The Morning Brief: Is NAFTA finished?

Bruce Carson - October 12, 2017


 Prime Minister Trudeau meets President Trump and the Beginning of the End of NAFTA

It might be argued at some future time when the outcome of these present negotiations is definitively known that yesterday in his meetings in Washington, Prime Minister Trudeau may have learned the true meaning of a phrase uttered a few centuries ago by Lord Palmerston, but neatly adjusted by Henry Kissinger; “America has no permanent friends or enemies, just interests.”

While the ever optimistic Trudeau put the best face on the day he had spent on Capitol Hill with the House of Representatives Ways and Means Committee and then at the White House with President Trump, he had to admit at the end of it yesterday in a media availability, that Canada had to be ready for any outcome from the NAFTA talks. Perhaps this view started a couple of weeks ago after the Ottawa round of negotiations when as noted here yesterday Foreign Affairs Minister Freeland concluded out loud that the Trump administration is “openly protectionist” and held “unconventional” views on the success or failure of international trade treaties. Yesterday, as tough subjects are now on the agenda of the negotiations for the next seven days, the Trump administration’s protectionist approach to trade surfaced for all to see.

But before meeting with the president, Prime Minister Trudeau met with the House Ways and Means Committee as it is this group that will have the final say over any deal that emerges, multilateral, bilateral or perhaps no agreement at all. Strategically this meeting was good move for Trudeau as it gave him an opportunity to road test his view that trade treaties need to be progressive and therefore contain matters such as the protection of labour, environmental protection, gender equality and deal with Indigenous rights and issues because there are many folk who believe these agreements only benefit big corporations and do not touch the needs of workers and those who make up the middle class.

The members of this committee seemed more interested in modernizing NAFTA than scrapping it, but they were also interested in dealing with supply management and Canada’s protection of its dairy and poultry industries. In his media availability Trudeau was asked about his meeting with this committee and he said that its members had a “deep understanding” that Americans benefit from trade with Canada and that Canada is America’s biggest trading partner. He said that the Ways and Means Committee was “open to the conversation we were having” and that there are concrete benefits for the United States through trade with Canada. Members of that committee interviewed after the meeting expressed interest in modernizing NAFTA, not terminating it, as they recognized its commercial benefits. Leaving this meeting Trudeau would believe his view of renegotiating and moving forward together had support.

It was both before and in the private meeting with President Trump that Trudeau was presented with a cold dose of reality and a cloudy future for the renegotiation of NAFTA. Trump in his public session with Trudeau spoke of seeing a trade deal with Canada, without Mexico. On this he said “it’s possible we won’t be able to reach a deal with one or the other; in the meantime we will reach a deal with one.” He then seemed to contradict himself by saying “I think we have a chance to do something very creative that’s good for Canada, Mexico and the United States.” Trump also spoke of protecting American jobs and supporting workers. And then he ended the session by saying “we’ll see what happens” which usually means something will happen.

At the beginning of his media avail, Trudeau attempted to put a happy face on his private meeting with Trump as he said that they talked about how they could work together to serve the middle class and this was possible because there is no relationship in the world like the one between Canada and the U.S. He was asked what specific demands Trump put on the table in their meeting but Trudeau just talked about Trump wanting good jobs and economic prosperity and they would work together to modernize the agreement to provide opportunities to succeed.

After persistent questioning as to what Trump’s bottom line looks like and whether Trump would walk away from the talks, Trudeau said that the “circumstances are challenging” but Canada has to be ready for anything, and we are. Asked why he doesn’t take a tougher position like the one put forward by Mexico, he responded that his optimism is based on how good NAFTA had been and he truly believes we can work together. He said he understands that the president wants to create benefits for Americans and then added “the president makes decisions that surprise people from time to time.”

It was the two statements; challenging circumstances and that the president sometimes makes surprising decisions coupled with Trudeau’s numerous references to being ready for any outcome that leads one to the conclusion that in the private meeting Trump let Trudeau know what the U.S. bottom line is and also offered to scrap NAFTA and just do a deal with Canada. And that Trump’s bottom line in these talks is not something Canada can agree with.

One other matter that was raised in the private meeting by Trudeau was the dispute with Boeing and the duties levied by the U.S. Commerce Department on Bombardier. Trudeau referred to this as a difficult discussion and did not offer the media any insight into what the president said when this matter was raised.

At the end of this meeting Prime Minister Trudeau would have a better understanding of Kissinger’s quote in that even the Trudeau charm offensive can butt up against the economic interests of the United States.

Former diplomat Colin Robertson spoke yesterday afternoon about the difficulty of putting a deal together. He noted that with the free trade negotiations in the 1980s and even with CETA there was a walkout by one side but he noted that in those two cases both sides and their leadership wanted a deal. Robertson also pointed out that Trump seems “addicted to keeping election promises” and perhaps here the negotiations could be terminated and Trump throws the matter over to Congress for a solution.

Finally, former Prime Minister Harper was in Washington yesterday attending a conference on the future of NAFTA and made the point that he believes Trump would be willing to pull the plug on NAFTA. He said “I believe it is conceivable, I believe Donald Trump would be willing to take the economic and political risk of that (pulling out of the talks) under certain circumstances.” Harper went on to say that a few tweaks won’t satisfy Trump and one thing is predictable is the need for Trump to point to significant changes given that he has characterized NAFTA as such a terrible deal. Harper added “I just don’t know how you get from here to there.”

This may also now be the question that is troubling Trudeau, how to achieve a deal when the demands from the United States go far beyond anything that is acceptable to Canada and the American President doesn’t mind if no deal is reached as scrapping NAFTA fulfils one of his election promises. It’s all about interests, not friendship.

To Come

--today, Prime Minister Trudeau leaves Washington for Mexico and meetings with President Pena Nieto. On Friday the Prime Minister addresses the Mexican Senate. In Mexico he will find a trading partner which is almost as willing to pull out of the NAFTA talks as is Trump.
--today, day 2 of the Generation Energy Forum in Winnipeg, hosted by Natural Resource Minister Jim Carr
--today, new house price index for August to be released
--today and through to next Tuesday, NAFTA talks continue in Washington --bc

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