Analysis

Trudeau's got a NAFTA 2.0 Now he has to sell it to Canadians

It's certain that the highs and lows of Justin Trudeau’s first three years in office will be defined by the nearly 14 months his government has spent negotiating a new trade deal with the US and Mexico. Also certain: he's fine with that.

Losing NAFTA would have been a catastrophe. But did negotiating its replacement have to take this long?

Prime Minister Justin Trudeau and Minister of Foreign Affairs Chrystia Freeland share a laugh with Canada's negotiator Steve Verheul as they make their way to a press conference on the United States Mexico Canada Agreement (USMCA) at the National Press Theatre in Ottawa on Monday, Oct. 1, 2018. (Sean Kilpatrick/Canadian Press)

It's almost certain that the highs and lows of Justin Trudeau's first three years in office will be defined by the nearly 14 months his government has spent negotiating a new trade deal with the U.S. and Mexico. He's probably fine with that.

The prime minister didn't need to be friends with President Donald Trump. He knew there would be a political upside at home to standing firm against a president with a penchant for denigrating his opponents.

"We kept our collective resolve," Trudeau told reporters on Monday, "even when some were recommending we capitulate."

But allowing the talks to drag from spring into summer, then into the fall, came at an economic cost.

Bank of Canada Governor Stephen Poloz warned that the lingering uncertainty over NAFTA's chances of living another year could convince firms to choose the U.S. for investment — especially after Trump came out with a tax reform package that lowered corporate rates and allowed businesses to write off 100 per cent of their investments in new technology.

A deal was never a sure thing. Trudeau knew that, hovering constantly in the background, was the threat of losing secure access to Canada's largest trading partner. That would have been devastating for Canada's economy and, quite likely, for the Liberals' brand as well.

Trump frequently derided Trudeau and his negotiating team, dismissing the younger politician as weak and threatening to impose punitive tariffs on autos and auto parts on Canada if negotiations to renew NAFTA failed.

Despite the taunts, despite the fact the U.S. had reached a separate deal with Mexico weeks earlier (both nations indicated they were prepared to move ahead without Canada) and despite criticism from some Conservatives, it finally came together.

Mixed reactions

"Alongside our new European and trans-Pacific trade agreements, today we are securing a higher standard of living long into the future for the people of Canada," Trudeau said.

Saying so is one thing. Convincing voters — and expecting they'll see the benefits before next year's federal election — is something else.

Early domestic reviews of the deal are running a wide gamut. Dairy and poultry farmers, in particular, aren't happy that U.S. farmers will get greater access to Canadian markets. They'll have to be compensated, which could cost Canadian taxpayers hundreds of millions of dollars.

Steel and aluminum producers worry that Trump's tariffs on their products, imposed on national security grounds, will continue. There is nothing in this deal — nothing that the prime minister could point to today — to suggest that will change soon.

Ontario Premier Doug Ford kept a foot firmly in both the glass-half-full and glass-half-empty camps today.

"While I'm optimistic that the USMCA announced today will create continued opportunities, I remain concerned about the impact of Canada's reported concessions on Class 7 milk and access to Ontario's dairy market could have on our agriculture sector," Ford said in a written statement.

"We also remain concerned about the remaining steel and aluminum tariffs."

On the other side came praise from the auto workers' union, Unifor, and the Canadian Labour Congress — whose leaders had been involved in the discussions from the very beginning — for heading off those same tariffs on the auto sector.

The Canadian team won praise as well for keeping the independent dispute resolution mechanism that was a deal-breaker for Brian Mulroney during the original NAFTA talks.

The former prime minister released a statement Monday indicating he believes Canada achieved most, if not all, of its objectives:

"And I commend all — from the prime minister down — who contributed to writing this vital new chapter in the ongoing drive for greater Canadian strength and prosperity," Mulroney said.

Mulroney knows what it's like to make a political gamble on a trade deal. Back when he was in power, the public and most of the premiers saw little benefit to a free trade deal with the United States.

Charles McMillan, a former Mulroney adviser, wrote in 2007 that all the warnings of economic ruin that attended the negotiation of the original Canada-U.S. free trade agreement turned out to be illusory:

"Despite plant closures, as firms rationalized their production runs, expanded production to meet new markets and introduced powerful new technologies, trade expansion, job creation and trade growth reached unprecedented levels, doubling every eight years."

Why did this take so long?

Trudeau's own bottom line in these talks was always that no deal would be better than a bad deal. He claimed a win-win-win was there for the taking — even after his two negotiating adversaries crossed the finish line weeks earlier.

He will be pressed now to show that dragging out these talks to the final hours, with all the uncertainty it created for businesses and investors, led to Canada getting more than it would have otherwise.

The government also will have to counter the narrative from south of the border, where Trump has left no doubt that he really, really likes the deal he's dubbed the 'USMCA' (the United States-Mexico-Canada Agreement).

President Donald Trump speaks about the new trade deal between Canada, the U.S. and Mexico outside the White House on Monday. (Pablo Martinez Monsivais/Associated Press)

Trump insisted Monday that U.S. farmers won big in getting more Canadian market access for their dairy and poultry, that new chapters on intellectual property, the digital economy and banking are also wins for the U.S.

He likes the deal so much that he even had kind words for Trudeau.

"There was a lot of tension, I will say, between he and I more specifically," Trump said today. "And it's all worked out. You know when it ended? About 12 o'clock last night."

But could it have worked out sooner? Was a deal not in place weeks earlier?

Ontario Conservative MP Pierre Poilievre asks Minister of Foreign Affairs Chrystia Freeland about the new US, Mexico and Canada Agreement in Question Period 2:31

Foreign Affairs Minister Chrystia Freeland indicated the turning point in the overall talks came early, when her U.S. counterpart Robert Lighthizer softened his demand that half of all auto parts be made in the U.S. for autos to qualify as North American.

"When he decided that was not going to be his approach and we worked on labour value content, that was probably the single pivotal moment. From then on, we felt that the outline of a deal was there."

Even if it took until last night to finally fill it in.

Power & Politics talks to experts about the USMCA:

About the Author

Chris Hall

National Affairs Editor

Chris Hall is the CBC's National Affairs Editor and host of The House on CBC Radio, based in the Parliamentary Bureau in Ottawa. He began his reporting career with the Ottawa Citizen, before moving to CBC Radio in 1992, where he worked as a national radio reporter in Toronto, Halifax and St. John's. He returned to Ottawa and the Hill in 1998.

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