Trudeau Braces for Trump Nafta Gambit With Oil-Patch Huddle

Updated on
  • New president high on agenda as cabinet meets in Calgary
  • Canada highlights its purchase of U.S. exports ahead of talks

Why Canada Stands to Lose From NAFTA Changes

Donald Trump won’t be there, but the new U.S. president will factor in to nearly every discussion as Canadian Prime Minister Justin Trudeau’s cabinet meets ahead of the start of new continental trade talks.

Trudeau, Foreign Minister Chrystia Freeland and other top Liberal lawmakers convene in Calgary for talks beginning Monday to figure out how to limit losses from any renegotiation of the North American Free Trade Agreement. Trump reiterated his pledge to renegotiate the accord Sunday, promising a “good result.”

Government officials north of the border have downplayed concerns so far. Trudeau spoke with Trump Saturday, congratulating him on his inauguration and underscoring the scale of U.S. exports to Canada. Others, however, warn the new trade reality will almost certainly hurt the country.

“There’s no realistic way we’re going to renegotiate a Nafta deal that’s better for Canada,” said John Baird, a former Canadian foreign minister now a senior adviser with Bennett Jones LLP. The push for change is driven by rising protectionist sentiment across the U.S., not just in the White House, he said. “People have to understand this isn’t just the American president. The American public has moved substantially to this stance.”

Canada is the top buyer of U.S. goods, a message Trudeau is relying on in his pitch to Trump. It’s also among the top sources of U.S. imports, including the leading source of foreign oil. The cabinet meeting in Calgary -- the capital of the oil patch -- comes as low prices have sapped investment and sent unemployment in Alberta soaring to 9 percent in November from less than 5 percent two years earlier.

Cross-Border Ties

The prime minister reminded the president Saturday that Canada is the top market for 35 U.S. states. He has also dispatched senior aides, Freeland among them, for a series of meetings with Trump officials including Stephen Bannon and Jared Kushner beginning in December.

Michael Wilson, a former ambassador to the U.S. and finance minister who helped negotiate Nafta, argues it’s too early to say what Trump’s impact will be north of the border. Canada’s economy could, for example, benefit from a surge in U.S. growth.

“Any trade agreement can do with some changes, some updating,” Wilson, now chairman of the Canadian unit at Barclays Capital Inc., said in an interview Friday with Bloomberg TV Canada. “The key here is to try to avoid opening up the thing altogether. Because once you get everything on the table, then every member of Congress is going to say, ‘Well, if you’re going to add that, I want mine, I want mine.’”

Canada hasn’t been atop Trump’s priority list thus far. The president is due to meet British Prime Minister Theresa May and Mexican President Enrique Pena Nieto this month. Trudeau and Trump have committed to meeting soon but haven’t yet announced a date.

‘America First’

Trump’s inauguration speech struck a divisive tone on foreign policy, hammering at an “America first” message. But Trudeau’s officials didn’t betray any shock.

“As Canada’s foreign minister, for me it’s Canada first,” Freeland told the Canadian Broadcasting Corp. after the speech. Promoted to the post earlier this month as the government braced for the new U.S. administration, she will lead any Nafta talks for Canada. “It’s a surprise to no Canadians that President Trump has given a different speech from the kind of speeches we’re used to hearing from Justin Trudeau.”

Stockwell Day, who served as trade minister under Trudeau’s Conservative predecessor Stephen Harper, argues Canada will find a receptive ear if it can sell its agenda as a boost for U.S. jobs. 

“You bring a solution that includes a box that their boss, the president, can put a check mark in -- saying this will create jobs in America -- you will have a very high chance of getting your issue resolved,” Day, now an adviser at McMillan LLP, said by phone from Washington. “You’ve got to provide that check box.”

Tactical Play

Baird said it wouldn’t surprise him if, as a negotiating tactic, Trump issued notice that he’d pull out of Nafta altogether. Freeland -- who walked out of talks in Belgium before ultimately securing a trade pact with the European Union last fall -- suggested Canada could do the same. “I have some experience with walking away from the table in trade deals, and I think we always have to be ready for that and ready to do it ourselves,” she told the CBC.

Wilson urged Freeland to continue to tell the “Canada story” and emphasize the scale of U.S. exports. Day, meanwhile, stressed the need to provide the U.S. president an option that would allow him to declare victory.

“A show like the Apprentice? That is Trump,” Day said. “Bring me a solution. If you don’t, you’re fired.”

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