Where is global trade going in the Trump era?

The election of Donald Trump as President of the United States has sparked a discussion in the media over whether the era of multilateral trade, of which NAFTA, TPP and TTIP were the crown jewels, is dead. After the 100 day mark in Trump’s presidency, it has become clear what stance his administration is taking with regards to global trade and multilateral deals. He campaigned strongly on the notion that the U.S. has historically undertaken unfavorable trade deals that is hurting the American economy. Trump has personified a protectionist narrative that demonizes global trade agreements. These developments in the US, along with other global trends pushing against international trade – such as Brexit in the UK, will lead to deep uncertainty and challenges in trying to broaden the global trade agenda in the coming years.

Canada is a key trade partner that must now navigate through these unsettling waters in order to protect their interests in future trade negotiations. Mr. Trump’s decision to withdraw the U.S. from the Trans-Pacific Partnership was his first direct action in keeping up with his campaign promises on removing the U.S. from trade deals he deemed “the worst”, and effectively killed the 12-nation trade deal which would have encompassed nearly 40% of the world’s gross domestic product. The TPP may regroup with the remaining signatories and with China’s help, however, this move confirmed Trump’s trade intentions which echoed throughout his presidential campaign. The primary point of contention draws from President Trump’s keen desire to “tweak”, “renegotiate” or “cancel” completely the North American Free Trade Agreement. NAFTA renegotiations will be a challenge for Ottawa. While America’s sights are largely set on trade with Mexico, Canada needs to brace itself for what could be a rough ride as well. The US is already coming after Canada’s dairy and lumber industries. The Trump administration challenged Canada on two trade fronts: Its supply-management system for dairy products, and the long-standing softwood lumber dispute. Mr. Trump said the U.S. would work to give renegotiation “a good, strong shot,” but also cautioned that “if we do not reach a fair deal for all, we will then terminate NAFTA.”

The U.S. and Canada have had several softwood lumber disputes over the years, as each side attempts to maximize their return. The current dispute was set off on April 24, when U.S. Commerce Secretary Wilbur Ross said his agency would impose new anti-subsidy duties averaging 20 per cent on Canadian softwood imports. B.C. Premier Christy Clark has vowed to fight the resolution and hopes U.S. President Donald Trump’s administration will come to the table when they realize that the trade dispute will result in job losses and unaffordable lumber products that hurt consumers on both sides of the border. B.C. shipped $4.55 billion worth of softwood lumber to the U.S. in 2016.

Canada’s dairy, egg and poultry industries are governed by a supply-management system that dates back to the 1970s. It has three parts: Fixed prices, production quotas and tariffs to protect Canadian producers from foreign competition. The dairy tariffs – which run up to 270 per cent, and which Canada tightened last year to include unfiltered milk products used to make cheese and yogurt – have been a thorn in the side of other dairy-producing nations like the United States, Australia and New Zealand. Mr. Trump’s interest in the dairy file began with events in Wisconsin, a major dairy-producing state where a letter campaign from Wisconsin farmers indicated that the new Canadian classification of unfiltered milk would give Canadian companies an incentive to buy domestically instead of from the United States.

Both trade negotiations mark the current trend the U.S. is implementing with their future trade deals – bilateral, protectionist and in their best interest. A new North American trade regime would be only part of larger changes in America’s, and Canada’s, role in the world – and with NAFTA’s future in question, Canada is looking for other sources of trade revenue.

In that light, the European Union, Canada’s second-largest trading partner, finalized a trade deal with Canada even broader in scope than NAFTA: the Comprehensive Economic and Trade Agreement (CETA). Its approval by European legislators this past February cleared away about 98 per cent of the tariffs on both sides and will be a crucial step towards Canada’s introduction into new trading markets.

As Washington pivots away from decades of multilateral trade policy, will the rest of the world follow? To some degree, they will be forced to. Countries that want a trade deal with the world’s largest market will be forced to negotiate bilaterally with the U.S. However, even though the U.S. possesses the largest economy, it’s not certain that the rest of the world will shift its policy framework just yet, placing the U.S. at odds with many other countries over the future of international free trade.

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British Columbians for Prosperity is an independent group of concerned British Columbians. We are committed to establishing an economic, environmental and social climate where all British Columbians and our children will prosper.
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