairness and unfairness is to be determined unilaterally by the U.S.”
While the American actions would run contrary to WTO rules, “There will be little point in trying to use WTO dispute settlement,” he said. Instead of letting Canadian manufacturers, farmers and ranchers suffer, Canada has to be ready to reciprocate against American trade actions. “With $2 billion a day crossing the border, it does not take long for harm to reach devastating proportions. Canada must be prepared to respond – and U.S. stakeholders must understand they could be in the crosshairs.
“The Trump administration and U.S. exporters must be sensitive to what Canada can do, and they must be made to understand that we are prepared to do it. We need to hope for the best, prepare for the worst and not simply turn the other cheek.
“If a problem arises, and only if it arises, our approach should be to make it clear to U.S. exporters that targets of retaliation will be identified and surtaxes will be imposed in 30 days,” he said. “Motivating U.S. voters and business to resist the folly of President Trump’s Trade Agenda will be based on the public and legislators understanding just how destructive the president’s initiatives would be for everyone in North America.”