Get proactive in USMCA era, says analyst

The new NAFTA (USMCA) has a path to ratification in the U.S. congress now that the Democrats and the White House have come to terms on negotiated compromises. Both Canada and Mexico will ratify the deals in the coming weeks with relative ease, while the U.S. focuses all its trade threats on the European Union and China. That means everything is going to be back to normal in terms of Canada and U.S. relations, right?

Not so fast, says Carlo Dade, of the Canada West Foundation. Dade believes that recent history is a good indication that a deal is never done in this current era of protectionist populism. According to Dade, even if USMCA is fully ratified in 2020, Canada should not get comfortable at all.

Dade identifies three threats for the agreement going forward: 

  • Direct action : Congress has given power to the President to manage trade
  • Counter tariff blowback – We have seen recent increasing use of tariffs to persuade governments to bend on issues. For example, the use of section 232 tariffs on Canada.
  • The tweet of Damocles: The position of U.S. president comes with far-reaching, unchecked power that President Trump is willing to threaten to use even if it counters other U.S. self-interests. The mere threat of action through Twitter is a powerful tool that threatens Canada’s USMCA interests.

Instead of getting comfortable and thinking that calm waters are ahead, Dade believes that Canada needs to be proactive against the threats of unilateral presidential action by:

  • Developing contingency plans for potential new executive trade measures before they are imposed;
  • Rethinking and re-pricing the risk of trade with the U.S. in light of the cost of ongoing uncertainty; and,
  • Increase private and public spending on alliance building at the federal and state levels

As I wrote earlier this week, a ratified USMCA brings stability to agriculture more so than big gains, Dade’s warnings should be a sober reminder that this is not an era of trade calmness; vigilance is key.

Listen to the discussion with Carlo Dade, of the Canada West Foundation, below: