For Canada, the trade debate never ends

OTTAWA—Former prime minister John Turner, who died on Sept. 19, faced the collective resources and determination of not only Progressive Conservatives, but also nearly the entire Canadian business community in his losing campaign against Canada-U.S. free trade in 1988. The pro-trade push that helped Brian Mulroney win the pivotal battle over Canada’s economic future also got unexpected support from then-president Ronald Reagan, who weighed in late in the Canadian election. In high-profile comments, Reagan, who was near the end of his second term, said the ongoing effort to eliminate trade barriers “with our most important partner, Canada” was an example of co-operation at its best and a lesson for the rest of the world. Turner labelled the remarks as those of “a lame duck trying to rescue a dead duck.” But it all went Mulroney’s way. Interestingly in the current context, Reagan returned to the subject just after that 1988 Canadian election, saying: “Today, protectionism is being used by some American politicians as a cheap form of nationalism. Our peaceful trading partners are not our enemies; they are our allies. We should beware of the demagogues who are ready to declare a trade war against our friends …” Turner’s framing of the debate over the Canada-U.S. free-trade deal in terms of a potential U.S. takeover was a dramatic exaggeration. But issues of sovereignty are still straining the bilateral relationship 30 years later. Liberalized Canada-U.S. trade, followed by NAFTA in 1994 to include Mexico, led to an era of increased regional trade and rising cross-border investment. Canada’s trade with the U.S. tripled over the years. NAFTA, along with technological change, increased trade with China, and the transformation of high-income nations to more service-based economies contributed to a decline of Canadian and American manufacturing. But economists disagree on the overall impact and net lost jobs in Canada and the U.S. Turner could have been forgiven for shaking his head in irony on this in recent years. Here was Prime Minister Justin Trudeau, the son of his cabinet colleague Pierre, fighting to save free-trade with the U.S. from a president who condemned American trade deals in terms more derogatory than anything Turner uttered. The late Liberal in fact always said he favoured good free-trade accommodations. So, while he disliked the original Canada-U.S. pact, he clearly was aware of the overall economic benefits that reduced barriers to trade have stimulated internationally for decades. The framing of the debate over the Canada-U.S. trade deal by former prime minister John Turner, pictured in 2012, was a dramatic exaggeration, but issues of sovereignty are still straining the bilateral relationship 30 years later, writes Les Whittington. The Hill Times file photograph U.S. President Donald Trump’s America-first obsession ignores that history. Overall, his tariffs have cost American consumers $80-billion in what are, in effect, taxes in the way of tariffs. And on a net basis, Trump’s protectionism has cost the U.S. jobs and his trade war with China has helped bring global commerce to a dangerous standstill. With international trade flows slowing, a trade-dependent country like Canada is facing an extremely difficult future. Our dependence on a single export market, the U.S., is unusually pronounced for an economically advanced country, and Trump has regularly taken advantage of this situation to turn the screws on Ottawa. The benefits of NAFTA 2.0 are debatable and, at best, limited, but losing preferential access to the U.S. market, still the destination for 75 per cent of Canada’s exports, would have been a major blow to the Canadian economy. But the agreement included concessions with long-term negative implications for Canada. Among other things, the provision for regular renegotiation of the deal is troublesome, and Ottawa’s negotiators were unable to shield Canadians from Buy America stipulations on U.S. public works projects. A Democratic victory on Nov. 3 by Joe Biden would eliminate the gratuitous anti-Canadian attitude favoured by Trump and probably end the threat of more totally unwarranted tariffs. But the Democrats’ attitude on free trade is mixed. For one thing, Biden says he would certainly continue with the Buy America rules systematically disadvantaging Canadian exporters. Under these circumstances, the Canadian government needs to work a lot harder both to diversify Canada’s export markets and diversify export offerings. With a trade opening with China now out of the question in the near future, potential sales growth in other Asian countries within the 11-member Comprehensive and Progressive Agreement for Trans-Pacific Partnership needs to be prioritized. And Canadian businesses need to be encouraged more than ever to take advantage of our country’s free-trade deal with the European Union. Stepped up efforts to position Canadian companies to assume a leading position in exports of green technology and related services could pay great dividends on a long-term basis. And as Meredith Lilly of the Centre for International Governance Innovation has pointed out, Canada should be able to better prepare itself for the jobs of the future and the provision of education services to students from the world’s emerging economies than most countries—another area of potential growth going forward. It’s a campaign that will need national resources and consistent national buy-in. Les Whittington is a regular columnist for The Hill Times. The Hill Times