Life After NAFTA: Rebuilding the Canada-US relationship, now with USMCA

With a new deal reached,
Canada and the US face the challenge of repairing a bilateral relationship
damaged by the unprecedented negotiations seen over the last year. 

By: /
3 October, 2018
Canada's Foreign Minister Chrystia Freeland, centre, addresses the media with Mexico's Economy Minister Ildefonso Guajardo, left, and US Trade Representative Robert Lighthizer in Ottawa, September 27, 2017. REUTERS/Chris Wattie

In the next few weeks and months there will be time for a careful review of the new NAFTA — the United States-Mexico-Canada Agreement (USMCA) — that was posted to the website of the United States Trade Representative in draft form on October 1. Now, in the immediate aftermath of the harrowing negotiations of the past 14 months, it is easier to assess the larger importance of this agreement for US-Canada relations.

Veteran trade negotiators will tell you that tough talk and theatrics are to be expected in an important negotiation. Each side attempts to pressure the other, politically and psychologically, with threats and red lines.

The USMCA negotiation, however, was unusual in several ways.

Typically, leaders express confidence in an eventual agreement, and praise the relationship in broad terms. Presidents and prime ministers are the “good cops” so that the negotiators can play the bad cops. In these talks, however, US President Donald Trump played the bad cop, too, and made a convincing show of being angry with Canada and prepared to leave Canada without an agreement at all, and to withdraw from NAFTA as well.

Normally, interested citizens read a bit about the talks as they proceed, but must wait until a deal is reached to have an idea of what was agreed. Businesses and others directly affected work more closely with the governments and know a bit more. This time, social media made detailed arguments and analysis available to anyone, any time (though governments still remained quite guarded with negotiation details). We had Trump tweets on an almost daily basis that were cause for speculation and anxiety about what might happen next.

Since 1945, the United States has advanced principled arguments on the merits of liberalizing trade, while Canada and Mexico more often sought to protect their smaller industries and economies from competitive US firms. Now, it was Canada reciting the virtues of free trade and the United States proposing managed trade and punitive tariffs in the name of national security.

Historically, Washington has devoted attention to rivals and enemies, and for the most part ignored Canada. To manage bilateral relations with limited and sporadic US engagement, the two countries have structured bilateral relations with institutions, from the International Joint Commission to NORAD and NAFTA. Each institution is established by a political agreement on how to manage a problem or issue. The institution is then operated by public service professionals who develop solid working relationships with counterparts. This keeps important areas of the relationship on track without needing to get the US president and Congress directly involved (which works out well, since it is difficult to get either to focus on Canada, unfortunately).

These unusual aspects of the USMCA negotiation have done serious damage to US-Canada relations that will take time to repair.

Yet the negotiation of the USMCA began with a direct and sustained attack by Trump on one of the central institutions for managing the economic relationship: NAFTA. True, US politicians had criticized the trade deal over the years, far more than they have other institutions like the St. Lawrence Seaway Management Commission or NORAD, for example, but none of the past criticism had led to any serious threat to the economic relationship. Canadian leaders complained about NAFTA, too, particularly when NAFTA dispute settlement panels on softwood lumber failed to get the United States to change its policy.

Taken together, these unusual aspects of the USMCA negotiation have done serious damage to US-Canada relations that will take time to repair. Among the general public in Canada the worst damage has been to trust. Canadians believed that they could count on the United States to act consistently and predictably, and did so. Now that the Trump administration has suddenly abandoned agreements and longstanding US principles of free trade and collective security and demanded Canada accept less and do more, Canadians will be more guarded and unsure about the United States, and anti-Americanism, largely dormant since the end of the George W. Bush administration, will have a wider appeal. Prime Minister Justin Trudeau will have to work harder to convince Canadians the next time he wants to respond positively to an American request. Regulatory cooperation efforts may also suffer, which matters because differences in regulation and inspection standards add to business costs and are a greater barrier to US imports today than tariffs.

For Trump, the renegotiation of NAFTA wasn’t personal, it was business. Having achieved an agreement to replace NAFTA with the USMCA, Trump has what he wanted, and should be warmer toward Canada and Mexico. Or perhaps he will move on to battle China and the European Union over trade, and Canada will fall off the US administration’s priority list for a while. If so, all of us who care about good US-Canada relations should work hard to strengthen the institutions that have kept the relationship from suffering greater collateral damage as Hurricane Donald made landfall on North America.

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