Canada's NAFTA hopes now rest with America's congress



As the saying goes, what goes around comes around, and never has that been so true perhaps than with politics and current trade talks. Early in the NAFTA 2.0 negotiations the Team Canada approach was to penetrate the U.S. political system at all levels with its NAFTA lobbying. Whether it was governors, U.S. senators, or representatives, Canada’s non-partisan strategy was to ensure that the White House and the USTR were not its only point of contact.

This strategy saw federal and provincial Liberals and Conservatives visiting Washington, D.C., and individual states to make connections that would ultimately keep the Trump trade team grounded in its intentions to disrupt the Canadian/U.S. economic alliance. This strategy is not without controversy, and that controversy has perhaps grown within U.S. political circles as negotiations have progressed.

The low point came when the director of the National Trade Council, Peter Navarro, stated on Fox News after the G7 summit this past June that, “There’s a special place in hell for any foreign leader that engages in bad faith diplomacy with President Donald J. Trump and then tries to stab him in the back on the way out the door.”

It was not just Trudeau’s press conference after the G7 that earned the ire of Navarro, but also the Team Canada strategy. Navarro accused Canadians of “political interference,” though Navarro has since apologized for his remarks.

Congress members of both parties have publicly stated continually that although the president needs the freedom to negotiate, a trilateral NAFTA is in the best interest of the American economy

I have talked to many political insiders that say, based on the close economic ties of the two countries, Canadian and U.S. politicians and officials regularly make visits, and visits by multiple levels of Canadian government officials is nothing out of the ordinary.

The current make up of the U.S. congress (which includes the House of Representatives and the Senate) has Republicans holding the majority at both levels. The house and senate have a reputation of being grid-locked on immigration and health care reform. Congress members of both parties have publicly stated continually that although the president needs the freedom to negotiate, a trilateral NAFTA is in the best interest of the American economy.

Now that U.S. President Donald Trump has negotiated a “handshake” bilateral with Mexico, the U.S. and Canadian trade teams are sitting down this week to search for their own conclusion on trade differences.

There is much at stake for both countries. At the state and national levels, trade with Canada is critical for jobs and the economy. According to the U.S. Chamber of Commerce, 14 million American jobs depend on trade with Mexico and Canada. One of the issues in Canada’s favour is the integration of the manufacturing supply chains and the disruption that would occur should Canada and the U.S. not come to a deal.

The auto industry alone will suffer in Canada and the U.S. if a retaliatory Section 232 auto import tariff of 25% is slapped on Canada. It would be a potential death knell for Southern Ontario’s auto manufacturing and would hurt Michigan and U.S. consumers as well.

The question, then, is can Canada rely on congressional law makers to influence the USTR and White House to seek compromise and see NAFTA 2.0 to fruition?

“I would never rely on congress.  You are waiting for Godot,” said Jim Wiesemeyer on RealAg Radio on Tuesday.

Interestingly enough, China is also following the congressional influence strategy in its own negotiations as Chinese President Xi patiently bets on a Democrat winning run in the November U.S. midterms to give him leverage on completing the U.S./China trade talks.

A retiring Paul Ryan, the current House Speaker, has weaker influence which is unfortunate since he is from Wisconsin, a Northern state that relies heavily on trade with Canada. Though, Wisconsin is also one of the states looking for changes to Canadian dairy access as a counter point in this deal.

Senate Majority Leader Mitch McConnell’s (KY-R) will be very motivated to entice the president to have a free trade deal with its northern neighbour because Canada is Kentucky’s largest export market. In 2016, Kentucky exported US$7.5 billion worth of product to Canada. There is even a Tim Hortons in Kentucky.

The pressure is on to keep NAFTA a trilateral deal, but, ultimately, Canada now must rely just as much on congress as our own in-house negotiating skills to see a deal done.

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