Canada’s Trudeau Steps Up on Trade, as America Under Trump Pulls Back

Canada’s Trudeau Steps Up on Trade, as America Under Trump Pulls Back


But hard realities may limit what Mr. Trudeau can achieve. First among them: Canada is, at best, a medium-sized economic power.

“It’s hard to create the carrots to get other countries to come along with you when you’re relatively small,” said Chad P. Bown, a senior fellow at the Peterson Institute for International Economics in Washington.

While Canada is acting logically in seeking new trade partners, Mr. Brown added, “unfortunately it is unclear how much leadership they’ll be able to show in terms of getting other countries to open up, taking over the mantle from the United States.”

Above all, economists and trade analysts almost universally agree that because of geography and economic ties, Canada’s trade will continue to be dominated by the United States, regardless of the fate of the North American Free Trade Agreement, which is now being renegotiated.

“We have to be realistic,” said Dominique Anglade, the deputy premier of Quebec and its cabinet minister responsible for trade. “You can’t say that something will replace the United States.”

Still, there’s a broad consensus among Canadians that their country benefits from open trade, making Mr. Trudeau’s program relatively easy to sell politically. No mainstream party in export-dependent Canada echoes the protectionist views of Mr. Trump, who was carried into office on a wave of doubt about whether past trade policy had helped American workers.

Since World War II, the United States has led the world in championing free trade. Washington played the leading role in designing a system of global trading rules, persuading other countries to lower barriers and forging pacts that allowed American companies to expand globally.

Obama administration officials envisioned the United States as being at the center of several overlapping trade agreements: Nafta as well as new agreements with Europe and 11 other countries along the Pacific Rim. They believed this would encourage manufacturers and other companies to build their businesses in the United States.

“In general, we were the ones leading the rules-based trading system and people were counting on us,” said Wendy Cutler, a former trade negotiator for the United States and current vice president at the Asia Society Policy Institute. “Now we have a serious departure from that philosophy.”

Critics of the Trump administration’s trade policy have pointed to the progress of other countries like Canada in advancing trade pacts without the United States as evidence that Mr. Trump’s more protectionist turn would hurt American companies and workers.

Stefan M. Selig, a former undersecretary of commerce during the Obama administration who pushed for the Trans-Pacific Partnership, called the United States’ withdrawal from the proposed agreement a loss commercially, diplomatically and strategically.

“The timing of it serves as an extraordinary indictment, that the other 11 countries reached a T.P.P.-lite agreement,” Mr. Selig said. “The notion that we are not sitting at that table to be able to influence those countries strikes me as an extraordinary missed opportunity.”

Even industry groups that were critical of some provisions of the proposed deal are now concerned about the United States’ absence from it. John Bozzella, the chief executive of Global Automakers, an industry association, said a revived TPP, along with other deals, would put Canada and Mexico on “a path forward.” He added: “I think the path forward for the United States in terms of continuing to find markets for our exports is less certain.”

Mr. Trudeau’s trip to China is taking place while talks to revise Nafta appear deadlocked over demands from the Trump administration that Canada and Mexico view as being worse than having no deal at all.

For Canada, the announcement of a trade deal with China and a more prominent role in the global trade scene could be both a form of insurance against the risk of losing Nafta and a signal to the United States that Canada has other options.

Like his father, Pierre Elliott Trudeau, who was prime minister for 15 years, Mr. Trudeau has moved to improve relations with China, which waned under the previous Conservative government. But China’s authoritarian government, its dismal record on human rights and suspicion surrounding state ownership of many Chinese companies has made China an exception when it comes to Canadians’ acceptance of free trade.

Rather than move swiftly to trade negotiations, Canada instead held a series of talks about talking with China. Gordon Houlden, the director of the China Institute at the University of Alberta in Edmonton, said the Chinese government’s patience with preliminaries had worn thin.

“The Chinese are really keen and they will be very unhappy if nothing happens,” he said.

While Canada’s trade with the United States has roughly been in balance over time, last year it ran a trade deficit with China of 15.2 billion Canadian dollars, about $11.9 billion.

Andrew Scheer, the current Conservative leader, opposes free trade with China.

Mr. Ciuriak, the former Canadian government economist, said Mr. Trudeau could mitigate political criticism with a limited trade deal like the one between Australia and China, which would largely avoid changing trade rules.

“Keep it simple, very simple,” said Mr. Ciuriak, who is now a senior fellow with the Center for International Governance Innovation in Waterloo, Ontario. “Do tariffs and a few other things.”

But Mr. Houlden, a former diplomat who dealt with China-Canada relations, rejected that idea. Some Chinese government regulations and standards formed a far bigger barrier to Canadian exports than tariffs, he said. As a result, he expected that Canada would seek a more comprehensive deal.

Based on Australia’s experience, however, Mr. Houlden said it was unlikely that any deal will be even close to completion before Canada’s next election in about two years. That delay, he said, might solve the prime minister’s political problems.

Carrying out negotiations simultaneously on Nafta and other trade deals may create headaches for Canada as it tries to balance the demands of different agreements.

For example, Canada is now locked in negotiations for both Nafta and the T.P.P. over the so-called rules of origin for automobiles, which govern how much of a car’s content needs to be manufactured within a free trade area to be exempt from tariffs.

The United States is pushing for Nafta to set much higher thresholds for content made in North America, while the requirements proposed for the TPP agreement are much lower. As a result, Canadian factories could end up with difficulties shipping cars to the United States because they might end up using more Asian car parts under the T.P.P.

At the same time, Canada’s own auto parts factories would be facing increased competition from Asia.

While Canada’s trade pact with Europe was initially Quebec’s idea, Ms. Anglade, the province’s deputy premier, said that looking beyond North America would mitigate but not solve Canada’s most pressing trade issue.

“First and foremost we have to have a renewed Nafta,” she said from Quebec City. “We are deeply committed to try to make this happen.”



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