Not Getting All Shook Up

Donald Trump keeps threatening to tear up NAFTA. Tom Walkom writes that there's no need to panic. In fact, Trump may be doing us a favour:

We know that Canada and the U.S. are already at daggers drawn over a provision in the current deal that gives each member state a limited right to challenge one another’s trade practices before an independent tribunal.

Trump wants the provision scrapped altogether while Prime Minister Justin Trudeau has said he won’t sign a deal without it.

The two countries also disagree vigorously over U.S. Buy America policies as well as Trump’s insistence that manufactured goods sold in the U.S. contain a specific amount of U.S. content.

Mexico’s government, which also is at loggerheads with Trump, is already working on alternative plans for trade diversification should the NAFTA talks fail. Trudeau would be wise to do the same.

The recent spike in gas prices has reminded Canadians just how closely the Canadian economy is linked to the American economy. When things get rough in Houston, the bad news is felt in Napanee. It would be wise to diversify:

Indeed, some diversification has already begun. The recently negotiated trade deal between Canada and the European Union, while fatally flawed in its details, is at least the right idea. So is the long-simmering but never-acted-upon plan to negotiate a trade agreement with Japan.

Canada has already signed a foreign investment pact with China and started work on a comprehensive trade deal. The foreign investment pact is lopsided in China’s favour. With luck, Ottawa will do better on any trade deal.

And, truth be told, we didn't do so badly before we put so many of our eggs in the NAFTA basket:

Canada traded quite handily with the U.S. before signing a formal free trade agreement with that country. It could do so again.

A recent study done for the Canadian Centre for Policy Alternatives points out that even without NAFTA or its predecessor, the Canada-U.S. Free Trade Agreement of 1989, most Canadian exports to the U.S. would face either zero or moderate tariffs.

There are other nations eager to buy the goods and services Canada produces. Canadian governments have tried before to make the country’s economy less reliant on the U.S. Pierre Trudeau’ so-called Third Option, including his brief dalliance with economic nationalism, was an expression of this idea.

Trump takes pleasuring in rattling those he perceives as his enemies -- and he sees everyone as his enemy. We shouldn't get all shook up.

Image: newsblaze.com

 

No Einstein

The Trudeau government has spent a lot of effort trying to to stay on the good side of Donald Trump, fearing that he will rip up NAFTA. But a recent study concludes that Canada has less to fear from Trump than some believe. Tom Walkom writes:

Written by economist Pierre Laliberté and research fellow Scott Sinclair, the study — entitled “What is the NAFTA advantage?” — says that even without the pact, trade barriers between Canada and the U.S. would be relatively minor.

That’s because both countries adhere to rules set by the World Trade Organization that mandate minimal tariffs between member states.

Without NAFTA, 41 per cent of Canadian exports to the U.S. would still face no tariffs at all.

The remaining 59 per cent would face, on average, extremely modest tariffs. The authors calculate that the value of these extra tariffs would total roughly $4 billion a year — a relatively small amount when compared to annual exports of roughly $279 billion.

The authors also point out that Canada’s main aim in negotiating a deal with the U.S. — which was to obtain an exemption from that country’s often arbitrary trade laws — never materialized. The eternally recurring softwood lumber dispute is a testament to that.

That's not to say that walking away from NAFTA would not have costs:

The study doesn’t try to pretend that ending NAFTA would be costless. Some industries, such as agriculture, would be hit hard. Others, such as petroleum, would be barely affected.

But it does demonstrate that, for the most part, Canada’s economy could purr on quite contentedly without the pact.

That, in turn, means two things. First, Ottawa can safely walk out of the NAFTA talks if Trump’s demands are too outrageous. Second, Canada’s government need not twist its foreign and defence policies out of shape just to candy up to him.

During the past week, Trump the Bully has been on full blown display. His latest doctored video of him beating up on CNN is yet another example of his boarishness. But it also reminds us that Trump is no Einstein.