America first, fair trade last: brace for protectionist aggression

Trump has made several threats during negotiations to pull out of NAFTA.
PHOTO: OFFICE OF THE PRESIDENT

Who would have thought that with economic fundamentals looking so promising for the manufacturing sector, Canada’s most stable relationship with its biggest customer would be in danger of lapsing into uncertainty? Indeed, Canadian companies should hope for the best but prepare for the worst as NAFTA negotiations limp to the finish line.

It’s evident the current White House administration has little interest in seeing a new NAFTA agreement unless the free trade benefits flow mostly into US coffers. As of the third round of talks hosted by Canada, we had few details related to American demands. Since the US wanted a deal in the bag by February, many analysts and pundits question whether the US is even serious about concluding an agreement (additional talks are scheduled for February).

One scenario suggests negotiators will introduce outrageous demands (there have been a few of those already) at the eleventh hour that Canada and/or Mexico likely wouldn’t agree to, with Trump declaring it all a failure and moving to withdraw. Is this Art of the Deal negotiating or window dressing aimed at the Trump base to show the administration is working hard to protect American jobs? Sure looks that way.

US Commerce Department Chief Wilbur Ross was certainly aiming at the base when he bragged about an almost 50% rise in anti-dumping and countervailing cases last year, just as the outrageous 220% gouge against Bombardier was announced. The department is backing a dubious Boeing claim that the Montreal aerospace company has threatened its wellbeing with the sale of cut-rate C Series aircraft to Delta Air Lines. Boeing claims the C Series aircraft were sold below the cost of production, backed by about $3 billion in subsidies from Britain, Canada and Quebec.

That’s a laugh. Aside from the fact Boeing doesn’t compete in this aircraft segment having abandoned it years ago, the global aerospace industry is rife with subsidies and Boeing has been outed as the top US recipient of government assistance, drawing $14.1 billion from various spigots since the 1990s.

Its professed aim is to “level” the playing field, but Boeing is haunted by Airbus, the France-based aerospace giant that entered the US in a small way in the 1970s and is now gunning for 50% of the market.

So the aerospace giant, a beneficiary of tax breaks, government financing support and US defence largesse residing in the land of free enterprise, is tired of competing and seeks the comfort of a Trumpish trade barrier as it attempts to – as the British would say – strangle Bombardier in its pram. (This strategy has been checked for now with Airbus getting 51% of the C Series and partnering with Bomradier to produce US-bound aircraft in Alabama).

Aluminum, steel and other suppliers of raw materials are concerned about how their industries will be affected. And there are thousands of jobs at stake in the US, Canada and Britain.

Canada is not entirely without sin. We protect our telecom, banking and dairy industries from outside competitors. These are areas the US would like to see opened. Perhaps they should be. But as the White House shrouds itself in the mantle of fair trade, its real aim – as with the softwood lumber industry – is not just to protect, but to attack competitors, limit their activity or eliminate them.

This protectionist aggression invites retaliation, such as Prime Minister Justin Trudeau’s threat to cancel Boeing’s $6 billion Super Hornet deal with Canada, and could lead to potential trouble from a sympathetic Britain as well as other international players.

And let’s not forget that it was the folly of US protectionism (Smoot-Hawley tariff act) that worsened the Great Depression (1929-1941) by seriously reducing international trade while encouraging retaliatory tariffs in other countries.

Will similar trade fallout be the legacy of America First?

This is an updated version of an editorial that appears in the October 2017 issue of PLANT Magazine.