Trump, Trade and Trudeau

di Joe Volpe del 10 September 2018

TORONTO - Canadians can be forgiven if their eyes are starting to glaze over with indifference over the never-ending, "onagain, off-again", discussions on the North American Free Trade Agreement (NAFTA).
The chest-thumping "negotiation tactics" by President Trump and Prime Minister Trudeau fall just short of political theatre. Predictable, second rate drama.
But, in the words of another "great American entrepreneur" made famous by Hollywood script writers, "it's just business". Neither leader (actor) has full control over the direction or the outcome, try as they might to influence both. The Marketplace, as they say, will make the ultimate choice.
The customer - the electorate - will punish the leadership that is perceived to end up on the wrong side of that choice. First, consider the playing field and what is at stake. Trump says the NAFTA has been a disaster for the USA. Canada has been "eating America's lunch".
Trudeau says he won't sign on to a bad deal: “no deal is better than a bad deal”. Or so he would have us believe. Leaving the Mexican partner to one side for a moment, the Canada- Us side of the relationship is significant.
More so for Canada than it is for the USA, in the large scheme of things. The two-way trade between us amounts to an impressive $2 Billion per day.
The value varies according to the criteria applied by Statistics Canada, or by the US Trade Department, to the value of goods and services in the calculation. This notwithstanding, the relative significance to the overall Gross Domestic Product (GDP), measured in Purchasing Power Parity (PPP) reveals an imbalance in the importance of this bi-lateral relationship to each country.
For Canada, trade with the USA constitutes 33% of our country's GDP; for the USA it is a paltry 3% of GDP. The imbalance is even more stark when one considers that, in the context of the total value of import-export activity with the world, trade represents only 20% of the USA's GDP (measured in PPP) while for Canada that total is 50%.
The USA is as close as any nation can get to being self sufficient; even if one were to exclude the North American [Continental Trade] supply chain of primary and human resources as a singular component of its production and consumption market. This “unbroken supply chain” is at is at the base of the NAFTA negotiations: creating one market and one secure supply chain that would keep others out, while creating synergies for the benefit of the three continental partners, yet still keep their sovereignty more or less intact. Canada brings a wealth of Natural Resources to the table.
However, its political governance structure is mitigated by competing Provincial authorities, First Nations and previous Legislative and Court decisions favouring the rights of corporate entities investing in the commercialization of those resources. American companies already own more than 50% of the lumber rights.
A previous government dismantled the Canadian Wheat Board so that giant American corporations in the agricultural market - Cargill and Monsanto - now determine the direction of trade in those products. And, while Canada has the third largest known oil reserves in the world (after Saudi Arabia and Venezuela) – enough to last another 200 years at today’s rate of consumption - the decisions regarding petroleum exploration and marketing in North America are made by the oil companies in Texas and Oklahoma.
As to the value of our agricultural export market to the USA, it represents only 1.7% of our GDP; Milk and milk products being a fraction of that. Manufacturing (now largely auto assembly and auto parts producers) account for about 13% of Canadian GDP. This sector, too, is already integrated. The decision-makers are Foreign auto- makers. Governments incent them with tax breaks and other inducements (lower wages, weak labour laws, transport subsidies) to keep them "local" or to motivate their relocation. For governments, it all about the jobs. For leaders it's about the votes. For everyone else, its just business.
Trump is basking in a world of adulation, a dream world of an "it's all about me". He fancies himself a master of brinksmanship. It is an environment wherein he can, and does, create a diversion a day to keep himself as the centre of attention. He tolerates no competitors to that agenda. In this dance with a 500-pound gorilla, Trudeau's personal task is to appear relatively nimble on a floor where others are providing the music.

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