For Canada, Trade Trumps All

On January 20, Donald Trump will stand on the West Front of the U.S. Capitol and be sworn in as the 45th president of the United States.

In delivering his inaugural address, he will be looking out directly to the Canadian Embassy, just a couple of blocks away on Pennsylvania Avenue.

Canadians gathered at the chancery for the occasion, as well as officials back in Ottawa, will be parsing his words for policy shifts defining the early Trump administration.

Canadians will be weighing Trump’s words in three policy envelopes—economics and trade, energy and the environment and foreign and defence policy.

It would be a mistake to make this unforeseen development in bilateral affairs about us as Canadians, with our famous penchant for self-absorption. Former Vermont Governor Howard Dean, speaking to the Canadian-American Business Council in Ottawa the other night, remarked that he’d been coming to Canada for 40 years, and always hearing complaints from Canadians about being ignored by the Americans. He then suggested, to appreciative laughter, that might be the best thing that could happen to Canada over the next four years.

On trade, for example, Trump hasn’t spoken once about Canada when he has repeatedly called NAFTA “the worst trade deal in history.” He has been talking constantly about Mexico, and U.S. manufacturing jobs re-locating there over the last 20 years.

He wasn’t talking about Canada, except as one of one of 11 unnamed Pacific Rim countries at the table, when he denounced the TransPacific Partnership trade deal as “a disaster” negotiated by the outgoing Obama administration.

But Canada can certainly be sideswiped by his promise to either re-negotiate or “tear up” NAFTA. As for the TPP, with the U.S. and Japan having effective vetoes, the White House acknowledged in not sending it to Capitol Hill for debate during the lame-duck session of Congress that it was dead in the water. Trump needn’t say another word about it.

But on NAFTA, if he really means to do something about it on Day One, he can go to the Oval Office after reviewing the inaugural parade and sign an executive order giving the required six months’ notice to invoke the cancellation clause of the continental trade agreement. It would be his first act as president, one that shows he means business. Then he could call the Canadian prime minister and Mexican president and politely say he’d like to renegotiate the deal.

Justin Trudeau would not have a problem with that. On the day after the U.S. election, his ambassador to Washington, David MacNaughton, told the Canadian media in a conference call that if the Americans wanted to renegotiate, Canada would be “at the table.”

Trudeau himself the next day told a media availability: “If the Americans want to talk about NAFTA, I’m happy to talk about it.”

This pre-emptive Canadian gambit may have got the Trudeau government out in front of Trump’s NAFTA fixation, but the PM has also been criticized for opening up the deal before being asked. “Not a good move for Canada,” former Pennsylvania senator and Trump supporter Rick Santorum, in Ottawa for the CABC event, told CTV’s Question Period in its Sunday morning broadcast.

Trudeau himself followed up during his visit to Cuba at the start of his South American swing last week with a perfectly sensible comment. “The fact is,” he said, “that we are all committed to continuing to have strong relations with the new American administration.”

Trudeau may have had a “bromance” with Barack Obama, but he will almost certainly find a way to strike up a cordial relationship with Trump. Trudeau has demonstrated a knack for building inter-personal relationships at the top. In his first year in office, he has hardly put a foot wrong on the international stage.

Besides, the bilateral trading relationship is a matter of overriding importance to both Canada and the U.S.

Canada is the most important customer for 35 U.S. states. You can be sure that 35 governors and 70 members of the U.S. Senate are very aware of that.

No fewer than 9 million jobs in the U.S. depend on trade with Canada. In Canada, some 2.7 million jobs — about one-seventh of the work force — depend on trade with the U.S. In 2015, Canada purchased US$338 billion in goods and services from the U.S., while exporting $US$332 billion. On merchandise trade alone, Canada bought C$363 billion from the U.S. last year, while exporting C$397 billion.

As the outgoing governor of Indiana, the incoming U.S. vice president, Mike Pence, has a very close understanding of this. In 2014, Indiana sold US$12.2 billion of goods to Canada, or 35 per cent of the state’s global exports. No fewer than 190,000 jobs in his home state depend on Canadian customers.

More than US$3.5 billion of these exports were in auto parts, automobile and trucking industries, where the supply chains constantly go back and forth across the border. Now the chair of Trump’s transition team, Pence is looking very much like the chief operating officer of the incoming administration.

As a governor, he knows the Canadian trade file cold, and in the White House, could emerge as a solid and sensible friend of Canada.

The energy-environment and foreign affairs-defence files are also major policy concerns for Canada during the transition and beyond.

But trade is a major job creator and driver of prosperity for both countries.

For Canada, trade trumps all.