Maybe, just maybe, Trump’s right on trade. Maybe Canada should learn

Donald J Trump is appalling in many ways. Maybe in most ways.

He’s a bully and a liar. He encourages racism and xenophobia if it helps him politically.

He’s undermining his nation’s constitution on a regular basis. His disgraceful conduct is coarsening American mores.

But maybe he’s getting one thing right, or mostly right.

Maybe, just maybe, he’s right on offshore trade. Especially with China and the European Union.

He was boneheaded to pull the U.S. out of the Trans Pacific Partnership, which was a U.S. economic alliance formed to counter China’s corrosive influence in the Pacific Rim. He wasted time, energy and goodwill by launching attacks on Canada and Mexico in a mostly penny-ante revamping of the NAFTA.

But in his confrontation with China, he’s got it mostly right. And as he turns his antipathy towards the EU’s trade behaviours, he’s on a smart course too. Both China and the EU operate their trade policies to benefit themselves to the detriment of their trading “partners,” and they do this by ignoring rules, taking advantage of loopholes, using their import bureaucracies as moving blockades and operating their regulatory regimes like on-off switches for economic and political gain.

Canada knows all about this. Farmers especially know all about this, as usually the first and worst-hit victims of Chinese and European actions. China is mad at Canada over the detention of Meng Wanzhou, so it shuts its doors to Canadian canola, soybeans, beef and pork. It has done this without ever admitting its doing something deliberate, using its regulatory system as a flagrantly political tool. China is a member of the WTO, but that doesn’t mean much. It acts however it chooses, at least in respect to Canada.

The EU is less crude. It does a much better job of disguising its regular and ongoing misuse of its bureaucracy and regulatory system to block imports it doesn’t favour, including most Canadian canola and meat. But that doesn’t change the fact that since the Canada-EU free trade deal was signed, almost no improvements have come for Canadian agriculture and food exports.

That has provoked the Canadian Agri-Food Trade Alliance, which represents Canadian exporters, to issue this unusually blunt press release and call upon the government: Two Years In, CETA Not Delivering For Agri-Food Exporters.

As CAFTA notes in the statement:

“Ottawa, Ontario – September 26, 2019 – Marking two years since the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) came into force, the Canadian Agri-Food Trade Alliance (CAFTA) is urging Canadian and European lawmakers to enforce the provisions and commitments agreed upon to ensure trade flows freely and barriers are removed. CAFTA representatives are meeting with senior Canadian and EU officials this week to discuss the wide gap between the promises of CETA what the reality is for agri-food exporters.”

CETA, the name of the Canada-EU deal, was meant to improve market access for Canadian farmers and food exporters, but Canadian agrifood exports to the bloc have actually decreased 10 percent, while EU exports to Canada have increased 10 percent. That isn’t happening, according to CAFTA, because Canada’s ag exports aren’t wanted by EU consumers and processors. It’s happening because of the EU’s continuing unwillingness to reign-in its non-tariff trade barriers, in defiance of the spirit of CETA.

“Mechanisms within CETA were supposed to prevent non-tariff barriers from stifling trade and ensure that parties abide by their commitment. Instead, with non-tariff barriers still in place, viable commercial access remains elusive. It is time for Canadian and EU lawmakers to honour the deal negotiated and deliver on the outcomes promised,” said CAFTA President Dan Darling.

So there’s Canada’s situation: getting abused by both China and the EU, and doing little about it. We encourage the EU and China to play nicely.

Here’s where Trump comes in. Three or four years ago most U.S. politicians, exporters, farmers and citizens had reservations about China, but didn’t want any real confrontation with the giant nation because of all the perceived lost opportunities for increased trade China appeared to represent. Trade analysts and experts knew all about China’s egregious behaviour with intellectual property theft, forced technology transfer, protectionism and commercial cybertheft, but there was no political will to take on the issue.

That’s all changed, and it’s mostly due to Trump’s aggressive campaign of rhetoric and tariffs. People have woken up, and many find they agree that China needs to be confronted. Now both Republicans and Democrats support challenging China, and even if he loses his re-election bid, the U.S. seems unlikely to return to a just-let-it-slide approach with China. If Trump survives, I’ll bet he’ll continue his campaign with a long-term goal of forcing the U.S. and Chinese economies to decouple, regardless of the heavy costs and disruptions. that will cause.

For all the beliefs of some that China is strong and the U.S. is weak, it’s looking rather the other way, with China’s economy slowing to stall speed and its historic rise appearing to be ending, much as Japan’s did after 1990. China is feeling the impact of the trade war much more than the U.S. is (other than U.S. farmers, who are a particular victim), and that’s what’s behind China’s restrained response and friendlier tone. In comparison, China uses extremely harsh language when talking at Canada and shows little restraint.

This week Trump celebrated a “nice victory” over the EU at the World Trade Organization, which gave him permission to hit EU exports with tariffs because of the EU’s illegal supports for Airbus. His administration is quite gleefully hitting European wine, whisky and cheese with tariffs, and the EU is squirming. Just like China, the EU is appearing to be weaker than the U.S., and is likely to suffer more from trade actions. Germany’s economy has stalled, and as goes Germany, so goes the EU.

Canada is tiny compared to the U.S. What America can pull, Canada can’t pull off, at least not in the same way. If we stick it China and the EU, they might just ignore it, and they can probably get away with it.

But the present policy of being very, very polite and avoiding provoking those who are bullying us is beginning to seem wrongheaded. A few days ago I pondered whether we’ve passed out of an era of rules-following free trade and into a more combative world. I thought about what that should mean for farm risk management and support for farmers.

This post today is me thinking about how the Canadian government and people should respond to trading “partners” who bully, exploit or take advantage of us. Maybe it’s time to go tit-for-tat. Perhaps every abuse of our agreements and goodwill should draw a response. It might be the only way to make our erstwhile friends think twice before flagrantly breaching their commitments when it comes to Canada.

At the least, we’ve seen that accommodation and collaboration with China and pointless frustration with the EU has gotten Canada little. What it has achieved, unfortunately, is to make Canadians feel weak and compromised. It’s not Canada’s natural stance and it puts us on the back foot. (The Macdonald-Laurier Institute has written a number of excellent pieces on this situation, which I recommend you read, beginning with this: Canada must find a way to remake its strategy on China.)

The MLI’s ongoing analysis, and CAFTA’s statement, to me suggest that parts of Canada are waking up to the unacceptable treatment Canada and its farmers have been receiving. However Canada acts, nothing is likely to change quickly. But it’s clear that accommodation and appeasement have left us where we are today, and it’s not a good place.

 

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