In the era of 'America first' and 'Mexico first,' how about 'Canada first' too?
A national interest test on all major policy decisions may be best response to tariffs, trade fight
Only a few years ago, strengthening the NAFTA continental trade partnership was a primary goal of the three governments involved, committing in their annual "Three Amigos" leaders summits to make North America as competitive as possible with the other major global trading blocs.
The last Three Amigos summit was held in Canada in 2016 and ended with an undertaking by the U.S. to host the next meeting, but no meeting has been held and now the future of NAFTA itself is very much in question — one of many questions around trade we now face.
On July 1, even before the traditional fireworks start, Canada will begin applying new tariffs on a range of U.S. products in retaliation for the month-old "America first" tariffs on Canadian steel and aluminum.
The same day, Mexican voters will elect a new president, probably perennial candidate and former Mexico City mayor Andres Manuel Lopez Obrador ("AMLO" to his supporters), who has campaigned effectively on a "Mexico first" platform.
In these circumstances, what should Canada's governments do?
The best answer seems to be to stand firm, to keep a healthy North American economic partnership as a key goal, but also to make sure a "Canada first" national interest test is applied to every relevant policy decision.
Global trade war
The results of the current uncertainty around trade for Canada, especially with the threat of major new U.S. tariffs on the automotive sector, are already showing up directly in predictions of economic slowdown, investor uncertainty and a weakened loonie.
Canadians will soon start feeling the effects of our new tariffs on U.S. goods as well.
Here in our province, the president and CEO of the Business Council of Manitoba, Don Leitch, recently cited statistics indicating that about $300 million Cdn a year of Manitoba's exports are now subject to the U.S. steel and aluminum tariffs and that the exporting businesses employ almost 2,000 workers.
Regulatory harmonization and tax competitiveness are both worthy goals, but Canada has to retain the tools to avoid branch-plant status and to pursue its own economic and social aspirations.- James Eldridge
Some observers see the U.S. tariffs, real and threatened, as an attempt to force Canadian concessions in the NAFTA negotiations and as an effort to build support for Republican candidates in the November mid-term congressional and state elections.
Others see these measures as ominous signs of the long-term fracturing of the North American economic partnership, with all three countries as losers, but with Canada and Mexico facing the largest negative consequences.
New or existing bilateral agreements, including the still-in-effect Canada-U.S. Free Trade Agreement, could lessen the impacts, but there are no guarantees.
The greatest concern, however — and the one with the potential for the most damage for all countries involved — would be an all-out global trade war which, in the first year, could result in a recession in Canada, with a GDP reduction of close to two per cent, according to a recent Scotiabank report.
Too cozy with U.S.?
Our country's economic sovereignty must be safeguarded, as should our core institutions like medicare, which Canadians value highly and which distinguish us from our friends to the south.
Regulatory harmonization and tax competitiveness are both worthy goals, but Canada has to retain the tools to avoid branch-plant status and to pursue its own economic and social aspirations.
Perhaps we have been a little too cozy or complacent in our dealings with our American neighbours and have lost sight of some significant, and at times worrisome, trends.
Despite what the current U.S. administration has argued, NAFTA has been beneficial to all three partners, but it has had some downsides too.
U.S. influence and effective control over key sectors of the Canadian economy has increased in the last two decades, through takeovers and greater supply chain integration.
At the same time — and predating the last U.S. election — "buy America" policies and other forms of protectionism, including at state and local levels, have continued.
Manitoba in good position to advance trade interests
Fortunately for Canada, there seems to be a widespread consensus among the federal and provincial governments that our country's current measured response to the U.S. tariffs is the right course to follow.
The recent finance ministers meeting appeared to reinforce this view and demonstrated the importance of close, continuing consultation on policy options among governments, business and labour organizations in the months ahead.
Depending on circumstances, there could be merit, for example, in looking at measures to encourage more domestic investment by public pension funds, and at options for retaining and increasing Canadian ownership of successful business ventures.
The "Team Canada" approach has worked well in the past and seems to offer a good model for dealing with the current challenges. An obvious priority should be to broaden our trade relations with other countries while also continuing our advocacy work in the U.S.
Early exploratory communications with the new Mexican national and state governments will also be important, as they prepare to take office late this year.
With its ongoing work to maintain and build relations with subnational governments in North America and abroad, Manitoba is well-positioned to make a major contribution to advancing Canada's overall trade interests, as well as our own specific priorities.
In this connection, Manitoba's and other western provinces' longstanding connections with the non-partisan U.S. Western Governors' Association undoubtedly contributed to the governors' timely resolution, at their conference in South Dakota this past week, on the importance of NAFTA to the western states' economies and on the desirability of stable and predictable U.S. trade policies.
That resolution will be heard in Washington.
Other key Manitoba assets for advancing our trade objectives include our business leaders' well-established international links, excellent reputations and strong commitment to our province, and our diverse transportation sector — including air, rail and trucking, CentrePort, and, ideally, Churchill again soon.
Hopefully a unified Canadian effort — with a renewed dose of "Canada first" thinking as required — will lead to positive results both for our country and for our friends and allies across the border.