Thomas Walkom

Opinion: Tariffs a death knell to NAFTA

When it comes to the North American Free Trade Agreement, Justin Trudeau faces a stark choice.

The prime minister can either capitulate to the demands of U.S. President Donald Trump. Or he can begin to prepare Canada for a world without NAFTA.

There is no middle way.

If this wasn’t obvious before, it should be now. Washington’s decision to slap ruinous tariffs on Canadian steel and aluminum shows that Trump is serious about radically restructuring the free trade deal between Canada, the U.S. and Mexico.

He says the deal as written gives too many benefits to Canada and Mexico. He wants outsize benefits for the U.S. instead.

And he’s willing to do whatever it takes to get them.

In March, he threatened to impose tariffs on Canadian and Mexican steel and aluminum exports to the U.S. unless those two countries ceded significant ground in the NAFTA talks. Last week, he delivered on the threat.

Ostensibly, the tariffs – which have also been applied to metals from the European Union and Japan – are designed to protect U.S. national security. But as U.S. Commerce Secretary Wilbur Ross conceded Thursday, as far as Canada is concerned, Ottawa’s refusal to give sufficient ground on NAFTA was the reason.

Trudeau’s response to date has been measured. Ottawa has threatened to impose retaliatory tariffs on steel and aluminum imports from the U.S. as well as on a wide variety of consumer products ranging from toilet paper to ballpoint pens.

But those tariffs won’t come into play until July.

The prime minister used language that, for him, was unusually blunt, even suggesting at one point that the U.S. administration lacked common sense – a grave insult in Canadian political circles.

Trudeau also told an anecdote detailing how he had rebuffed blandishments from U.S. Vice-President Mike Pence that Canada concede to Trump’s demand for an automatic reappraisal of NAFTA every five years.

Presumably, this was to make the point that Trudeau is no patsy. Let us hope so. Trump’s NAFTA demands in areas like government procurement and dispute resolution would leave Canada denuded.

But toughish talk is not enough. Trudeau and Foreign Affairs Minister Chrystia Freeland must stop deluding themselves into believing that what they call a win-win-win outcome for the NAFTA talks is achievable. It is not.

Trump has made it clear he will exploit every available pressure point to ensure the U.S. wins its maximal demands. He is now threatening punitive tariffs on Canadian autos and auto parts.

Nor is Trump an anomaly. A Pew Research Center poll shows that only 36 per cent of Republican voters think free trade has been of net benefit to the U.S.

To blame Trump alone for America’s return to protectionism is to miss the point. Economic nationalism is popular in the U.S. these days. That is not likely to change even if Democrats win control of Congress in November’s midterm elections.

A year ago in the Commons, Freeland gave an impassioned cri de coeur for the postwar, rules-based global order. But that order, with its emphasis on the free movement of capital and goods existed only because America benefitted from it. America also benefitted from having Canada as a useful sidekick.

Today, Americans are divided over the usefulness of global internationalism.

We will continue to live beside the Americans and trade with them. But we can no longer depend on them for our economic prosperity.

In practice, this means many things. In some areas, it may mean a return to the protectionism that used to exist before NAFTA and that Canada continues to practise in dairy and poultry farming.

In others, it may mean the deconstruction of integrated supply chains and a deliberate effort to bring high-skilled manufacturing jobs to Canada.

But it does not mean NAFTA.

NAFTA as we know it is finished. The price to keep it alive – the price of appeasing Trump’s America – is just too high.

Thomas Walkom is a Toronto-based columnist covering politics.

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