A trade gamble Canada can’t win

January 1, 2017

Illustration by Remie Geoffroi

Like many of you, we were caught off guard by the Trump victory. We are now faced with a right-wing, plutocratic U.S. government championing a nationalism laced with racial and ethnic overtones.

Trump’s ugly style of campaigning—especially the scapegoating of immigrants and minorities—is already tainting Canadian politics. Hopefully these tactics will not find fertile ground here, but they must be condemned unequivocally. 

Yet, despite all the post-election hand-wringing among Canadian economic elites about Trump’s protectionist views, an upheaval in Canada-U.S. trade relations is probably the least of our worries. 

If President-elect Trump actually follows through on his pledges of a US$1-trillion infrastructure program, deep tax cuts, and sweeping environmental and financial deregulation, it might even temporarily boost the U.S. economy and Canada-U.S. trade flows. But any “Trump boom” would be short-lived, and set the stage for severe ecological and financial problems in the near future. 

The Trump administration is likely to pull the U.S. out of the Paris Agreement, lift Obama’s limited curbs on coal-fired plants and hamstring the Environmental Protection Agency. These steps will all contribute to a backsliding on climate change. There will be negative impacts on Canada, where climate change skeptics and the energy industry have already been emboldened by Trump’s win. 

While Trump’s rhetoric against the Trans-Pacific Partnership (TPP) and NAFTA helped get him elected, his core economic policies will hurt blue-collar workers even more than the trade deals he’s been attacking. 

Promised corporate tax cuts and breaks for the wealthy will worsen already high levels of inequality and inevitably lead to cuts in public services, which are disproportionately relied upon by the poor, low-waged workers, minorities and the middle classes. Many of Trump’s nominees for cabinet posts are billionaires; their approval by Congress will concentrate power directly in the hands of the rich in a manner not seen since the late-19th century. 

The renewed influence of Wall Street coupled with deregulation could lay the groundwork for a future financial crisis, which poses a far greater threat to the health of the Canadian and global economies than perennial bilateral trade irritants such as softwood lumber or beef exports. There will of course be increased bilateral trade frictions, as there also would have been if Hillary Clinton had won. But there are, as yet, no convincing reasons to anticipate a major trade disruption. 

One silver lining to the otherwise devastating Trump victory is the collapse of the TPP. Whatever Trump’s logic for opposing it, the demise of this imbalanced treaty, with its expanded investor–state dispute settlement (ISDS) mechanism, supercharged intellectual property rights, and toothless labour and environmental protections, is most welcome. But just like zombies, it’s hard to keep slain trade deals buried for long. 

A major policy plank of the Trump administration is to renegotiate NAFTA. Given Republican control of Congress, this would probably mean intensified TPP-plus demands directly targeting Mexico and Canada: more restrictive, U.S.-friendly intellectual property protections sought by Big Pharma, Silicon Valley and Hollywood, an all-out attack on agricultural supply management, further inroads on data privacy and new demands to lock in U.S. “energy security.”  

Canadian corporate voices are already lining up to back a NAFTA renegotiation that many see as an opportunity for further gains for their sector, or to “bring the deal into the 21st century,” using their favourite but highly deceptive catchphrase. The Trudeau government—which telegraphed its openness to renegotiation immediately after Trump’s win—will no doubt be primarily focused on maintaining market access and protecting the investment interests of the now more globally oriented Canadian corporate sector.

Progressive Canadians, in close concert with their U.S. and Mexican allies, need to quickly contest this renewed NAFTA push and put forward an alternative agenda for inclusive prosperity. They could start by drawing public attention to the most destructive elements of NAFTA, such as its investor–state dispute settlement process—the one TransCanada is using to sue the U.S. government for US$15 billion for abandoning the Keystone XL pipeline. 

But frankly, it is hard to envisage meaningful ISDS reforms after Exxon Mobil CEO Rex Tillerson—a big booster of corporate rights in trade deals—is appointed Secretary of State. Likewise, with the impending Keystone approval, NAFTA’s energy provisions, which lock in the U.S. share of Canadian exports, take on a more ominous tone. 

Canada should be prepared to walk away from the NAFTA negotiating table, even if that means Trump makes good on his threat to pull out of the agreement. While such a step would be disruptive for trade and the North American economy, it would not be disastrous. The two countries could conceivably revert to the Canada–U.S. FTA, which would maintain duty-free access but without NAFTA’s ISDS baggage. In any case, much of Canada’s access to the U.S. is locked in by WTO rules, with average U.S. tariff levels bound at just 3.5%. 

Those hoping for genuine reform and an alternative model of North American regional integration should already be looking beyond Trump’s tenure. Just as grassroots resistance needs to be renewed, the organizing and visioning for a post-Trump era should begin now. 

Prime Minister Trudeau told the Guardian U.K. newspaper at the end of 2016 that he worried people were being driven to leaders like Trump by “the fact that globalization doesn’t seem to be working for the middle class, for ordinary people.” You would think he’d be open to a positive, post-NAFTA agenda for North America that is based on shared prosperity, economic fairness and environmental protection—something that might inspire those who rightly feel that intensified NAFTA-era integration has left them further behind economically and with less control over their lives and futures.

Scott Sinclair is a senior researcher with the CCPA and Director of the centre’s Trade and Investment Research Project. He is the co-editor, with CCPA Monitor Editor Stuart Trew, of The Trans-Pacific Partnership and Canada: A Citizen’s Guide (Lorimer, 2016). 

This article was published in the January/February 2017 issue of The Monitor. Click here for more or to download the whole issue