Prime Minister Mark Carney in Brampton, Ont. on April 7. The White House is reportedly prodding Canada to make unilateral concessions before USMCA negotiations start.Carlos Osorio/Reuters
That noted expert in international trade relations, Kenny Rogers, once summed up the importance of the rhythm of negotiations this way: “You’ve got to know when to hold ‘em, know when to fold ‘em.”
The sage counsel of Mr. Rogers, in his signature song The Gambler, springs to mind as the Trump administration flings demands at Canada ahead of hoped-for negotiations about the future of the United States-Mexico-Canada Agreement on continental trade. (Once upon a time, it was known as a free-trade agreement.)
The Globe and Mail reported on Wednesday that the White House is prodding Canada to make unilateral concessions before negotiations start. On the menu: fine-tuning dairy supply management, ending provincial bans on American liquor, or scrapping the Online Streaming Act or Online News Act.
Whatever the concession, the U.S. would offer nothing in return, other than agreeing to negotiations, which would undoubtedly kick off with fresh demands.
U.S. demanding concessions before USMCA talks can start, sources say
The Liberal government is striking the right tone, somewhere between impassiveness and insouciance. On Wednesday in Ottawa, Prime Minister Mark Carney told reporters, “It’s not a case of the United States dictates the terms. We have a negotiation.”
Dominic LeBlanc, the minister steering those trade talks, said the federal government is happy to deal with most, if not all, of Washington’s concerns. “But it’s got to be part of a larger, more comprehensive arrangement,” said Mr. LeBlanc, speaking at The Globe and Mail Intersect conference in Toronto.
Whatever one thinks of the merits of the policies on the Trump administration’s list of demands (and some, like supply management, are in desperate need of reform), it would be folly to simply toss bargaining chips away ahead of any actual bargaining. That would be true for any U.S. administration. It is particularly prudent when the Trump administration is on the other side of the table.
Indeed, Ottawa has already found out what pre-emptive concessions buy: approximately nothing. The axing of the digital services tax and the withdrawal of retaliatory tariffs did little for Canadian industry. The most that could be said is that the government avoided larger, even more punitive tariffs.
Prime Minister Mark Carney says the United States will not dictate the terms of trade talks as Canada and the U.S. as a review of the Canada-U.S.-Mexico Agreement looms. Carney says Canada is aware of the trade 'irritants' raised by the U.S., and says Canada has some of its own.
The Canadian Press
It will take a bit of nerve to keep to that course as July 1 approaches. That day marks the deadline for Canada, the U.S. and Mexico to agree to a 16-year extension of the USMCA. In lieu of such a deal, the pact does not expire, but it does move to a system of annual review for 10 years. (In any case, any of the signatories can exit the agreement with six months’ notice.)
The Liberals do not seem particularly fixated on July 1 as a deadline, and properly so. On Tuesday, Janice Charette, Ottawa’s chief trade negotiator, said negotiations are likely to extend beyond that date. And on Wednesday, Mr. LeBlanc was similarly sanguine, noting that Canada, the U.S. and Mexico could simply agree to extend the agreement for 16 years at the bargaining table at some later point. Avoiding a false sense of urgency is the first step in avoiding being stampeded into bad deal.
As we have argued before, lengthier negotiations could well play out in Canada’s favour. The economic fallout of the war in Iran has weakened U.S. President Donald Trump’s poll numbers. The Republicans are fretting about losing not just the House of Representatives, but perhaps even their majority in the Senate. Mr. Trump may very well need the political win of a renewed trade pact to win back voters in border states.
That said, Canada should be prepared to bargain, if the United States is willing to match Ottawa’s concessions with its own. Tariffs on steel and aluminum are unlikely to disappear, but there is a possibility of securing lower rates for a quota of production. Similarly, it is realistic to aim for a modest increase in U.S. content requirements for vehicle manufacturing that would still allow for the continued existence of the Ontario auto industry.
The key will be to make it clear to the United States that Canada is willing to go without a deal, if it must and continue trading under higher tariffs without an overarching agreement. Or, as Mr. Rogers might put it, letting the Trump administration know that Canada knows when to walk away.