Whatever your thoughts on Donald Trump’s chaotic time in the White House, no one can claim they weren’t warned. The president telegraphed his policy obsessions, personality tics and deal-making ploys long ago in his 1987 book Trump: The Art of the Deal. With Canada now engaged in a high-stakes renegotiation of the North American Free Trade Agreement, it’s time to re-read the Trump playbook.
Trump has long complained about NAFTA and United States trade deficits. Most economists consider excessive focus on trade imbalances to miss the point of international trade, which is to take advantage of countries’ comparative advantages. Trump’s fixation on this statistic, however, is part of his obsession with winning. “Money was never a big motivation for me, except as a way to keep score,” he said in his bestseller. Trade deficits and surpluses are how he keeps score globally.
What does this mean for Canada? From Trump’s perspective, Canada ranks as a loser. According to ofﬁcial U.S. statistics, Canada ran a US$12.6 billion trade and services deficit with our southern neighbour last year. We may know it’s folly to get worked up over that, but if it gets Trump’s attention, so much the better. Mexico, with its large trade surplus and ample supply of cheap labour, is the real source of the president’s ire. Other major trade complaints from Trump, such as state-owned enterprises, currency manipulation and non-tariff trade discrimination, are largely to be blamed on China and Europe. Based on Trump’s rules, we’re not the enemy.
Perhaps the biggest problem facing Canada is the possibility Trump might abandon renegotiation and tear up NAFTA altogether. Again from The Art of the Deal: “I never get too attached to one deal or one approach. For starters, I keep a lot of balls in the air, because most deals fall out.” Abrogating NAFTA would allow Trump to seek a bilateral deal with Mexico and apply maximum pressure on that country to contribute to his border wall or make some other high-profile concession on wages. In this case, Canada would likely fall back to the original Canada-US Free Trade Agreement. The problem is this would turn the U.S. into the hub of the North American trading relationship, and the obvious location for new investment and jobs. To prevent this scenario, Canadian negotiators will need to don their best poker faces. “The worst thing you can possibly do in a deal is seem desperate,” Trump wrote in 1987. “That makes the other guy smell blood, and then you’re dead.”
To date, Canada has avoided any whiff of desperation. Foreign Affairs Minister Chrystia Freeland has rightly vowed to walk away if the Canadian priority of an impartial dispute resolution mechanism is threatened. Then again, her claim that Canada will fight to include gender and Indigenous rights in a new NAFTA is likely a non-starter, and says more about the Trudeau playbook of identity politics than how to deal with Trump.
All negotiations require some give and take. If we have to give something up to satisfy Trump’s obsession with winning and maintain a trilateral deal, farm supply management seems the most likely candidate, particularly since doing so will provide an unambiguous benefit to Canadian consumers. (While, admittedly causing some political controversy.) In addition, there are plenty of areas where the 23-year-old NAFTA could be improved to everyone’s advantage—harmonizing regulations, smoothing customs procedures, improving country-of-origin rules and modernizing e-commerce standards, to name a few.
NAFTA renegotiation is serious business. But it’s not necessarily bad news for a determined, free-trading country such as Canada. “Deals work best when each side gets something it wants from the other,” the president also wrote in 1987. Consider it a rare Trumpism we can all agree on.
MORE ABOUT NAFTA:
- Trump’s America actually has a trade surplus with Canada
- How NAFTA looks from a Canadian auto parts plant in Mexico
- New Canadian trade data complicates NAFTA negotiations
- NAFTA nations make progress in second round of talks
- How NAFTA looks from Mexico City
- McKenna ‘done’ with ‘ridiculous’ Tory language on environment
- ‘Negative’ tone in NAFTA talks as sticking points emerge
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