Canada isn’t blustering back at its American cousins when it comes to trade rhetoric, and that might be the best strategy. Keep the credibility high and powder dry, saving it for the negotiating table.
America’s new chief of trade is telling Canada and Mexico to “get ready to make concessions,” crediting his tweeter-in-chief for “softening up” its two largest trading partners with bully talk.
Is Commerce Secretary Wilbur Ross’s “softening up” the same as President Donald Trump’s North American Free Trade Agreement comments after meeting with the Prime Minister Justin Trudeau last month?
Face-to-face, Trump said the $673 billion Canadian portion of the trade relationship just needing “tweaking.”
Or is the U.S. strategy to tear up NAFTA as the groper-in-chief suggested when on the campaign trail?
At this point, the new American administration’s claims to be expert negotiators, proven by their billionaire net worths, might be called into question.
If just telling someone ahead of time that you plan to out-manoeuvre and take advantage of them in a negotiation is all it takes to improve a deal, it would make life pretty simple. He who speaks first and loudest wins.
This comes from the same Trump administration that has mused about exiting the World Trade Organization, the United Nations and NATO.
The credibility gap for the Trump administration, like the US$500 billion global trade deficit that it seems overly concerned with, widens with time and a healthier economy.
Three-quarters of Canada’s exports, $395 billion last year, were to the United States. We imported $278 billion from our neighbour. Thirty-five of the lower 48 states have Canada as their largest customer. Europe,our second largest trading partner, takes less than 10 percent of Canada’s exports. If the U.S. limits our trade we don’t have large alternative markets.
The U.S. should realize any effort to limit its imports will only hurt itself. If it were to impose a border tax it would likely increase the value of the U.S. dollar, making it harder for American exporters.
Cut off from low-cost imports, American consumers would face higher prices and inflation would rise. A border tax would reward inefficient domestic-oriented businesses and penalize efficient export-oriented business.
Both Canada and Mexico would likely retaliate against American import taxes and any new country-of-origin labelling legislation.
Mexico’s senior trade representative said it has started shopping for Brazilian corn supplies to replace nearly four billion bushels of U.S. imports, potentially causing 24 million acres of U.S. crop to go looking for a new, higher cost destination and driving up the American trade deficit with its southern neighbour.
Bullying and bluster are generally for the crowds back home, not for the actual trade tables. We shouldn’t look for a public Canada tit-for-tat on the menacing behaviour of Ross and Trump
We have allies in state capitols and in the American business community who depend on an open border. We can hire lobbyists to carry the free trade banner to Congress.
Just because you can’t smell the dinitrotoluene in the air doesn’t mean Canada’s trade team and politicians aren’t preparing for a scrap.
And that’s the way it should be: powder dry and ready to use when it counts.