21
January
2017
|
01:00
Europe/Amsterdam

6 hot-button issues for Canada to consider as Trump takes power

Canada may get caught in the crosshairs as new administration targets Mexico.

By GEOFF McMASTER

Perhaps no Canadian is anticipating the inauguration today of Donald Trump as U.S. president with keener interest than Chrystia Freeland, Canada’s new foreign affairs minister.

After a cabinet shuffle last week, she will be the one most responsible for fostering a functional relationship between the two countries—a major challenge, given there’s no way to predict how Trump will act on any issue important to our country.

But tapping Freeland to walk that minefield is at least a good start, said Greg Anderson, a University of Alberta observer of Canada-U.S. relations.

"I think she would have been a good foreign minister from the beginning,” he said, noting that Freeland successfully closed the Canada-European Union trade deal. “She was great as trade minister and is first rate on economics and economic policy, and that's about 85 per cent of the relationship between the U.S. and Canada anyway.

“She speaks their language—the language of business. An academic voice like that of (former foreign minister) Stéphane Dion just wasn't going to cut it.”

There are any number of fractious issues on Freeland’s agenda, mostly dealing with trade. Here are six big ones to watch when she heads to Washington to take on the Trump administration.

1. Border security

First and foremost, Trump’s gripe with Mexico could be very bad news for Canada, said Anderson, since we’ll likely get caught in the crossfire. Trump says he wants a wall and expects Mexico to pay for it. He may mean that more figuratively than literally, but it’s hard to see how Homeland Security will make an exception for its northern border when imposing restrictions down south, said Anderson.

“We're talking about a massive labyrinthine bureaucracy that doesn't discriminate very well,” he said. “Homeland Security is just a big police force. Whatever gets implemented on the U.S./Mexican border in terms of new border restrictions on the movement of people will carry over to Canada.

"We’ve seen this already—restrictions on the movement of Canadians across the U.S. border has changed dramatically in 15 years, and the two borders are treated essentially the same."

2. NAFTA

According to Anderson, 43 per cent of Canada’s economy is dependent on open markets and trade.

“The potential impact of U.S. protectionism is even more evident if you consider where most of Canada's and Mexico's exports actually go—77 per cent and 81 per cent respectively to the U.S. alone,” said Anderson. “The bottom line is that selling lots of stuff to Americans has worked out very well for both Canadians and Mexicans.”

As a result, we could feel the impact of any major changes to the NAFTA "big time," potentially lowering our average standard of living.

"I'm shocked that Trudeau is even willing to put NAFTA on the table,” said Anderson, “as he did the first day he called Trump to congratulate him.”

This week, U.S. Commerce Secretary Wilbur Ross told a senate committee that “all aspects of NAFTA will be put on the table,” while also sending reassuring signals that his administration is really more interested in goods crossing the Mexican border, and that Canada has little to fear in opening the agreement.

Anderson isn’t convinced.

“It's kind of difficult to imagine how what gets done with Mexico doesn't in some sense get felt here,” said Anderson. “The idea that Canada is going to get some special exemption is rubbish.”

3. Keystone XL

Trump promised to reverse Obama’s decision blocking the Keystone XL pipeline extension—which would carry diluted bitumen from Alberta’s oilsands to the Gulf of Mexico—within his first 100 days in office. It’s a move Prime Minister Justin Trudeau said he’d welcome.

Meanwhile, the pipeline opposition movement has been gathering steam in the U.S., demonstrated most forcefully by the standoff over the Dakota Access pipeline late last year. Opponents won’t give up without a fight, but that’s unlikely to deter a Trump administration, said Anderson.

"I think that will be put back on the table and will probably get done,” he said, especially with former ExxonMobil CEO Rex Tillerson leading the State Department.

“I'm not sure when it will be reconsidered or exactly who will initiate it (White House or Congress), but it should be an easy win for Trump and the GOP.”

4. Environmental policy

When it comes to environmental protection, Trump’s election could reverse years of progress, said Anderson, throwing us back to “a situation like we were under the Kyoto protocols, when the (former president George W.) Bush administration said it wasn't going to do anything to meet those commitments. It was a nice excuse for (former prime minister) Jean Chrétien to do nothing too.”

Given that precedent, Anderson said, the question is whether Trudeau will continue to pursue measures like a national carbon tax and other environmental regulations while our neighbours to the south get a free ride.

One argument you’re bound to hear, he said, is that “we can't have the Americans at a competitive advantage while we're paying carbon levies of one kind or another. So Trudeau is going to get a lot of blowback, but whether he pushes ahead or not—or has the guts and spine to do it—is another question.”

5. Canadian auto sector

Trump already tweeted that big auto manufacturers like General Motors and Toyota would face a “big border tax” if they import vehicles from Mexico, but until last Friday his team remained mum on the Canadian auto industry.

That’s when Trump spokesperson Sean Spicer finally broke the silence, promising heavy tariffs "when a company that's in the U.S. moves to a place, whether it's Canada or Mexico or any other country seeking to put U.S. workers at a disadvantage.”

Last year, the five biggest auto companies in Canada exported about $60 billion worth of cars, crossovers and minivans to the United States, and four of them recently announced plans to invest more than $2 billion in the Canadian auto sector.

"And does Trump get personally involved,” asked Anderson, picking and choosing specific cases in which to interfere and sending unpredictable and contradictory signals to the market?

“The big question is how any Trump border measures would be implemented (in both Canadian and Mexican cases) when so many parts and semi-manufactured bits of cars go back and forth across the border.

“Where would Trump assess the border tax? Only finished cars? What about parts that end up in finished cars? Would they effectively be double-taxed? Might some kind of exemption for the sector be negotiated? Who knows?”

6. Softwood lumber

This is a sticking point for both countries going back decades and has since become a barometer for U.S.-Canada relations. The American lumber industry has long argued that Canada unfairly subsidizes its lumber producers, since most timber is owned by provinces setting stumpage fees rather than allowing the product to openly compete in the marketplace.

Just this month, the U.S. International Trade Commission found that Canadian lumber is “subsidized and sold in the United States at less than fair value." More duties will likely follow, said Anderson, which could result in further job losses and plant closures on this side of the border.

Freeland has vowed to fight vigorously for Canadian interests, but Anderson suspects the dispute has reached a stalemate.

“There will be another managed agreement, a repeat of what's happened in the last 40 years,” he said. “If Trudeau were smart, he would take a page out of Harper's playbook and pursue a managed agreement sooner rather than later—a truce basically for five more years.

"It's really about the way land is managed in the two countries, so unless you change the constitutions of the two countries, you're never going to solve this problem.”