Why Trump's desire for a protectionist wall threatens more than NAFTA: Don Pittis
Success at the Montreal round of NAFTA talks is a matter of preventing a Brexit-style breakdown
Completing Donald Trump's Mexican border wall seems as far away as it ever did. But some Canadian trade experts fear the protectionist president may be succeeding in building trade walls that could weaken the entire global economy.
The protectionists haven't won yet. And if the current U.S. administration really wants to throw a wrench into the gears of global free trade, it faces obstacles from both inside and outside its borders.
As delegates gather in Montreal this week for the sixth round of the NAFTA renegotiation demanded by Trump, no one is expecting a sudden resolution. Instead, success will be measured by whether Canadians can prevent the talks from collapsing.
Learning from Brexit
After stepping out of a two-day meeting on trade and climate change in Ottawa, Oonagh Fitzgerald warns of the dangers of walking away from any negotiation.
"As long as you keep the conversation going there's the possibility you can be more optimistic," says Fitzgerald, a research director with the Centre for International Governance Innovation, a think-tank based in Waterloo, Ont. "The conversation's still open and you're not dealing with the fallout of an abrupt decision that has huge implications."
Drawing a line in the sand and standing on principle can be politically popular, as Trump has repeatedly shown. Last week, for example, the U.S. president seemed to say he wanted a deal for Mexico to pay for a border wall included in the current NAFTA talks.
....The Wall will be paid for, directly or indirectly, or through longer term reimbursement, by Mexico, which has a ridiculous $71 billion dollar trade surplus with the U.S. The $20 billion dollar Wall is “peanuts” compared to what Mexico makes from the U.S. NAFTA is a bad joke!—@realDonaldTrump
For Canada, two of the biggest perils include a Trump-imposed March deadline to complete the renegotiation and his repeated threats to end the talks and scrap NAFTA.
"I think the example of Brexit is apposite right now," Fitzgerald says. "Because you can see that once [you've made] that kind of decision that you're going to move out of an agreement ... you're set on a path and you have to deal with all those consequences."
To former Canadian international trade adviser Meredith Lilly, the unique situation in the current round of talks is that, for the first time, one of the three negotiating parties is opposed to the principles of free trade.
"The U.S. current administration is openly protectionist," says Lilly, now Simon Reisman Chair in Trade Policy at Ottawa's Carleton University. Reisman was Canada's chief negotiator for the very first Canada-U.S. free trade deal in the 1980s.
Including a provision in NAFTA that Mexico would pay for the U.S. border wall is evidently a non-starter for the Mexicans.
That, plus attacks on Canadian exports of lumber, wood pulp and aircraft, as well as impossible requirements on sourcing auto parts in the U.S., seem aimed at exasperating Canadian and Mexican negotiators.
Did Trump blink?
"I don't think anyone is going to withdraw in the next round of talks," Lilly says. "I would be shocked if that occurred."
She takes it as a positive sign that among his contradictory remarks and tweets, Trump has reportedly conceded that talks will continue past his previously specified March deadline.
"I have my doubts we are near the end. I think we're right in the middle," she says. "I think to some extent the U.S. may have blinked."
Lilly insists Canada is not without allies in trying to keep the talks alive.
"There are many, many good reasons that disrupting NAFTA is bad for American business, and it's American business who can make that case most strongly."
A return to power politics
One of the things yet to be resolved in the NAFTA talks is the dispute-settlement process.
Armand de Mestral, an experienced specialist in international trade law, fears U.S. Trade Representative Robert Lighthizer wants to turn the clock back to a time when the U.S. wasn't bound by trade rulings at either NAFTA or the World Trade Organization.
"Power politics played a broader role," says de Mestral, professor emeritus at McGill University in Montreal.
But in a world where other trade powers, notably China and Europe, have enormous and growing clout, power politics leads to conflict. An agreed system for settling disputes is crucial for avoiding a new round of escalating tit-for-tat trade battles of the kind that many blame for the Great Depression.
While Trump and Lighthizer might be willing to sacrifice long-term trade peace for the short-term benefits of rebuilding their own domestic industries, de Mestral says they represent only a single faction in a U.S. government committed to free trade.
Like business, he says, the U.S. Congress broadly favours both NAFTA and the WTO, and it's not clear Trump could kill either of those deals without the support of both the upper and lower house.
Of course, there may be ways around that legislative requirement. In the case of the WTO, for example, the Trump administration has stopped appointing members to the body that hears trade appeals. Only three of the seven U.S. spots are filled, and that number will soon get even smaller, says de Mestral.
Meantime, he says the best strategy for Canada is to keep talking as long as possible.
"There are people asking, 'What if the U.S. goes crazy?'" says de Mestral, imagining a moment when Trump succeeds in walling his country off from the rest of world trade.
"Do we simply say, well, for the rest of us it's business as usual and we'll hope that in three years we'll be back with the U.S. at the table?"
He pauses thoughtfully. "But that's speculation."
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