Consequences of Trump disruption becoming clearer as NAFTA talks set to begin

Trump

Canadian Prime Minister Justin Trudeau (L) meets with U.S. President Donald Trump in the Oval Office at the White House in Washington, U.S., February 13, 2017. REUTERS/Kevin Lamarque.

Canada exported $62.3 billion of oil/gas in 2016, just behind vehicles at $64.3 billion

By Glen Hodgson, senior fellow, Conference Board of Canada

Donald Trump’s election agenda promised to challenge the existing U.S. political and economic order – that’s what his populist political base voted for. But while Mr. Trump promised to make America great again, there are inevitably unintended consequences to any disruptive change. Nature abhors a vacuum and a response is emerging internationally. We can already identify a variety of consequences, not all of them necessarily negative.

Follow Teo on Linkedin and Facebook!

For Canada, the immediate consequence of Trump disruption is on trade – no surprise there. Trade policy is a top priority again, to maintain and even improve Canadian access to the U.S. market, but also to diversify and deepen international trade and investment options. The development of a Canadian position for the coming negotiations on the North American free-trade agreement has involved not just the federal government and its trade negotiators, but the private sector, provinces, think tanks and other informed stakeholders.

There could also potentially be a disruption in national security, although the professionalism of the U.S. and Canadian military and a long history of close collaboration are an important brake.

There has been a clear decline in U.S. engagement in recent meetings of the Group of 20, Group of Seven and NATO, and in other international forums. Forming an international consensus on big issues is seldom easy, but Mr. Trump’s presence at the recent G20 meeting frustrated a consensus on the importance of free trade and on climate change policy. It is rare that official communiqués from these events highlight the differences among participants, but that may become the norm in the Trump era.

Meanwhile, Japan, Canada and others continue to discuss a trans-Pacific free-trade area, without the United States. (Hopefully, any agreement would contain an accession clause for future candidates that meet the requisite membership conditions.). As negotiations between the European Union and the United States go nowhere, the EU and Japan have announced their intention to conclude a bilateral free-trade agreement in 2017. China is eager to lead on free trade and public-infrastructure investment in Asia, which will slowly marginalize the impact of the United States in the region.

Trump

Alberta accounts for the majority of Canadian oil and gas exports, and will be affected by changes in NAFTA that restrict petroleum exports to the United States.

Mr. Trump’s international pullback has created room for others to step up. Angela Merkel, the undisputed political leader in Europe, has taken note of Mr. Trump’s shortcomings – such as his uncritical view of Russia. She has made it clear Europe can no longer automatically rely on the United States.

With the election of a reform-minded centrist government, France appears ready to join Germany in driving forward EU leadership on the global economic and political stage. China is also pushing for an expanded geopolitical role, although it does not yet seem inclined to step fully into U.S. shoes in international economic organizations.

At home, the U.S. political system itself is being tested. The Trump administration has failed to build consensus on big policy issues such as health care and tax reform, even within the Republican Party. Major legislative reforms appear to be increasingly unlikely, and there are considerable limits to governing by executive order and through changes to regulations. Congress is not taking seriously the flawed budget and fiscal framework proposed by the Trump administration, which could add as much as $10-trillion (U.S.) to public debt over the next decades. As The Economist magazine recently highlighted, the gap in values, incomes and economic opportunities in the United States is being reinforced and widened by the Trump agenda.

Into this U.S. vacuum, there are some positive developments. U.S. states, cities and the private sector are more actively engaged on major issues, such as the funding and delivery of health care, as well as climate change policy. Ironically, by withdrawing the U.S. federal government from the Paris climate-change accord, Mr. Trump may have accelerated other political and economic actors toward a lower-carbon economy.

Some geopolitical analysts are now musing about the end of American global hegemony. In our view, it’s too early to say whether the Trump effect will be a four-year blip, or a structural change in global leadership.

The disruption being sown by Mr. Trump provides an incentive for Canada to step out of the U.S. shadow and define a more diversified economic and political path. Canada can be an active partner with other global leaders committed to advancing an open international economic and political agenda, while still looking to work with the United States on practical issues.

Foreign Affairs Minister Chrystia Freeland’s recent speech to Parliament articulated a new, wider vision for Canada’s international relations and attracted considerable public attention.

Canadians in general and Parliament in particular must now be prepared to resource this new vision properly, and implement it fully. Beyond the coming NAFTA negotiations, are we ready to devote more scarce fiscal resources to items such as military capacity, international trade diversification, immigration and refugees, and targeted foreign assistance? The answer to those questions will provide Canada’s concrete response to the Trump disruption.

This article was originally published in The Globe and Mail on July 28, 2017.

Trump

Posted in: Politics

Post a Comment