As Donald Trump brags to the world’s billionaires at Davos about his two newest trade deals — the revamped NAFTA and a new agreement with China — how should Canadians feel about these developments?
Relief, no doubt. But a bit of trepidation, too.
First, the relief.
Since Trump came to power three years ago, vowing to rip up NAFTA and replace it with something more to the U.S.’s advantage, Canadian negotiators needed to bargain hard to avoid giving up too much in the new deal.
At the same time, Canada needed to maintain business confidence, persuading investors that their next dollar should be spent here, and not south of the border, where Trump is calling the shots.
We more or less managed both, says Brett House, deputy chief economist at Scotiabank.
Sure, the new trade agreement with Mexico and the United States costs us some protection of our dairy market. It makes the North American auto market less competitive and more inward-looking.
And some point to the deal’s weaknesses in protecting intellectual property.
Still, almost everything Canadians sell across the U.S. border does so without facing a tariff, and that’s a victory in itself, given Trump’s protectionist bent.
Compared to what could have happened, “it’s as good as it gets under the circumstances,” House said.
As for the U.S.-China truce in its trade war, “everyone is better off with these two giants not fighting,” said Rohinton Medhora, president of the Centre for International Governance Innovation.
The escalating tariff battle between the two countries had required a reorganization of supply chains around the world, cutting into global growth prospects and prompting exporters in every country to rethink how they do business.
The agreement will roll back only some of the tariffs, but more importantly, it at least represents a temporary peace, and fears of a full-blown currency war, with all the global devastation that implies, are receding, Medhora says.
And yet the fears of such a war should not be entirely erased by the deal. And the stability promised by the new NAFTA pales in comparison to that provided by the old one.
And herein lies the trepidation.
In the era of Trump chest thumping and the relentless Chinese push for hegemony, trade deals don’t offer the kind of economic stability that they once did.
No longer do they lay out ironclad rules of the game that apply to everyone. No longer are they formal arrangements under which Canada, with its small, open and trade-dependent economy, can be assured of fair treatment for its businesses in other countries.
No longer are they impeccable marketing tools for Canadian businesses to boast to investors of their market access. No longer are they necessarily built to last.
If Canadians are not jumping with joy with NAFTA, it’s probably because they don’t know how long it will stick, or how much sway it will hold.
Already, the U.S. has threatened to reimpose tariffs on Mexico for its immigration practices. And the federal Liberals are shying away from unilaterally imposing a digital tax for fear of poking the angry U.S. bear, like France just did.
And the China-U.S. trade detente is inherently unstable. How will its requirements be monitored? How will they be enforced? Ripping up the agreement seems to be the most likely way to settle any disputes.
And is there a risk that Canada will be squeezed out of newly developed export markets in China, since China is now obliged to buy from the United States?
Probably not, experts say, but we need to keep an eye on that, and investors will undoubtedly act accordingly.
So when Trump boasts about the “two biggest trade deals ever made,” Canadians can be forgiven for having their doubts. Trade deals, after all, aren’t what they use to be.
Heather Scoffield is a columnist with Torstar Syndication Services.