Phoenix-Like, a New NAFTA Rises

October 5, 2018 Updated: October 12, 2018

There is a French phrase, “sauve les meubles” (save the furniture), that implies there has been a disaster (house fire) but still enough time to protect some of the family valuables. It describes a lower-level crisis than one prompting “sauve qui peut” (every man for himself; save yourself, if you can).

One gets the impression from Canadian media analysis that Ottawa is just grateful it saved the “furniture.” But to have gotten to this parlous circumstance required a number of unforced Canadian errors, combined with a blithe misunderstanding of U.S. negotiating imperatives.

It is the impression of some historians and political observers that Canadians persistently out-negotiated U.S. reps in multiple trade-related agreements, ranging from the 1965 Auto Pact to the 1995 Open Skies, bracketing the 1992 NAFTA Agreement.

Notably, in NAFTA, Canada secured a cultural carve-out to protect its media/news production and continued egregious tariffs on U.S. dairy/poultry products. U.S. negotiators accepted Canadian remonstrations that dairy protections were vital to preserving federal/national unity support in sovereigntist-leaning Quebec.

Moreover, there was the sense that if U.S. diplomats couldn’t reach an agreement with those nice Canadians, they weren’t very effective. And, consequently, perhaps our negotiators were not always “A-Team.” Ottawa became accustomed to dealing with senior U.S. officials, including presidential-level, who thought Canadians were “good guys,” and we shouldn’t take advantage of them.

They hadn’t encountered President Donald Trump’s approach to negotiations.

And to be fair, first impressions of Trump-Trudeau relations seemed to reinforce existing preconceptions. Although during his presidential campaign, Trump had inveighed against NAFTA as the worst agreement ever negotiated, Trudeau’s February 2016 Washington visit was akin to a bromance/love fest.

Delivered in “not-to-worry” modulation, Trump implied NAFTA revisions for Canada would be “tweaks.” Perhaps Ottawa’s full-court press with USG officials in Washington and key state capitals, to explain how important NAFTA was to American workers/business, had mitigated Trump’s campaign excesses?

Consequently, when Trump dropped tariffs on Canadian steel and aluminum citing a national-security rationale, Ottawa threw a hissy fit. National security was an absurd pretext, and Canada wouldn’t be “pushed around.” Trudeau subsequently infuriated Trump, by repeating this bombast immediately after the G-7 summit. It was a totally unnecessary shin-kick.

As Trump was on his way to an unprecedented, high-risk, “bet his presidency” summit with North Korea’s Kim Jong Un, U.S. responses verged on unprintable ad-hominem critiques of Trudeau. Subsequently, the United States sidelined Canada during summer negotiations, while reaching an agreement with Mexico.

Moreover, when Trump hinted at a nuclear option of 25 percent tariffs on Canadian automobile exports, Ottawa faced potential economic calamity and recession if unable to reach an agreement. That negotiators reached agreement minutes prior to the Sept. 30 deadline reflects recognition of politico-economic reality rather than cut-off-your-nose-to-spite-your face abstract principles.

Following are some selected outcomes/changes in “NAFTA 2.0,” now named U.S.–Mexico–Canada Agreement (USMCA):

  • A 16-year terminal date with a six-year review;
  • Continuation, at least for the interim, of steel and aluminum tariffs;
  • Retention of dispute resolution boards to address dumping and countervailing tariffs (a Canadian priority);
  • Rules for internet commerce and increased “tax-free” Canada–U.S. purchasing;
  • Opening Canada’s “managed” dairy industry to U.S. products (a Trump bete noire). Access is still trivial, but it drove a wedge for greater access;
  • Required increases in North American content for automobiles to 75 percent from 62.5, with automobiles requiring 40 to 45 percent of content made by workers earning at least $16/hour); the predicted result being fewer lost manufacturing jobs;
  • Greater protection for intellectual property in pharmaceuticals; stronger labor rights and environmental protection.

The United States success is particularly noteworthy as it comes against the fulminations of virtually all “experts” and trade economists. Their general attitudes fell between predicting the sky-is-falling or an ice age is coming combined with instant global warming doom and “It isn’t worth the effort for marginal change.” Their prognostications emphasized hypothetical astronomical costs in jobs and money for U.S. workers, with barely a nod to the alternative reality of costs inflicted on our trade opponents that would prompt their agreement to our proposals. Trump simply blew off the doomsayers.

There is no question that such was bare-knuckle (if not brass-knuckle) negotiating. Nor is there any assurance comparable approaches will be effective in forthcoming negotiations with the Europeans, Japan, and China. But it has laid down an economic marker comparable to our demands for greater NATO security contributions that there is a “new sheriff” in Washington—like him or not.

David T. Jones is a retired U.S. State Department senior foreign-service career officer, who has published several hundred books, articles, columns, and reviews on U.S.–Canadian bilateral issues and general foreign policy. During a career that spanned more than 30 years, he concentrated on politico-military issues, serving as an adviser for two Army chiefs of staff. Among his books is “Alternative North Americas: What Canada and the United States Can Learn from Each Other.”

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.

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