How should Canada respond to threats to global trade?/Shutterstock

By John M. Weekes

February 6, 2025

In the face of Donald Trump’s disruptive approach to trade, it is not unreasonable to question whether negotiated, ratified, and settled trade agreements with the United States still have any value. What good are they to Canada if they don’t codify and compel the behavior of our largest trading partner as well as our own? Until time reveals the full answer to that question, there are several measures Canada can take to mitigate and pre-empt damage.

Strength in numbers

Canada should reach out to our other significant trading partners to share ideas for managing trade relations with the United States and also to consider ways to strengthen trade with each other. Prime Minister Justin Trudeau has already taken important steps in this regard. He has spoken with his British counterpart, Keir Starmer, by phone and will be traveling to Paris and Brussels in the coming days. Such discussions must be initiated at a senior political level, but they will also need to get into detail which would be more efficiently undertaken by trade officials operating under political direction. It would make sense to undertake at least some of these more detailed discussions in Geneva, where members of the World Trade Organization (WTO) maintain offices staffed by trade policy experts. Members can engage with each other and in small groups, as well as in formal or informal meetings of the WTO itself.

The WTO General Council, the top management body of the organization, will hold one of its regular meetings on February 18 and 19. This will be an important opportunity to discuss in a measured way recent trade developments, including actions and threats from the United States. It can help send a signal to Washington that its trading partners are concerned and are contemplating working together.

The value of stability

Since 1945, the main forum for trade negotiations was the General Agreement on Tariffs and Trade (GATT), reconstituted in 1995 as the WTO. The trade agreements negotiated in this Geneva-based multilateral forum have resulted in a set of detailed rules governing trade among 166 countries. They have also resulted in major reductions in tariff barriers among countries. Perhaps even more important than this liberalization of trade has been the establishment of agreed rules providing a stable, predictable framework within which businesses can plan and invest. This system of rules has been buttressed by a set of procedures for the resolution of trade disputes. It has functioned with remarkable success, has increased prosperity in all countries and has been instrumental in bringing hundreds of millions of people out of poverty.

In 2023, the value of world merchandise exports was nearly 24 trillion U.S. dollars. In the same year, total world services exports were nearly 8 trillion U.S. dollars. These amounts account for a substantial part of world GDP, valued at about 106 trillion U.S. dollars.

Resolving trade disputes is one of the core activities of the WTO. A dispute arises when a member government believes another member government is violating an agreement or a commitment that it has made in the WTO. The WTO has one of the most active international dispute settlement mechanisms in the world. Since 1995, 633 disputes have been brought to the WTO and over 350 rulings have been issued. Canada has been active in the dispute settlement system, participating as a complainant in 40 cases, as a respondent in 24 cases, and as a third party in 179 cases.

The WTO, as did the GATT before it, envisages the possibility of members concluding bilateral or regional free trade agreements provided they contribute to the general liberalization of trade without imposing new barriers. This goal was more than pragmatic; it was an agreed-upon value of postwar multilateralism, based on the belief that countries who trade with each other have a greater investment in peaceful relations.

According to the WTO, as of January 2025, 373 regional trade agreements were in force. It is important to note that some 80% of world trade still takes place on the basis of WTO rules. Currently Canada has 15 free trade agreements in force with 51 different countries, including major agreements like the Canada, United States, Mexico Agreement (CUSMA), the Comprehensive Economic and Trade Agreement (CETA) with the European Union, and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) with a number of Asia-Pacific countries, including Japan.

The core functions of the WTO are:

• Administering WTO trade agreements
• Providing a forum for trade negotiations
• Handling trade disputes
• Monitoring national trade policies

Unfortunately, in recent years the United States has pulled back from its leadership role in the WTO and has damaged the dispute settlement system by blocking the appointment of new judges to the organization’s Appellate Body, thereby rendering it unoperational. However, many countries are still bringing complaints to the WTO (as China has just done against the U.S.) and a group of important members including Canada, the EU, Japan and China have put a temporary replacement for the Appellate Body in effect. Importantly the WTO agreements continue to function in many areas crucial to trade but that do not grab headlines. For instance, much valuable work continues in areas such as product standards and other technical regulations. While the WTO is clearly weakened, it is vital to preserve it while planning how to reform and strengthen it in the future, when conditions for international cooperation are more propitious.

Learning from the past

My experience with the negotiation of trade agreements goes back to the early 1970s, when, as a junior officer, I was part of the team preparing for Canada’s participation in the Tokyo Round of GATT negotiations. I was then posted to Geneva as part of the Canadian delegation in those negotiations, which lasted six years. In this creative, intensive and demanding environment I learned that Canada can make a difference and that furthering Canadian economic interests can be achieved through trade negotiations. Success requires a lot of work: Work with various government departments, the provinces and Canadians in business and civil society; and  work with representatives of other countries to develop and advance the elements of an agreement. People do make a difference, and it is remarkable how creative this process can be as various countries try to advance their own interests while recognizing that there are ways to do this in which everyone can benefit. It is most unfortunate that Donald Trump seems to view trade as a zero-sum game, as though win-win is impossible. But believe me, it is not. Canada can still play a leadership role today but to do so the government must put a strong minister in charge of the trade file and ensure that high-quality personnel are assigned to support the effort.

Something else I learned from my experience is that both exports and imports make Canadians better off and make Canada’s economy more competitive and prosperous. Exports allow for the development of more competitive industries in Canada and generate higher-quality employment. Imports give Canadian consumers greater choice and provide Canadian businesses with needed inputs for their finished products.

Finally, to plan, prosper, invest and employ, businesses need a predictable trading environment. Yes, it is important for barriers in foreign markets to be low enough to allow Canadian businesses to compete, but it is essential that those conditions of access to foreign markets be predictable. That is what is both so dangerous, and so contradictory, about the current difficulty in our relationship with an American president who also happens to be a businessman. Suddenly, uncertainty surrounds the conditions of access to our largest foreign market. In these circumstances, it is vital that Canada work to preserve, to the extent possible, the integrity of our trade agreements while at the same time working to put our own house in order and strengthen our economy through a series of domestic reforms.

Our system of global trade functions not just as the world’s economic circulatory system, but as a vast network of commercial diplomacy. To willingly, unilaterally threaten its equilibrium can only be harmful to all concerned.

John Weekes, who was Canada’s chief negotiator for the original NAFTA and ambassador to the WTO, is a member of the Expert Group on Canada-U.S. Relations, and a fellow of the Canadian Global Affairs Institute.