Prime Minister Justin Trudeau and his government have done as well as anyone could reasonably expect in negotiating a new economic deal with the United States and Mexico.
Canada (and Mexico as well) were always going to be playing defense in these talks, given the overwhelming size of the U.S. economy and the willingness of the Trump administration to use every kind of threat and bully tactic.
In the end, for Canada, it came down to making a few acceptable concessions in order to keep the most important aspects of NAFTA in place and win guarantees in key areas, including autos and culture.
Most importantly, it avoids the truly troubling prospect of Canada being left on the sidelines as Washington and Mexico City made a deal of their own.
So we’ve dodged that bullet and, make no mistake, it was a big one. It would have been an enormous political blow to the Trudeau government and — much more important — a real danger to a Canadian economy that for better or worse has been shaped for decades around easy access to the world’s biggest and most dynamic market.
That being said, the new United States-Mexico-Canada Agreement, or USMCA, falls short of the “win-win-win” deal that was promoted during the 13 months of trade talks.
For one thing, it’s notable that the words “free trade” appear nowhere in the new name. The very phrase has become synonymous with “lost jobs” in rust belt states that saw factory jobs migrate to Mexico under NAFTA. This is frankly about managed trade and political branding. Count that as a big win for Trump.
Canada did make a real concession in opening our dairy industry a bit more to U.S. producers. But the howls from the industry are way out of proportion to the real impact: It still amounts to giving the Americans access to only 3.6 percent of the Canadian market.
Weigh that against ending the threat of big tariffs against Canadian-made cars exported to the United States, and a ceiling on Canadian auto exports that is well above what Canada currently sends south of the border. That’s a huge win for Canadian industry, and in particular for Ontario. No wonder the auto workers’ union is thrilled.
Canada also bent on extending patent protections for pharmaceuticals, raising the prospect of higher drug prices. And most disappointingly, U.S. tariffs on steel and aluminum stay in place. They should have been removed as part of the deal.
Still, there are other gains for Canada in this accord. For one thing, Canadian workers stand to benefit from a major concession by Mexico, increasing guarantees for higher-wage workers in the auto industry. This was aimed at helping U.S. workers, but Canadians will win as well.
The threatened “sunset clause” won’t be in the new USMCA, thanks also to Mexico’s negotiators. Canada will keep important exemptions for cultural industries. And key to reaching the deal, the new accord will include dispute settlement mechanisms that Canada had insisted on and the Americans wanted to dump. That was a red line that Canada had to maintain, and it did.
For those inclined to criticize the new deal from the left, including the federal NDP, it should be noted that it drops a couple of NAFTA provisions they found particularly objectionable.
Chapter 11, which allowed corporations to sue governments, is no more. And the so-called “proportionality rule,” which required Canada to maintain its proportion of energy exports to the U.S., is also gone. That will make it easier to diversify Canada’s markets.
Realistically, Canada was never going to make big gains in these negotiations, and simply walking away was a fantasy.
The real question is whether another government could have done significantly better under the circumstances. At this point, the answer to that must be no.
Copyright Toronto Star. Reprinted with permission.