One foot in, one foot out: Canadian trade policy realigns

(Kayleigh Valentine / The McGill Policy Association)

“I said when we began that there would be moments of drama,” announced Foreign Affairs Minister Chrystia Freeland, on Sept. 30, 2018 after more than a year of discussions on the state of the North American Free Trade Agreement (NAFTA), “and there have been.” For the past year, Canada has been on the edge of its seat as the negotiations on the state of NAFTA were subject to the scrutiny of U.S. President Donald Trump. However, Canadian trade policy has also undergone major upheavals besides the United States-Mexico-Canada Agreement (USMCA), and international trade now occupies a larger portion of the ministerial plate.

International trade in Canada has come to be seen, largely and for good reason, as trade with the U.S. Statistics Canada reports that in the third quarter of 2018, the U.S. accounted for 17,881 trade receipts of 31,903, and in trade payments, for 18,687 of 35,858 in total. The U.S. has—despite the scale of conflicts between Freeland and Trump—remained Canada’s chief trading partner. The conclusion of the USMCA makes the continuation of the countries’ trade relationship possible for the foreseeable future. The deal proclaims itself to be a, “21st Century, high-standard new agreement,” designed to replace NAFTA, which was signed in 1994. The new agreement stands out due to it establishing a Committee on Intellectual Property Rights. Notably, according to Article 31.3, the dispute settlement mechanism also allows for the governments party to the agreement to select a forum, when attempting to resolve a given dispute under the terms of the USMCA. These features align with overall Canadian trade policy, which is reflected in the statement on Global Affairs Canada’s page, explaining that the “Government of Canada is committed to creating the most favourable conditions for Canadian businesses to compete internationally.”

Yet, that statement also points to Canada’s commitment to trade beyond the U.S. On Dec. 30, 2018, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership entered into force between Canada, Australia, Japan, Mexico, New Zealand, and Singapore, with more countries to follow. In September 2017, the Canada-European Union Free Trade Agreement provisionally entered into force. Lawrence Herman, in a 2017 opinion piece for the Globe and Mail, claimed that these agreements were part of the correct policy path for Canada. According to Herman, “getting the Canada-EU trade agreement up and running,” as well as reform at the World Trade Organization, the top international body that oversees trade and trade disputes, were priorities for Canada. The Institute for Research on Public Policy (IRPP) also supports Herman’s multilateral approach. In October 2017, the IRPP pointed to the necessity of Canadian effort in building “a strong multilateral foundation for the global trade and investment system.”

Yet, it should not be said that Canadian negotiators have made too many concessions. CNN noted that greater access to Canadian dairy markets, a key demand of the U.S. in NAFTA/USMCA negotiations, was merely in line with what Canada had already agreed to give the EU and the Pacific countries in those separate deals. The shift in Canadian trade policy is also evidenced by Prime Minister Justin Trudeau who, in October 2018, stated that Canada was ready to intensify talks with China on a bilateral free-trade zone, despite marked U.S. concerns over such a project. In the same interview with the Globe and Mail, Trudeau also emphasized that he believed diversifying Canadian trade was extremely important. To that end, Canadian trade policy seems to be reaching a paradigm shift away from U.S. emphasis, but this change will take some time to manifest.