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So far, so good—but don’t tinker with Nafta, Ottawa says

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The late Prime Minister Pierre Trudeau once said that Canada's relationship with the United States is like that of a mouse in bed with an elephant "No matter how friendly and even-tempered the beast, one is affected by every twitch and grunt."

So when congressional Democrats included a "Buy America" provision in the $787-billion infrastructure stimulus package, it set off alarm bells north of the border. Never mind that the U.S. and Canadian steel industries are riveted together by an integrated supply chain and cross-border ownership, the ruling Conservative Party of Canada believed that the principles of free trade were in jeopardy of being breached and wouldn't have any part of it. With Canada exporting more than $7 billion in iron and steel to the United States annually, this was no small matter.

President Obama quickly doused the fire by pledging that "Buy America" would not violate trade pacts. Imports would be allowed from the 38 nations with which the United States has trade agreements, and Canada was largely off the hook.

While this was playing out, Canadian unions and the left-leaning opposition party, the New Democrats, began lobbying to hatch a "Buy Canada" initiative for infrastructure spending north of the 49th parallel. The idea wasn't really to limit trade with the United States, but to send a signal that overseas suppliers—China especially—weren't welcome to furnish the raw materials for building Canadian roads, bridges and buildings.

Prime Minister Stephen Harper didn't waste any time rejecting the idea, labeling it as a misguided step towards protectionism. And protectionism, he argued repeatedly in multiple interviews at home and in the United States, is the biggest single risk in the world economy. A government that erects trade barriers, he said, is just asking for retaliation and setting the groundwork for the sequel of the Great Depression.

Harper, a trained economist, was elected to Canada's House of Commons in 1993 as a member of the unabashedly right-wing Reform Party, later folded into the Conservative Party. By all accounts, his first meeting with Obama—on Feb. 19, the President's first foreign visit—was smooth and neighborly. The two leaders have some things in common, which no doubt helped a similar age, two energetic children and a love for the athletic world (although one favors shooting a puck over hoisting a basketball).

But ideological differences between the two men could mean a bumpier ride in U.S.-Canada relations in the months ahead as welcoming mats disappear and job creation becomes an even greater focus with every tick higher in the unemployment rate.

Among Canada's concerns is Obama's pledge on the campaign trail in the Rust Belt states to renegotiate the North American Free Trade Agreement (Nafta). He even hinted that under his leadership the United States could opt out of Nafta if it isn't tweaked to his satisfaction. But as he got closer to winning office, Obama toned down the rhetoric. The new President now suggests he wants to incorporate side agreements on labor and the environment so that they can be more closely monitored.

Harper isn't welcoming any move to reopen Nafta, saying it's a vitally important and complicated pact that's best left alone. During their first meeting together, Obama reassured Harper that he didn't want to stifle trade and promised to help streamline cumbersome border procedures that have been a costly irritant for moving goods between the two countries.

For now, the Nafta issues remain simmering on the back burner. Obama, who is advised on economic matters by ardent free-trade and free-capital-movement supporter Lawrence Summers, isn't likely to push for any drastic changes. Still, there is a sense that all this trade talk could mark just the beginning of nations turning more inward looking as sickened economies wreak havoc on the lives of voters and their families. Calls to dismantle globalization could grow louder as times worsen.

The Canadian steel industry kept a low profile as its unions pushed for "Buy Canada" provisions, largely declining to take a position. Perhaps it was the Canadian tendency for being polite and non-confrontational. Or maybe it knew that becoming entangled in what could be perceived as tit-for-tat actions and unnecessary rhetoric would just be counterproductive.

In the end, few can argue that the majority of a country's tax dollars shouldn't be directed at enhancing jobs domestically. But in this globalized economy, that doesn't necessarily mean shutting out the rest of the world by erecting trade barriers. Finding a proper balance while managing a global crisis will be difficult, but it can become more achievable with the help of closer political partnerships. For now, the mouse and the elephant seem to be peacefully coexisting, but larger tests lie ahead.

Darcy Keith


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