Is it time to start preparing for a post-NAFTA world?
Canadian, American and Mexican negotiators gathered in Mexico City for a fifth round of North American Free Trade Agreement talks earlier this month. They met without their political counterparts — a scenario observers had hoped would help depoliticize the ongoing negotiations, allowing for some substantive progress.
Instead, the stalemate — and its resulting trade uncertainty — continues.
The Americans continue to dig in their heels, staunchly defending their numerous non-starter asks. They’re demands that Canada and Mexico will never agree to in areas including dairy, dispute resolution, government procurement, rules of origin for automobiles and a five-year sunset clause on the entire trade deal.
Foreign Affairs Minister Chrystia Freeland used a news conference in Ottawa to repeat Canada’s insistence that any renegotiation of NAFTA must be fact-based.
“I think it’s important for us to be approaching these negotiations in the spirit of goodwill, a spirit of seeking win/win solutions and compromises and that is what we are doing,” Freeland told reporters.
“Having said that, I think our approach is to hope for the best and prepare for the worst, and Canada certainly is prepared for every eventuality.”
Every eventuality — including a U.S. withdrawal from NAFTA. It’s an outcome several provincial ministers, including Saskatchewan Agriculture Minister Lyle Stewart, have warned is a real possibility.
What Ottawa’s preparations look like remains anyone’s guess.
International Trade Minister Francois Philippe Champagne has said his mission is to diversify Canada’s trade portfolio and broaden its market access.
However, in an increasingly protectionist world, that’s easier said than done.
International trade rules prohibit countries from signing sector-specific trade agreements — forcing nations to negotiate overarching trade agreements that usually take several years to complete.
Longstanding trade issues and spats over such things as regulatory compliance show no signs of resolution, while others are escalating.
For example, a three-minister trade trip to India in mid-November failed to secure an extended fumigation exemption for Canadian pulses.
A surprise 50 percent tariff on pea imports, a major Canadian export to the region, also remains in place.
Ottawa has floated the idea of negotiating a bilateral trade agreement with India.
Still, a U.S. withdrawal from NAFTA would deliver a severe economic punch — one that will shock the North American economy regardless of how many alternative trade deals are signed.
Even the Americans are reportedly preparing for a possible NAFTA doomsday.
Earlier this month, U.S. Agriculture Secretary Sonny Perdue told Politico he and his staff at the U.S. Department of Agriculture are working on a contingency plan for farmers and ranchers should U.S. President Donald Trump’s administration pull the plug on NAFTA. He later pulled back his comments, saying he misspoke.
Whether he misspoke, or simply let the cat out of the bag too early, is unclear.
Perdue, a staunch supporter of free trade, is acutely aware of the economic blow a NAFTA withdrawal would deal to the agriculture sector.
Remember, he was the cabinet member who managed to walk back Trump from the NAFTA withdrawal cliff the first time.
At least 80 U.S. farm groups have publicly warned that the slightest sniff of a NAFTA withdrawal will send commodity markets crashing. In a letter to U.S. Commerce Secretary Wilbur Ross, they said a NAFTA withdrawal would cost the American agriculture and agri-food industry 50,000 jobs and deliver a $13 billion hit in gross domestic product for the farm sector alone.
North of the border, Agriculture Minister Lawrence MacAulay won’t say whether Ottawa is working on a contingency plan that’s agriculture-specific.
Meanwhile, Agriculture Canada insists Ottawa remains focused on ensuring NAFTA is successfully renegotiated. The department would not say whether a post-NAFTA contingency plan for Canadian farmers, ranchers and processors is in the works.