Canada's various free trade initiatives are in better shape than a year ago but that's no reason for any complacency, says John Weekes, a veteran Canadian negotiator.
Overall Canada is “on considerably firmer ground than we were a year ago” in the various trade talks it's participating in, said Weekes, chief negotiator in the original NAFTA talks and former ambassador to the WTO.
“The NAFTA negotiations continue and the threat of U.S. withdrawal from the agreement has lessened,” he said. The trade deal with Europe “has finally been implemented on a provisional basis and the CPTPP has become a reality – but without the United States.”
While NAFTA negotiations should remain the top priority, ratifying the CPTPP and securing its implementation is also important, he said. “The government should also assist Canadian businesses to take advantage of both the European deal and CPTPP and to consolidate market access gains during the window in which Canadians have better access to these two enormous markets than Americans. The government should also give a big push to starting free trade negotiations with China.”
At the same time, Canada needs to work “with other like-minded countries to strengthen the WTO in the medium term. It remains the most logical forum for managing the challenges of technological change and the forces of globalization. It also offers the best chance of putting all countries on an even playing field and thereby making a significant contribution to global security and world peace.
“The wild cards in today's trade policy firmament are President Donald Trump and his trade representative, Robert Lighthizer,” Weekes said. “The Trump administration's key interest seems to be in moving away from trade agreements which they believe fetter American power in their dealings with other nations.
“Trump made it clear from the outset that his administration intended to renegotiate NAFTA or to withdraw from it,” he said. “The fact that NAFTA has been very beneficial to the United States is strongly supported by business and most elected state officials, and by the leadership of the Republican majority in Congress has cut little weight – at least until recently. Remarkably, Lighthizer sees his own private sector as part of the problem and wants it to avoid undercutting his negotiating leverage.
A key challenge for the Canada and Mexico “has been how to engage the U.S. team in real negotiations. Lighthizer clearly believes in the U.S. rebalancing proposals and sees a real opportunity as Trump's instrument to advance approaches that he has privately supported for decades. The situation is further complicated by the fact that the American negotiators including the U.S. chief negotiator have no authority to cut a deal on anything.”
Anticipating the tactics of Trump and his insiders, Canada and Mexico “embarked on a two-pronged engagement with the United States,” he said. “On the one hand, they are negotiating with Lighthizer and his team, but at the same time they are working with a wide range of economic and political stakeholders in the U.S. to influence Congress, which in turn will pressure Trump and other members of his administration to modify the American negotiating approach.”
It's worked to the point that “Lighthizer is reported as complaining that discussions between Canadian officials and U.S. stakeholders are diminishing his leverage in the negotiations.
This advocacy work in the U.S. has tapped into a well of concern in American business circles that the President might invoke NAFTA Article 2205 that allows a party, after six months' notice, to withdraw from the agreement. “It is now becoming clear that the efforts of U.S. business and pro-NAFTA elected officials have reduced the likelihood that Trump will opt to withdraw from NAFTA.”
However serious differences remain in the negotiations, which will take a long time to address, he said. “It is increasingly likely that the negotiations will continue through the Mexican elections in July, the U.S. midterm elections in November and on into 2019.”
The CPTPP is the most significant trade policy development in 2018 and is in large part due to Japanese Prime Minister Shinzo Abe's government decided to play a major leadership role in salvaging the deal, he said.
The Japanese were “alarmed at the Americans' retreat from Asia and by their weakening support for global trade rules. They were also concerned that American withdrawal would greatly strengthen China's role in the region.
“By bringing the CPTPP into being, the Japanese used their market as leverage to encourage the Americans to reconsider their approach,” Weekes said. “The reason Trump has been musing about possible American interest in joining a revised TPP is that American agricultural producers – many of whom voted for Trump – now realize that that the president's action has shut them out of the Japanese market.”
Japan supported the CPTPP because it was “their interest to have a major trade agreement with high-quality rules that encourage market forces in the Asia Pacific area. Such rules establish a reference point that countries can use in negotiating with China.
“It is important for Canadians to realize that for Japan, the CPTPP is important not just as a trade agreement but as a geopolitical agreement that enhances Japan's role in an area where the major players are China and the U.S.” he said. “The Japanese would not look kindly on any country that upset their strategic plans. Certainly, if Canada had damaged this initiative it would have dashed any prospects of obtaining free trade with Japan for at least a decade.”
Alex Binkley is a freelance journalist and writes for domestic and international publications about agriculture, food and transportation issues. He's also the author of two science fiction novels with more in the works.