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WASHINGTON—If Donald Trump’s vague words had convinced any Canadian that he would largely ignore Canada when looking to revise America’s trade agreements, his administration is now offering a sobering reality check.
Trump included Canada in a Friday executive order in which he launched a pointed study of how 16 countries might be committing so-called trade abuses against the United States. More importantly, in a draft letter to Congress, the president’s acting trade representative made clear that the Trump team will be seeking substantial changes to the U.S. trade relationship with Canada.
Trump declared at the White House in February that the trade relationship was “very outstanding” and needed only “tweaking,” sending Prime Minister Justin Trudeau home pleased. The draft letter, though, suggested Canada might be in for a real battle.
“It’s certainly more than tweaking,” said Dan Ujczo, an Ohio-based trade lawyer specializing in Canada-U.S. matters. “I think we’re getting a clear vision from the administration that they have (a) broad initiative that they want to take that will be much more than a quick fix under NAFTA.”
“Certainly, for those people who were thinking, ‘Oh, it’s going to be minor tweaks, I can count on this basically passing me over,’ there’s some cause for alarm that Canada will be under some pressure to give up big things,” said Christopher Sands, director Center for Canadian Studies at Johns Hopkins University. “And it’s not just going to be a negotiation about kicking Mexico out of certain aspects of the American economy, it’ll be much more contentious.”
Taken together, the executive order and the draft letter again call into question the extent to which Trump’s own statements can be taken as reflective of his true intentions. On issues of all kinds, his cabinet secretaries have taken actions that do not square with the president’s words.
“Trump has a habit of telling people what he thinks they want to hear face-to-face, so I don’t put much stock in anything he said to Trudeau,” said Judah Ariel, a trade lawyer in Washington. “Trump also doesn’t get involved in policy specifics, so it’s not clear that he’d even know what Canada, or Mexico, would consider tweaks, as opposed to non-starter demands.”
Mickey Kantor, a lawyer who served as Secretary of Commerce and trade representative under Bill Clinton, said in an interview that there should be no “panic on the part of the Canadian government or Canadian citizens.” The letter was far from “radical or outrageous,” Kantor said, and “within the realm of where most of us have been for years.”
And it included some language that may be read as encouraging to Canada. The acting trade representative, for example, said the administration’s goal is to make manufacturing more profitable “within the trading bloc,” at least temporarily treating Canada and Mexico as U.S. teammates rather than competitors.
But there were also hints, albeit unspecific hints, of looming clashes with Canada.
Among other things, the letter said the U.S. wants to “level the playing field on tax treatment,” reduce non-tariff barriers to American agricultural exports (one of which is supply management), pursue better “rules of origin” (Trump says his guiding principle is “Buy American”), get commitments to open up the telecommunications sector to Americans (Canada’s industry is tightly regulated), and get rid of a NAFTA chapter that has helped Canada in the long-running softwood lumber dispute.
It is not yet clear how important any of these matters is to Trump’s administration. Regardless, Canada’s road will likely get even harder from here.
The U.S. Congress now gets to express its own wishes. In a mid-March confirmation hearing for Trump’s pick for permanent trade representative, Robert Lighthizer, a bipartisan group of senators asked him to get tough on Canada on everything from softwood lumber to dairy supply-management to counterfeit goods crossing the border.
“I think the White House will be the lesser of two evils here,” Ujczo said.
And the author of the letter, acting trade representative Stephen Vaughn, has more conventional views than other Trump officials who will play a major role in NAFTA negotiations. Commerce Secretary Wilbur Ross and National Trade Council chief Peter Navarro are both trade skeptics. Ariel said there are multiple administration “power centres” on trade.
“The question is what happens when the Secretary of Commerce and Mr. Navarro attempt to weigh in,” said Kantor. “I’m not sure where they are.”
The Friday order Trump lumped Canada in with his chief trade villains, Mexico and China, as well as other key allies. Its stated purpose is to assess the underlying causes of the U.S. trade deficit, specifically whether trading partners are imposing “unequal burdens, or unfairly discriminating in fact against, the commerce of the United States.”
“Under my administration, the theft of American prosperity will end,” Trump said.
Canada, though, has only a small trade surplus with the U.S. — $11 billion in 2016, 32 times smaller than the deficit in China. Trade experts said the review was largely about symbolism, since the government already studies such matters, and could actually be good for Canada, helping to ensure the talks are based in common facts rather than Trump’s hyperbolic musings.
“They regularly assess what their partners are doing and what goes on in the trade relationship. That is something that we are certainly happy with,” Trudeau said Friday.
Kantor said the study amounts to little more than political point-making. But he took issue with Canada’s inclusion in an order phrased with such suspicion.
“I don’t understand why we are criticizing countries and markets that are so vital to us,” he said.
