While it hasn’t looked good for the future of the North American Free Trade Agreement (NAFTA), it is interesting to note how hard the federal government has been fighting for so many months to save it. There is simply no choice.
Free trade with the United States and Mexico is a cornerstone of the Canadian economy and it is difficult to think of any serious person in Canada who opposes it. The hope is that before U.S. President Donald Trump officially rips it apart, even he will realize the agreement is too economically entrenched to undo.
After three decades, the economies of the three countries are interwoven. In manufacturing, there are so many instances of parts being produced in each of the three countries before final assembly in one of them. To abandon NAFTA is to undo the way so much business has been done for 30 years.
Despite his bluster, Trump has not pulled the plug on NAFTA and his recent assertion that nothing would necessarily change until after November’s mid-term elections can be taken as sign he prefers the bluster to drastic change. The Trudeau government is betting everything that this is the case. Until it is resolved, Trump holds the Liberal government hostage and Trudeau can only hope he is freed up soon.
What is uncomfortably undeniable for the Liberals is that being held hostage to Trump’s whims and wishes on North American free trade is not an exaggeration. Without the agreement, even a renegotiated agreement, the Canadian economy would take a huge hit. With an election less than a year-and-a-half away, the Liberals cannot electorally afford to have the economy tank by a stroke of Trump’s pen.
It is worth remembering the wild and woolly debate over free trade in Canada. Thirty years ago, the 1988 election became the “free trade election.” Then-prime minister Brian Mulroney proposed it while the Liberals, under the leadership of John Turner, vehemently opposed it. The NDP also stood solidly opposed to free trade.
The Liberals and NDP railed against the loss of Canadian water and oil, but they also feared the loss of Canadian sovereignty. The Liberals ran a controversial TV campaign ad that visually eliminated the border between Canada and the United States. The opposition’s rallying cry was that Canada was going to lose its cherished Medicare and that just about every other Canadian social program would be in jeopardy.
Opponents of free trade painted the bleakest picture imaginable and they likely erred in being too damning in their criticism. The sky fell too many times – helping Mulroney to roll back to 24 Sussex with another majority government, fully armed to negotiate free trade, first with the Americans, and then expanding the agreement to include Mexico.
Mulroney was proven right. The border didn’t disappear. Nor did Medicare or any other social program. We never became less Canadian. If anything, we became more Canadian. The fear campaign didn’t work. In relatively short order, it was empirically proven North American free trade was a good thing for Canadians.
In the late-1980s and early-90s, the unemployment rate in Canada hovered around 10 per cent. Today, it is half that. The growth in job creation is not all because of free trade but, clearly, it spurred many economic positives that no one can or will deny.
In fact, it is ironic that there are no naysayers today. No credible Canadian is suggesting it is a good thing that Trump is threatening to undo NAFTA. The Liberal government knows that tariffs imposed on products like steel and aluminum are already the beginning of a trade war that no one but Trump seems to want. Their job now is to contain the damage.
The NAFTA agreement will have to change. There will have to be changes that will result from on-again, off-again negotiations. There seems to be no scenario in which Trump can walk away without making changes to NAFTA that will not be in Canada’s interests.
This renegotiation is not about all-or-nothing. It is about nothing-or-something. The Trudeau government psychologically needs that “something” and needs it badly. The problem is that someone else is driving the bus.
The Liberals don’t like it, but Trudeau’s re-election could largely depend on that free trade “something” that Trump will decide all by himself.