Rebooting Canada’s failed NAFTA strategy

By Danny Lam   

Industry Government Manufacturing Exports Freeland government Lighthizer NAFTA trade

Must speak with one voice on NAFTA and on Canada-US relations.

WATERLOO, Ont. — Canada’s NAFTA strategy is in trouble, to the extent that officials reportedly fear the US is about to withdraw from the deal.

Canada’s credibility with Americans has been damaged during the past year because political expediency has triumphed over institutional integrity. Understanding how Canada’s credibility has been damaged, and repairing it, will be key to a new start.

Robert Lighthizer, America’s top trade official, reacted to the latest Canadian WTO complaint by calling Canada’s strategy “ill-advised,” saying it could “lower US confidence that Canada is committed to mutually beneficial trade.” He argued that Canada is “acting against its own workers’ and businesses’ interests. Other countries would primarily benefit, not Canada.”

This assessment by Lighthizer clearly indicates that Canadian trade strategy is not well-received where it matters.


Central to the federal government’s failed NAFTA approach is the reshuffled cabinet and “Trump Unit” created in the Prime Minister’s Office in the aftermath of US President Donald Trump’s stunning victory in November 2016.

The unit was formulated to seek the opinions of key Trump figures, reach out in an attempt to change some of those opinions and implement a “rapid response” system in times of crisis.

It is a centrally directed organization in which the Liberal government orchestrates moves like an election campaign “war room” with the goal of dealing with Trump administration initiatives that include the NAFTA renegotiations and its challenge to Canadian subsidies of Bombardier.

Trump war room

The “war room” is staffed by seasoned political operatives, including PMO figures like Gerald Butts and Katie Telford, cabinet ministers like Chrystia Freeland, Ambassador David MacNaughton and even journalist Michael Den Tandt. Problems and issues with the United States are dealt with as though they are “campaign issues.”

The Trump Unit will likely be disbanded as the 2019 federal election approaches, leaving career civil servants to take over the hard work of managing Canada-US trade issues.

Trade negotiators, after all – unlike politicians – are all about long-term credibility, crafting good deals and sticking around to ensure those deals keep working. They smooth out differences and disagreements that inevitably arise as a deal is implemented over decades.

The late Simon Reisman, a longtime Canadian civil servant, owed no small measure of his success to his reputation and credibility in making not one, but successive deals work. He was relied upon by all political parties to solve the problems that inevitably arise in the implementation and evolution of any trade deal. The decades-long continuity of his deals is testament to his achievement.

The Liberals have seemingly abandoned the Reisman approach and are now treating Canada-US relations as a political campaign against the Trump administration, assigning people to that strategy accordingly. Maintaining Canadian institutional integrity and credibility is apparently not a concern compared to “winning.”

The government has taken a win-at-all-cost, no-prisoners approach to relations with close allies who have historically relied on Canada’s steadfastness, credibility and trustworthiness.

Credibility problem

Canada now has a credibility problem thanks to the well-established pattern for successive governments to renege on commitments made by their predecessors, whether it’s the Kyoto Protocol in 2011 or NATO’s Wales Declaration in 2014.

For a fresh start, Canada has to speak with one voice on NAFTA and on Canada-US relations. The government and trade experts, both in and out of government, must share their knowledge equally with all political parties and provinces.

Dramatically changing Canada’s political culture and established behaviour is out of the question in the short term. But it’s within the parliamentary tradition to form an ad hoc governing coalition for both NAFTA renegotiations and the Canada-US relationship to ensure continuity by successive governments.

The Trump Unit should be replaced by a cabinet-level, Canada-US relations committee consisting of MPs from all four major parties as well as provincial and territorial representatives. A new group of trade experts – call it the “America Unit” – can support and report directly to this team.

The first task for the restructured team should be to revisit Canada’s NAFTA renegotiation objectives and remove partisan demands that the US is unlikely to entertain, in particular a “progressive” agenda that includes labour, gender, Aboriginal and environmental issues.

Stop issuing threats

Existing tactics, methods and means have to be reviewed and modified in light of the lack of progress in the past year.

For example, drop the use of veiled threats – especially since the threats don’t work. An example is during the Bombardier-Boeing dispute when Canada threatened not to buy Boeing fighters unless they dropped the Bombardier trade complaint.

American concerns that NAFTA is being exploited by countries like China have to be taken seriously. Rather than fight the US on issues like Chapter 4 – which raises the NAFTA originating goods’ qualifying content to 85% – how about working together to prevent abuses that are known to take place under the guise of free trade? Those loopholes need to be tightened in a renegotiated NAFTA.

The Liberal government also needs to come clean with Canadians as to what China is seeking in any kind of Canada-China trade deal, and what impact this would have on allies and trading partners who are in the process of tightening access to China. Have conflicts over China’s many demands of Canada influenced our stances on NAFTA and the Trans Pacific Partnership?

Lighthizer noted that Canada’s just-filed WTO complaint would result in US$11.5 billion of Chinese products flooding into North America. Canadian taxpayers, therefore, are financing trade complaints against the US that benefit totalitarian regimes like China.

Work with the US

Working with the US on export controls, sanctions, anti-dumping and countervailing duty investigations, screening of foreign investments especially for national security risks, immigration, state-owned enterprises and co-ordinated measures to curb subversion by peer competitors are agenda items that the United States would welcome.

Yet these have not been raised as priority items by Canada’s NAFTA negotiators.

Linking Canadian national security/defence procurements with ongoing trade disputes like Bombardier/Boeing was a fatal blunder. Ambassador MacNaughton reportedly said to Boeing representatives something along the lines of: “I don’t do business with people suing me” and “You shouldn’t treat customers this way.”

This reported emotional outburst seems to have become Canadian government policy – and procurement of Boeing F/A-18s was abruptly suspended and then cancelled in retaliation. The failed threat also drew attention to Canada’s failure to meet NATO Article 3 treaty obligations to provide for an adequate self-defence.

What’s more, the Bombardier-Boeing dispute also exposed Canada undermining the US government’s campaign to compel allies to contribute fairly to mutual defence.

Abiding by longstanding Canadian commitments to the alliance will do wonders to improve relations with allies and begin the process of undoing the damage done by the Liberal government.

A fresh start as outlined above will begin the process of reversing the damage and pay dividends in a revitalized trade and security partnership with our closest ally.

Let’s do it.

Danny Lam is research associate, environment & Security at the University of Waterloo, in Waterloo, Ontario.
This article was originally published on The Conversation.


Stories continue below