About Colin Robertson

A former Canadian diplomat, Colin Robertson is Vice President and Fellow at the Canadian Global Affairs Institute and hosts its regular Global Exchange podcast.  He is an Executive Fellow at the University of Calgary’s School of Public Policy and a Distinguished Senior Fellow at the Norman Paterson School of International Affairs at Carleton University.  Robertson sits on the advisory councils of  the Johnson-Shoyama School of Public PolicyNorth  American Research Partnership, the Sir Winston Churchill Society of Ottawa and the Conference of Defence Associations Institute  He is an Honorary Captain (Royal Canadian Navy) assigned to the Strategic Communications Directorate. He is a member of the Deputy Minister of International Trade’s NAFTA Advisory Council and the North American Forum.  He writes on foreign affairs for  the Globe and Mail and he is a frequent contributor to other media.

Colin can be reached by email at cr@colinrobertson.ca

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A New Trade Agenda for Canada

JSGS Policy Brief

The Policy Brief is a digital and print publication, written by Johnson-Shoyama Graduate School (University of Saskatchewan and University of Regina) scholars and leading policy experts, to provide context and perspective on important public issues and to further discussion and debate within the public sector. It provides policy makers and those interested in policy formation with timely and expert analysis, observations and potential policy approaches to relevant issues concerning the public.

Ensuring prosperity: A new Canadian trade agenda

Trade is a cornerstone of Canada’s economy and society. The very idea of Canada was formed on the need to create a union based on trade and commerce.

The Case for Trade

Trade is a cornerstone of Canada’s economy and society. The very idea of Canada was formed on the need to create a union based on trade and commerce. The fathers of Confederation agreed to reduce inter-provincial trade barriers as part of creating a nation because they knew it would help the promotion of Canadian exports and attraction of the foreign investment necessary to build factories and finance the railways to transport our goods to market. Today, virtually every aspect of our standard of living as Canadians — most of what we eat, drink, wear and our modes of transportation — is made possible by trade. International trade represents 60 per cent of our GDP, and one in five jobs is linked to exports. Quite simply, the wellbeing and quality of life of Canadians depends on our ability to trade and attract investment.1 A liberal trade policy has been and remains fundamental to Canada’s prosperity.

The world has changed, but the trade realities that applied in 1867 continue to apply in 2018. The facts of Canada’s trade-based economy are undeniable. We still sell what we harvest from our oceans, fields and forests, and what we mine onshore and offshore. We still need more foreign investment as well as better infrastructure – rail, pipe, grids and ports – that is cyber-secure to get our products and services to our global customers. We also need continued effort to reduce pernicious inter-provincial trade barriers that continue to defy the logic and promise of Confederation. The Canada West Foundation estimates that more than 100, 000 jobs in Saskatchewan depend on foreign trade.2

Natural resources continue to anchor the Canadian economy and the monetization of these resources requires access to global markets. Canada ranks 12th in the WTO table of leading exporters, ninth as importers and 16th in trade in commercial services.3 Include interprovincial commerce, and 80 percent of the Canadian economy depends on trade – internal and external.4 Half of what Canadians produce is exported.5 For Saskatchewan it‘s approximately 70 per cent.6 The United States is the top market for both Canada and Saskatchewan, followed by China.

It’s also important to recognize that trade forms the sinews of the nation. In fact, nearly 40 per cent of Canadian trade occurs within our borders.7 Economists estimate provincial protectionism costs us billions annually. The dispute between Alberta and British Columbia over the new Kinder Morgan pipeline is just the latest in a series of inter-provincial disputes. Confederation was supposed to remove inter-provincial barriers. The federal government has the constitutional “declaratory” authority (Section 92.10) to approve “works and undertakings connecting the Provinces … or extending beyond the limits of the Province.”8 Also Section 121 states: All articles of the growth, produce or manufacture of any one of the Provinces shall, from and after the Union, be admitted free into each of the other Provinces.”8

Unfortunately, the Supreme Court ruled in 1921 that “free” did not mean all products “of any of the provinces should be admitted into the other, but … they should be admitted ‘free’, that is to say without any tax or duty imposed as a condition of their admission.” The Supreme Court will soon hear a case on New Brunswick limiting the beer trade that a New Brunswick judge has ruled the restriction is unconstitutional, citing Section 121.9

If we could eliminate barriers between provinces,10 an exercise that western provinces have led on in recent years through the New West Partnership Agreement (2010) and now the Canadian Free Trade Agreement (2017),11-12 trade flows could be even higher, with commensurate benefits to consumers and gains to provincial coffers. As an aptly titled Senate study (2016) Tear Down These Walls argued “Canadians should be able to practise their profession or trade, operate a business whose goods and services can cross provincial/territorial borders, and purchase goods and services both freely and without penalty anywhere in this great country. The inability to do any of these diminishes us as a country, and makes citizens and businesses more tied to their region than to their nation.”13

Our history as a trading nation has earned Canada’s place in global supply chains, most notably in the manufacturing of passenger aircraft, trains, automobiles and energy-related products. We are also leaders in critical service industries like banking, insurance and engineering. Services are increasingly important to the Canadian economy, employing approximately three in four Canadians,14 and make up an increasing amount of our exports.15

In a world where trade linkages are an integral part of the global economy, trade has long since come out of the shadows and become part of the political dialogue. It is debate often framed by issues of sovereignty and self-determination, of economic efficiency and comparative advantage, of rich versus poor, developed versus developing nations.

Figure 1: Top Saskatchewan Trade Regions 2016.

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SOURCE: SASKATCHEWAN TRADE AND EXPORT PARTNERSHIP ANNUAL REPORT 2017

In fora, like the World Trade Organization (WTO), OECD, IMF and World Bank, Canada often plays the role of ‘helpful fixer’ and bridge to consensus. For a trade-dependent nation like Canada, it’s obviously in our self-interest and the right thing to do. Canada draws most of its annual income from trade.16 So it is good trade policy to pursue the current effort to renew secure access to the United States, our most important market, through the on-going NAFTA negotiations. The same is true of the new trans-Atlantic and trans-Pacific agreements—Canada Europe Trade Agreement and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership CPTPP—which seek to broaden and secure market access to Europe and Asia.

Trade Once Divided Canadians, Now It Unites Them

The Wilfrid Laurier Liberals fought and lost an election in 1911 on a renewed Canada-USA reciprocity agreement. While the Conservatives traditionally opposed freer trade with the U.S., Brian Mulroney changed his mind, and that of his party, and negotiated a Free Trade Agreement (FTA) with the U.S. The free trade initiative drew on the intellectual heft of the Royal Commission on the Economic Union and Development Prospects for Canada originally commissioned by his predecessor, Pierre Trudeau.17

The real success of the FTA, and later the North American Free Trade Agreement (NAFTA), was the confidence it gave Canadians to compete internationally. If most premiers opposed freer trade in 1988, today it is the premiers who are the most active advocates for freer trade. Surveys consistently demonstrate the majority of Canadians believe that trade works to their advantage and that Canada can compete both with the USA and globally.18

Freer trade also became a catalyst for domestic economic reform. The restructuring included the introduction of a national valueadded tax—the GST—and the economic growth it spurred helped federal and provincial governments to reduce and eliminate their deficits. Since the negotiation of the NAFTA, the federal Conservative and Liberal parties have mostly shared a commitment to freer trade and have pursued this objective when in government.

A Renewed NAFTA?

Figure 2: Trilateral trade between Canada, Mexico and the United States

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SOURCE: AMERICAS SOCIETY COUNCIL OF THE AMERICAS

When it comes to trade, for Canada it will always be the United States, and then the rest. We cannot change our geography, nor would we want to. That’s why securing the Canada-U.S. FTA was a pivotal point in Canadian affairs because it gave us preferred access to what is the biggest market in the world. With President Donald Trump, an avowed economic nationalist subscribing to the mercantilist notion of protectionism to achieve a trade surplus, the U.S. administration continues to ramp up barriers against foreign competition.19 In recent months, the United States has hit Canada with punitive tariffs on lumber, jets and newsprint and now threats to aluminium and steel. We can expect more of the same.20

Foreign Minister Chrystia Freeland’s “hope for the best, prepare for the worst” is a fair characterization of NAFTA’s prospects.21 Whether we can renegotiate the NAFTA will pivot on three issues:

  1. Can we preserve dispute settlement as a check against unfair protectionism?
  2. Can we find an equitable formula around trilateral content rules for cars, our most traded commodity?
  3. Will government procurement stay open to all three nations?

If we cannot resolve these issues, then we have to look to life without the North American free-trade agreement.

President Trump’s repeated threats to rescind NAFTA have galvanized hitherto-silent U.S. support into action, making this a U.S. debate that will be decided by U.S. interests. The farm community and business, two vital groups in the Trump coalition, want NAFTA improved, not rescinded. Surveys show a majority of Americans like NAFTA, which explains why senators and members of the House of Representatives, especially those in the Midwest and from Texas, are pressing the President to do no harm to NAFTA.22 

For Americans, NAFTA is a litmus test of its place in the world. For the first time, the most important global economy wants to renegotiate a trade agreement by increasing trade barriers so as to balance its trade. With preferred access to the U.S. in question, Canada must look to market diversification, which means broadening our trade horizon.

Global Trade: A Spaghetti Bowl

The preferred venue for trade liberalization after the Second World War was the Geneva-based General Agreement on Trade and Tariffs (GATT), which eventually became the WTO as an institutional body to manage global trade.

Negotiations among the WTO’s 164 members is slower and requires more compromises. But that shouldn’t obscure the fact that the WTO is as an important international forum for trade discussions and the court for settlement of member trade disputes. For now, serious trade negotiations are conducted either bilaterally or regionally. Like-minded nations are turning to regional agreements like the CPTPP or bilateral accords like the Canada-Korea FTA to achieve trade liberalization. Increasingly, they address ‘beyond the border’ domestic regulations, such as public policy choices on investment, dispute settlement, innovation, intellectual property and, for Asia, state capitalism. The result is a ‘spaghetti bowl’23 of different agreements, of which the recently negotiated CPTPP is a good example. Companies parse the different agreements for advantages relating to differing rules of origin or intellectual property protection.

Ultimately, in an era where goods are “made in the world” of supply chains and of trade largely intra-firm or connected to global value chains (by some estimates, 80 per cent of all trade), business will demand one set of rules and the WTO likely will reassert its primacy as the main table.24-25

But good trade policy must also be coupled with good social policy. It must recognize that opening doors to trade inevitably involves the pain of economic dislocation and job loss for uncompetitive industries. Governments have an obligation to address adjustment needs through training in new skills. It also obliges government support for industry restructuring, as Canada did with its wine industry after the Canada-U.S. FTA by planting grape varieties producing wine that was good for more than taking the paint off cars.

Figure 3: Complex trade connections

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SOURCE: ITC MKI ANALYSIS

Looking Forward: A Strategy and Implementation

The ultimate test of our trade agreements is their ability to generate economic opportunity and growth. That means Canada needs to take advantage of its positive international brand and do a better job selling our goods and services. Surveyed in 2013, of the more than 1.09 million SMEs operating in Canada, only 41,000 were exporting.1 To capture the domestic benefits of trade, we must do better. Here’s how:

1. Develop a new Canada Trade and Export Strategy26

A Trudeau government ministerial-mandate priority, such an initiative would help Canadian exporters fill their order books and secure contracts. The Harper Government’s Global Markets Action Plan,1 rolled out in November, 2013 set our priority markets and incorporates key government agencies to assist in this task, including Export Development Canada,27 Canadian Commercial Corporation and the Business Development Bank of Canada.28-29

2. The Prime Minister should hold a First Ministers’ conference around a national trade promotion strategy.

A revised strategy needs to address:

  • International investment by Canadian firms, a necessary part of competing globally, including the role of pension funds;
  • Canadian business participation in development bank projects, especially infrastructure;
  • Foreign direct investment in Canada including state-owned enterprises and public-private partnerships;
  • Internationalization of start-ups through reciprocal softlanding arrangements in incubators and accelerators in the United States and abroad;
  • Target and encourage women-owned businesses to scale up and increase exports;
  • Identifying opportunities for Canadian cyber tools, technologies and services, especially in emerging markets;
  • Utilization of the Canadian diaspora and the family ties created by immigration to advance trade and investment;
  • Integrating international education, immigration and tourism into our strategy.

The first ministers should re-validate the target countries and get on with trade promotion. Saskatchewan’s Trade and Export Partnership (STEP) is a model for collaboration between business and trade promotion that other provinces could emulate.30

3. Revitalize Canada’s Trade Commissioner Service (TCS)31

The world’s oldest national trade promotion organization (1884), trade commissioners are door-openers, matchmakers and a source of market intelligence for Canadian business. They help with the challenges of foreign languages, customs and regulatory thickets. Every dollar spent on the TCS generates $27 in increased exports.32 Those that access TCS services export 18 per cent more than comparable firms.32

Final Observations

The Canada brand in the global economy is solid. We need to exploit it. Canadian services in banking, insurance, and engineering are efficient and trusted. We are global leaders in medical and energy innovation and digital technology. Canada ranks 14th in the Good Country index, defined by what each nation contributes to the common good of humanity.33The OECD Better Life index accords us a similar high ranking.34 As a trading nation we have become a nation of traders, and we need to commit to continuous improvement.

Our successful integration into North American markets, which account for almost 80 per cent of our trade, proves that Canadian business can successfully compete. We are meeting the Trump challenge by doubling down on our outreach and marketing into the U.S. Reminding Americans that Canada is their first market for 35 states and second or third for the other 15 states will help hone marketing skills that we need to apply globally.

Given the fundamental role trade has played historically in raising and maintaining Canada’s standard of living, we need to open new markets and expand our existing base. Trade and investment promotion will always be the main drivers, but we should broaden our marketing scope to include tourism, a money generator and a precursor to attracting international students to our colleges and universities.

As important as the U.S. market remains for Canada, the world trade map is being redrawn. The emergence of China specifically, and Asia more broadly, as a primary engine of global economic growth means a trade-dependent nation like Canada must adapt and adjust. This is a pivotal moment for trade policy in Canada. As history has demonstrated, nothing less than our standard of living and quality of life depend on getting it right.

 Download the Policy Brief.

Works Cited

1http://international.gc.ca/global-markets-marches-mondiaux/plan.aspx?lang=eng#message

2http://stat.wto.org/CountryProfile/WSDBCountryPFView.aspx?Language=E&Coutnry=CA

3www.gobal-economics.ca/northsouth.htm

4https://data.worldbank.org/indicator/tg.val.totl.gd.zs

5https://www.saskatchewan.ca/business/investment-and-economic-development/exporting-and-trade

6http://news.gc.ca/web/article-en.do?nid=877619

7http://laws-lois.justice.gc.ca/eng/const/index.html

8https://ipolitics.ca/2017/06/06/yes-the-feds-could-force-trans-mountain-on-b-c/

9http://www.theglobeandmail.com/report-on-business/economy/canada-competes/why-are-we-blocking-free-trade-between-provinces/article11541453/?page=all

10http://www.newwestpartnershiptrade.ca/the_agreement.asp

11https://www.cfta-alec.ca/

12https://sencanada.ca/content/sen/committee/421/banc/reports/2016-06-13_banc_fifthreport­_ss-2_tradebarriers(final)_e.pdf

13https://lop.parl.ca/content/lop/reserachpublications/2016-42-e.pdf

14http://www.international.gc.ca/trade-agreements-accords-commerciaux/topics-domaines/services/index.aspx?lang=eng

15http://www.international.gc.ca/economist-economiste/performance/state-point/state_2012_point/2012_7.aspx?lang=eng

16http://publications.gc.ca/site/eng/472251/publication.html

17http://www.latimes.com/world/mexico-americas/la-fg-canada-trade-20161030-story.html

18https://www.commerce.gov/news/press-releases/2108/01/us-department-commerce-issues-affirmative-final-determinations-fine

19https://www.theglobeandmail.com/report-on-business/us-newspapers-warn-of-devestating-impact-from-duties-on-canadian-newsprint/article37565314

20https://www.theglobeandmail.com/politics/freeland-on-nafta-hope-for-the-best-and-prepare/videodf63b038-9bea-43b8-b11d-ae5e541d6bca

21http://www.pewreserach.org/fact-tank/2017/11/13/americans-generally-positive-about-nafta-but-most-republications-say-it-benefits-mexico-more-than-u-s/

22http://www.rieti.go.jp/en/comlumns/a01_0193.html

23http://www.wto.org/English/news_e/sppl1267_e.htm

24http://unctad.org/en/publicationslibrary/diae2013d1_en.pdf

25http://pm.gc.ca/eng/minister-international-trade-mandate-letter

26https://www.edc.ca/en/pages/default/aspx

27http://www.ccc.ca/

28https://www.bdc.ca/en/about/who-we-are/pages/default.aspx

29https://www.sasktrade.com/

30http://tradecommissioner.gc.ca/index.aspx?lang=eng

31http://www.parl.gc.ca/content/hoc/committee/411/ciit/reports/rp5478079/ciitrp03-e.pdf

32https://goodcountry.org/index/results

33http://www.oecdbetterlifeindex.org/#/11111111111

 

Summit of the Americas

Summit of the Americas presents opportunities for Canada

IPOLITICS by Colin Robertson
April 13, 2018

Success at this week’s Summit of the Americas in Lima, Peru should be measured by a re-commitment to liberal democratic institutions and freer trade. For Justin Trudeau the test will be to advance our trade objectives beyond NAFTA and actively support hemispheric democratization.

‘Democratic Governance against Corruption’ is the theme of this summit. The rule of law is a basic structural challenge across Latin America. Brazil’s Oderbrecht bribery scandal – Operation Car Wash- has toppled several leaders and it has regional scope.

Democratisation is the great achievement within Latin and Central America but is must be sustained. Presidential elections are scheduled this year in nine of the members, including the three biggest Latin America countries – Brazil, Colombia and Mexico, There is already Russian meddling in the Mexican election. President Vladimir Putin wants to discredit liberal democracy and create wedges in the US alliance system.

Working through the Organization of American States (OAS), Justin Trudeau should offer Canadian expertise on conducting and monitoring elections. When it comes to governance, Canada’s Parliamentary Centre, helping legislatures and legislators better serve their citizens should be enlisted. With fifty years experience, it has established its global credentials as a go-to center for governance expertise.

Hemispheric free trade remains elusive. US backing is essential but not with Donald Trump and ‘America First’.

The Lima summit, the eighth in a regular series, will bring together most of the 35 hemispheric leaders. President Bill Clinton hosted the first summit, in Miami (1994) to boost a hemispheric free trade area stretching from Alaska to Terra del Fuego. Negotiations began but the divides proved too big. There were subsequent summits in Santiago, Chile (1998) and Quebec City (2001) and then Mar del Plato, Argentina (2005) but with the discrediting of market fundamentalism – ‘the Washington consensus’ – the appetite for closer economic integration was gone.

Populist leaders led by Venezuela’s Hugo Chavez, Brazil’s Lula da Silva, Bolivia’s Evo Morales and Argentina’s Hector Kirchner derided the FTAA, labelling it Yankee neo-imperialism. Instead, they embraced ‘Bolivarianism’, creating their own regional trade part – Mercosur –  and development bank – Banco del Sur.

But if the Washington consensus was bitter medicine, especially for Argentina and Ecuador, ‘Bolivarianism’ was toxic. Banco del Sur was never capitalised and populist policies resulted in corruption, impeachments and economic catastrophe.

Venezuela, once the richest country in Latin America, is in economic free-fall. According to the IMF, the Venezuelan GDP has shrunk by 50 percent  in the last 5 years.  This economic collapse has caused untold human suffering and massive migration of Venezuelans to neighbouring countries (especially Colombia) in search of food, medicine and a future.

Venezuelan president, Nicolas Maduro is ‘disinvited’ to Lima. He fails the ‘democracy clause’ established by then Canadian prime minister Jean Chretien and other leaders at their Quebec summit. Managing a post-Maduro Venezuela will be on the agenda.  Canada is invested in this effort through the imposition of Magnitsky-style sanctions against Maduro associates and involvement in the Lima Group.

The looming Sino-American trade war will also be discussed. For most of the hemisphere, the US and China are thir biggest trading partners. These protectionist spiral and growing geo-political tensions, spelled out in a recent speech by former US Secretary Rex Tillerson,  risk significant collateral damage for the region.

Justin Trudeau can use the summit to advance Canada’s trade agenda. With its rapidly growing middle class and younger demographics, marketing Canadian schools should be part of every conversation.

Mr. Trudeau should establish a date for our associate membership in the Pacific Alliance with presidents Pena Nieto, Sebastien Pinera (Chile), Juan Manual Santos (Colombia) and Martin Vizcarra (Peru).

Freer trade with Mercosur is also a Trudeau objective. If Canada can help Mercosur put its protectionist past behind it then the recent initiative should include progressive trade provisions. Advancing the environment, labour, gender, and small business is a better way to address populist discontent.

Canada is a country of the Americas. Since NAFTA, especially with its re-negotiation, we have come to appreciate Mexico as our friend and partner.  Mexico and USA aside, there are 32 other nations whose votes we will need in our quest for a UN Security Council seat.

We now also have a growing hemispheric web of trade agreements buttressing our commercial interests – banking and mining but now including manufacturing and infrastructure. Migration has created growing Latin diasporas, especially in our cities. Tourism and student study will bring more. Devoting sustained attention to the Americas makes sense for Canada.

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NAFTA… and behind this door

Donald Trump has decided it’s “Let’s Make a Deal” time for NAFTA. Like in the long-running game show co-created and hosted by the late Canadian Monty Hall, there are three doors with different prizes: the big, the modest and the booby.

After deliberations last week in Washington by the key ministers − Chrystia Freeland, Ildefonso Guajardo and Robert Lighthizer − three doors lie before their leaders:

  • Pursuing a big deal with negotiations suspended until next year, after the Mexican inauguration and new U.S. Congress convenes.
  • Agreement now on a modest deal, such as the recent remake of the Korea-U.S. FTA.
  • The booby prize — Mr. Trump rescinds the NAFTA.

Calling NAFTA “the worst trade deal ever,” Mr. Trump has come close to scrapping it on several occasions. Farmers, auto workers and business, key components in the Trump base, now say “do no harm“ to NAFTA.

Congress is responding to their pressure by telling the U.S. President to reform NAFTA. After enduring 23 years as one of the scapegoats for job loss and illegal migrants, its threatened demise has rehabilitated NAFTA with half of Americans saying they want to keep it.

As Sino-American trade tensions continue to escalate, China requires sustained attention from the Trump administration.

If Mr. Trump wants to build international support to persuade China to curb its overcapacity in steel production and to follow international norms on intellectual property, then repairing neighbourhood relations makes good geopolitical sense. With the midterms approaching, it is also good politics.

So what would a revised NAFTA, even in a modest deal, look like?

Dispute settlement is the red line for Canada and Mexico. The Trump administration is applying trade retaliation as never before. Canada has felt the U.S. sting on softwood lumber, Bombardier jets and newsprint. We also face tariffs on steel and aluminium – exemption depends on the NAFTA talks. Canada and Mexico must have redress, beyond the U.S. court system, from unilateral U.S. trade actions.

A new content formula for North American autos appears within grasp, although Mexico will need to bend on the minimum-wage component.

Access to government procurement could be resolved by letting governors and premiers figure this out through regional reciprocity agreements. We did this in 2010. States and provinces handle most spending on infrastructure. Having a variety of vendors ensures better value and checks local gouging.

The Mexican idea of having a thorough review of the agreement after five years should satisfy the U.S. demand for a sunset clause.

If these pieces fall into place, resolution of other items should follow.

Canada would keep supply management of its dairy and poultry industry. In return, the United States will get increased quota access — what they would have got if they had stayed in the Trans-Pacific Partnership. The threshold after which duties apply on cross-border imports would be revised upwards from Canada’s $20 rate to that approaching the Mexican rate – $50 – but nowhere near the $800 U.S. rate.

The negotiators and ministers have gone as far as they can go. If Mr. Trump is set on a “quick“ deal, then the three leaders must weigh in.

With new auto-content rules and slight improvements on agricultural access, President Trump would claim victory for auto workers and farmers. Canada and Mexico would retain dispute settlement. There would be provisions on energy as well as environment, labour and gender – reflecting elements of the Trudeau progressive trade agenda.

For Mexico, the stakes are high. How will a deal affect campaigning for its July 1 presidential and congressional elections? President Enrique Pena Nieto’s chosen successor, Jose Antonio Meade, is currently running well behind the leftist former mayor of Mexico City, Andres Manuel Lopez Obrador.

And what about Congress? A modest deal won’t meet every local interest.

With effort, an agreement could be voted on during the lame-duck session after the Nov. 6 mid-term elections, but it would be tough. Mr. Trump may well decide to double down by introducing the new NAFTA and rescinding the current version, telling Congress to take it or leave it.

A modest NAFTA agreement would still be a win-win-win. North America would retain its top spot as a competitive trading platform. In time, there will be more improvements, whether through future NAFTA updates or when a future U.S. administration joins the Trans-Pacific partnership.

Monty Hall said that there were “some strange moments” on Let’s Make a Deal, like the time that there was an elephant behind one of the doors. Living in Trump times, we understand what he meant.

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Putin, Sanctions, Canada and the G-7

Sending Russian intelligence operatives packing, back to Moscow, was necessary and important. Russian President Vladimir Putin’s regime crossed a red line with its use of a banned chemical agent in Britain. The West has to demonstrate collective sanction to deter this heinous form of assassination.

Russia is promising retaliation – tit-for-tat or some other form. The Putin modus operandi is to push until pushed back, so the West needs to plan its next moves.

As a first step, there should be agreement that no Western leader will attend Mr. Putin’s re-inauguration on May 7. Mr. Putin has made himself a pariah and should be treated as such.

As host of the G7 summit this June, Prime Minister Justin Trudeau should add managing the Putin regime to the agenda. The G7 needs to take the lead in a collective response and then encourage the rest of the West to follow.

But in considering further sanctions, the West needs to be smart. It must disapprove of the Putin regime but not the Russian people. What it should not do is withdraw its ambassadors in Moscow, nor send Russian ambassadors home. This old-fashioned tactic deprives leadership of our most experienced diplomats just when we need their advice and on-site perspective to avoid misunderstandings that can create dangerous escalation.

Nor should it sanction cultural, educational and scientific exchanges with the Russian people. These individuals are often critics of their own regime. We need to encourage them by showing them a better way, and exposure to life in our liberal democracies helps achieve this.

Similarly, cutting off access to our food and energy know-how leaves Mr. Putin and his kleptocratic entourage unscathed. But it does hurt the Russian people and gives Mr. Putin more ammunition to play on Russian insecurities. It also hurts Canadian farmers and the oil patch by denying them market opportunities when relations are normalized.

Smarter sanctions in a digital age would include those that target the pocketbooks of the kleptocrats, depriving them of a refuge for their ill-gotten gains. Ban them from entry to the West. And to really hit home, ban their wives and children from shopping, studying or working in the West.

Last year, Parliament adopted legislation – it passed unanimously in both the House of Commons and Senate – allowing travel bans and asset freezes on human rights abusers. Named after the Russian activist Sergei Magnitsky, who was beaten to death in 2009 in a Russian prison, it has already been applied against 52 human-rights violators in Russia, Venezuela and South Sudan. It’s a powerful weapon that should be applied judiciously but liberally. We should encourage all our allies to pass Magnitsky-style legislation.

We also need to better prepare for future threats. With support from the European Union and NATO, there are new centres of excellence related to hybrid threats in Helsinki, strategic communications in Latvia and cyberdefence in Estonia. All three deserve Canadian support. Recent revelations about the misuse of personal data make a compelling argument for the Canadian government to take up the Finnish invitation to join the Helsinki Center.

Canada should also rejoin the International Institute for Applied Systems Analysis (IIASA). Created in the aftermath of the Cuban missile crisis, it was an initiative of the Soviets and Americans to employ scientific co-operation to build bridges across the Cold War divide and to solve global problems. This Vienna-based organization does excellent work. The IIASA wants Canada back. As part of its recent recommitment to basic science, the government should respond favourably.

Mr. Putin has been renewed as President until 2024. Robert Gates, who served as defence secretary to presidents George W. Bush and Barack Obama, has a good read on the Russian President: “I had looked into Putin’s eyes and I saw a stone cold killer.”

Mr. Putin is trying to create a pro-Russia bloc of states of the former Soviet Union. He wants them tied economically and militarily to Russia. The invasions into Georgia, Moldavia and Ukraine, and the Syrian intervention, are all aimed at upending the post-Cold War rules-based order. Mr. Putin disregards borders and interferes in the election process of liberal democracies. He uses force – traditional, chemical and cyber – to settle revanchist scores.

The Putin problem needs readdressing by the G7 at Charlevoix, Que. As host, Canada must be strategic in offering ideas. There is more than enough global disarray without tumbling into a new Cold War.

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Trump, Trade Deficits and Trudeau

President Donald Trump repeated his controversial claim on Thursday that the U.S. has a trade deficit with Canada to swipe at Canadian Prime Minister Justin Trudeau, a day after boasting about attempting to bluff the Canadian leader on the subject.

“We do have a Trade Deficit with Canada, as we do with almost all countries (some of them massive),” Trump said on Twitter on Thursday morning. “P.M. Justin Trudeau of Canada, a very good guy, doesn’t like saying that Canada has a Surplus vs. the U.S. (negotiating), but they do…they almost all do…and that’s how I know!”

The Office of the U.S. Trade Representative says the U.S. in 2016 had a goods and services trade surplus with Canada of $12.5 billion. And Trump’s own 2018 economic report, which was released last month and signed by the president, also notes that the U.S. runs “a net bilateral surplus only with Canada and the United Kingdom.”

But Trump and his top trade official, USTR Robert Lighthizer, argue that official statistics understate the size of the U.S. trade deficit with Canada, as well as with Mexico, because the data doesn’t reflect the value of imports from China and other suppliers that first enter the U.S. and are then re-exported to one of the North American neighbors.

“You have a number of — $30, $40, $50 billion worth — of transshipments that have nothing to do with the U.S. economy,” Lighthizer told reporters in January of this year, at the end of a round of talks to renegotiate the North American Free Trade Agreement. “We end up having wrong numbers about Canada, wrong numbers about Mexico.”

The president’s early morning tweet came after he bragged to donors at a closed-door fundraiser in Missouri on Wednesday evening that he recently told Trudeau the U.S. had a trade deficit with Canada, even though he wasn’t sure of the details. He said the Canadian prime minister refuted his claim.

“I didn’t even know,” Trump said, according to audio obtained by POLITICO. “I just said, ‘You’re wrong.’”

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Trump also reportedly asked staff to check on Trudeau’s assertion that the U.S. does indeed have a trade surplus with Canada. He then said that the statistics don’t include energy and timber, “and when you do, we lose $17 billion a year,” he said. ‘It’s incredible.”

The White House defended Trump’s comments at a press briefing Thursday afternoon and appeared to embrace his formula, telling reporters that the data showing a surplus are “not complete.”

“The president was accurate because there is a trade deficit and that was the point he was making,” said White House presssSecretary Sarah Huckabee Sanders, adding: “There are plenty of things, once you take into the full account all of the trade between the two countries, that show that there actually is a deficit between those two.”

The latest back-and-forth over the deficit comes as the U.S. is negotiating with Canada and Mexico to modernize NAFTA, which took effect in 1994. Trump in recent weeks has repeatedly mentioned a U.S. trade deficit with Canada in the context of the NAFTA talks. “We have large trade deficits with Mexico and Canada,” he has said, using that to defend his argument that the agreement has been a “bad deal” for Americans.

But Canada’s Foreign Affairs Ministry, which is leading the NAFTA talks for Ottawa, brushed off Trump’s latest remarks.

“Canada and the United States have a balanced and mutually beneficial trading relationship. According to their own statistics, the U.S. runs a trade surplus with Canada,” Adam Austen, a foreign affairs spokesperson, said Thursday. “We are energetically at work modernizing and updating NAFTA to support good jobs and the middle class in Canada, the United States, and Mexico.”

Trump’s latest remarks are unlikely to have any significant effect on the ongoing talks, which are set to resume next month with another formal negotiating round, to be held outside Washington, D.C.

“I think people just look at this and say, ‘There he goes again,’” said Colin Robertson, a former Canadian diplomat who was part of the country’s original NAFTA negotiating team. “I think people think Trudeau has managed Trump well to the national interest. They know that you can’t insult him, because our prosperity depends on our ability to trade with the U.S.”

“So don’t get diverted,” Robertson added. “Don’t get fussed by this.”

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Trade Retaliation

Maple syrup from Vermont and perhaps California wine may be on Ottawa’s hit list in response to U.S. President Donald Trump’s proposed tariffs on steel and aluminum.

Lisa Rathke/The Associated Press

Canada will need to either bend or break international trade rules to take quick retaliatory action should the United States slap hefty tariffs on Canadian-made steel and aluminum, but experts say Ottawa has been forced into this position by an exceptionally protectionist White House.

Canadians should expect to pay more for iconic U.S.-produced goods if a trade war breaks out. Ottawa could slap import charges on goods from California wine to Vermont maple syrup – the sort of items that Canada has targeted in previous trade conflicts with Washington.

Canada has not released any lists of products – and the Trudeau government is staying mum on possible retaliation while it continues to seek an exemption from the Trump action. But experts suggest looking back at past trade spats with the United States – such as a 2014 dispute over meat labelling – to see what Canada has been prepared to hit.

Canada will be in good company in this trade fight, however, because more than 20 other countries or trading blocs will be taking similar countermeasures.

The European Union has already outlined a list of U.S. exports it would target after President Donald Trump said he will levy a tax of 25 per cent on imported steel and 10 per cent on aluminum.

U.S. President Donald Trump told a joint news conference that he still backs the idea of adding tariffs to steel and aluminum imports, linking them to a new NAFTA deal. Trump said he will straighten out trade in a “loving, loving” way.

Normally, Canada is supposed to seek retaliatory authority from the World Trade Organization to impose countermeasures on foreign countries but this process can take years. But, unlike past quarrels with the United States, Canada will be hard-pressed to act immediately – regardless of what the rules say.

“I don’t believe any countries affected by these tariffs will wait for WTO procedures to be completed before acting,” international trade lawyer Lawrence Herman said.

“Politics will drive this. Governments, including Canada, will be forced to respond immediately. That’s the dangerous precipice we’re facing, thanks to Mr. Trump.”

Colin Robertson, a former Canadian diplomat, writing in The Globe and Mail, says Canada and other countries threatened by the Trump tariffs should be drawing up a common list of U.S. exports that they could target with retaliatory action.

The EU has already warned it plans to target key Republican leaders with import taxes on items such as Kentucky bourbon – a product from the home state of Senate Majority Leader Mitch McConnell – as well as cranberries and dairy products from Wisconsin, home to House Speaker Paul Ryan.

Mr. Trump threw cold water on hopes for a Canadian exemption this week when he warned Canada would not be spared unless it agrees to U.S. demands for changes to the North American free-trade agreement – a series of protectionist U.S. requests that both Ottawa and Mexico City have characterized as unreasonable.

He said Tuesday that the tariffs will be applied in a “loving way.”

Mr. Ryan, the most powerful member of the U.S. House of Representatives, said the proposed tariffs are too broad and open the country to possible retaliation. Mr. Ryan named China, rather than Canada, as a problem.

The steel tariffs will be raised Wednesday at a meeting between auto industry leaders and officials in Prime Minister Justin Trudeau’s office, said Jerry Dias, president of Unifor, who will attend the meeting.

Auto industry executives sought the meeting to urge Mr. Trudeau to halt Canada’s participation in the Trans-Pacific Partnership trade agreement, which will eliminate Canada’s 6.1 per cent tariff on vehicles imported from Japan.

One U.S. trade expert estimates the annual cost to Canada of the steel and aluminum tariffs could be US$3.2-billion. Chad Bown, a trade adviser to former president Barack Obama, wrote in an article for the Peterson Insitute for International Economics that this amount would be roughly what Canada could justifiably expect to seek compensation for in retaliatory action against the United States.

Former Canadian government officials have said it’s very difficult to pick retaliatory targets. In 2005, when Canada was angry at a U.S. law that funnelled cash collected from tariffs on foreign goods to U.S. companies, Ottawa drew up a list that targeted the states where U.S. politicians voted for the legislation. In that case, Ottawa was forced to abandon some retaliatory targets – such as U.S. motorboats – because of push-back from Canadian industry. Its final list was narrowed down to a few items, such as tropical fish.

Laura Dawson, director of the Canada Institute at the Wilson Center in Washington, said Canada’s best bet to head off the tariffs may be to wait for the U.S. system of checks and balances to run its course, including a likely court challenge of steel tariffs by companies that buy steel.

“People are already talking about how court challenges will be launched, what would the courts be asked to adjudicate; would they be asked to adjudicate what constitutes a national security threat?” Ms. Dawson said.

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Trump Trade Threats

For Canada, Trump times are trying times. In spite of constant provocation, the team around Prime Minister Justin Trudeau’s team has successfully avoided making our policy differences personal. This is the right approach.

The latest ‘Trumplosion’ links the threatened new tariffs on steel and aluminum to renegotiating a “new and fair NAFTA agreement.” Delivered in one of the President’s now-trademark early morning tweets, it is straight out of Donald Trump’s playbook.

The Trumplosions are a distraction to the NAFTA negotiators. They remind us why we need a fair dispute-settlement chapter as insurance of secure access to our largest market.

Getting an exemption from the tariffs means redoubling our advocacy efforts in the United States. To our mantra about Canadian trade sustaining nine million American jobs, we now need to add that Canada is the biggest market for U.S. steel, taking half of U.S. steel exports. That Canada is the largest foreign supplier of both steel and aluminum to the U.S. only underlines our role as a trusted and reliable ally. And, as the President’s own 2018 Economic Report points out, the U.S. enjoys a trade surplus with Canada.

The multipronged Team Canada approach both in and beyond the Washington beltway is working. Ministers and premiers consistently reach out to their counterparts. Federal and provincial legislators work both sides of the aisle on Capitol Hill and in the statehouses. Business and labour engage customers and suppliers.

As a result, we have identified many more American allies than we thought. The dividend from all this activity is the significant number of U.S. legislators now making the case for a Canadian exemption.

The North American free-trade agreement, a leper in U.S. political circles for most of the last 24 years, is finding champions in the United States. The farm community, the auto industry and most business is now telling the Trump administration to “do no harm” to NAFTA.

But the problem, as Foreign Minister Chrystia Freeland recognizes, is that the Trump team approaches trade negotiations as a “zero sum” game. They are mercantilists and the growing U.S. trade deficit only strengthens their protectionist instincts.

The fate of the tariffs and NAFTA is ultimately an American debate.

The 140,000 jobs in the steel industry face continuing pressure not because of foreign competition but because of automation and robotics. The jobs are not coming back. The Trump administration owes these workers retraining and adjustment assistance.

There are 6.5 million jobs that depend on the steel imports. These are the jobs that Mr. Trump should be supporting. They will suffer if tariffs are imposed. It is “straight up stupid,” says Peterson Institute’s Adam Posen, “…you mess up your entire trading system.”

Mr. Trump is wrong on one thing. No one wins a trade war. Using national security as a protectionist cloak to impose tariffs risks unhinging the global trading order. It will backfire on the Trump administration.

Canadians are feeling the impact as the threat of tariffs disrupts our markets, our currency and potential investment. Bank of Canada Governor Stephen Poloz warns that the redirection of investment towards the U.S. will only increase. The Trump tax reforms will only accelerate this flight. Finance Minister Bill Morneau needs to rethink how to sustain Canada’s competitiveness.

Global overcapacity in steel production is testing the global trading system. Both the Organization for Economic Co-operation and Development (OECD) and International Monetary Fund (IMF) have identified the problem – Chinese overcapacity. A useful Canadian initiative would be to bring together China and the U.S., and our fellow U.S. steel suppliers – Brazil, E.U., Mexico, and South Korea – to see what we can work out.

With our fellow targets of the Trump tariffs, we should also draw up a common retaliatory list. By jointly and very publicly threatening to target products such as California wine, Canada and Mexico persuaded Congress to rescind the pernicious country-of-origin labelling requirements.

The tariff threat reminds Canadians that the Trump challenge – an impulsive, unpredictable president who thrives on chaos – requires constant vigilance. We will get through the latest Trumplosion because of our co-ordinated advocacy and careful diplomacy.

Even before being elected Prime Minister, Mr. Trudeau recognized the wisdom of Brian Mulroney’s axiom that the most important relationship for every Canadian prime minister is that with the U.S. president. Like it or not, Mr. Trudeau must continue to work diligently on his relationship with Mr. Trump, including the late-night telephone calls.

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Trudeau travels to India

Prime Minister Justin Trudeau’s visit to India this week will reinforce and underline our growing people-to-people ties. The economic relationship is less buoyant, but if Indian Prime Minister Narenda Modi can deliver on his promised domestic reforms, there is the potential for more two-way trade and investment.

With stops in Agra, Amritsar, Ahmedabad, Mumbai, as well as New Delhi, it will be a rare session that does not include some reference to family living or studying in Canada.

The Indian diaspora includes several members in the Canadian Parliament, with four members in the Trudeau cabinet. Nearly 4 per cent of Canadians claim Indian decent, with 40,000 Indians migrating to Canada last year. The 124,000 Indians studying in Canada are our second-largest group of foreign students. No surprise that tourism is also on the rise, with more than 210,000 Indians visiting Canada last year. There are daily and non-stop flights.

India definitely deserves Canadian attention.

India will soon surpass China in population, with one-sixth of humanity. It is also the world’s largest democracy, which is a cacophony of caste and creeds. The two Prime Ministers will empathize over the challenges of managing federations with strong sectional and regional pressures. Some of these, such as the Sikh separatist movement, play into Canadian affairs.

At the World Economic Forum in Davos last month, Mr. Modi was forceful in his embrace of globalization. He described his “New India” reform agenda and its pillars of structural reform: technological governance; physical infrastructure; business facilitation; and inclusive development. Designed to give “good administration and better amenities,” Canada needs to identify the niche opportunities within each pillar.

Trade and investment will figure in every discussion. Investment from Canadian pension funds in real estate and other sectors has picked up in the past couple of years.

With its steady GDP growth, India is expected to become the third-largest consumer market by 2025.

But Canada and India are still some distance from long-promised deals on foreign investment and closer economic relations.

The foreign-investment protection agreement negotiated by the Paul Martin and Stephen Harper governments that was concluded in 2007 has yet to be implemented. Free-trade negotiations began in 2010. The six-month “road map” to its achievement, that Mr. Harper and Mr. Modi enthused about during the Indian Prime Minister’s Canadian visit in April, 2015, has yet to materialize.

Much of the problem lies, as the World Bank consistently reports, with India’s trade restrictiveness. Mr. Modi talks a good show on reform and, while he is making some progress, the structural impediments are deep and entrenched.

There is also, notwithstanding Mr. Modi’s declaration in Davos, Indian protectionism.

The imposition late last year of a 50-per-cent import tariff on peas and a 30-per-cent tariff on chickpeas and lentils should be high on Mr. Trudeau’s discussions with Mr. Modi. Agricultural sales to India are a major market, especially for Prairie farmers.

Mr. Trudeau will likely get a receptive hearing on climate and the progressive trade agenda that can be parleyed into useful initiatives.

Mr. Modi will raise Indo-Pacific security and likely ask about Canadian capacity and capabilities. Indian policy under Mr. Modi has shifted from “Look East” to “Act East.” His “Neighbourhood First” policy is roughly analogous to the Trudeau government’s new “Strong, Secure, Engaged” defence policy. At last month’s Association of Southeast Asian Nations forum, there were discussions about the “congagement” – containment and engagement – of China. Mr. Trudeau should listen to Mr. Modi’s perspective.

With the Trans-Pacific Partnership now a reality and likely to be implemented later this year, our trade in the Pacific will only increase. It will oblige more attention and commitment to Indo-Pacific security.

The tempo of Indo-Pacific activity by our Esquimalt-based warships has picked up. HMCS Chicoutimi, one of our Victoria-class submarines, is completing a nearly six month successful Pacific exercise that also took it to Japan. If we want to be seen as a serious Indo-Pacific partner, the current tempo will be seen as the bare minimum.

Mr. Trudeau’s India visit is his longest yet to a single country. The Indian backdrop will provide a spectacular picturesque travelogue against a celebration of family ties. But real success will also require serious and continuing conversations on trade and security.

A Conversation with Indian High Commissioner Vikas Swarup

February 12, 2018

On today’s Global Exchange Podcast, we speak with the Indian High Commissioner to Canada, Vikas Swarup. Join Colin and High Commissioner Swarup for a discussion on the High Commissioner’s career, his impressions of Canada, the importance of Canada-India relations, and the significance of Prime Minister Justin Trudeau’s upcoming visit to India.

Participant Biographies

  • Colin Robertson (host): A former Canadian diplomat, Colin Robertson is Vice President of the Canadian Global Affairs Institute.
  • Vikas Swarup: High Commissioner of India to Canada.

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Trudeau in California

Trudeau to meet with Amazon, eBay CEOs on 4-day U.S. trip

Prime minister to promote trade, look for investment while visiting Illinois and California

By Katie Simpson, CBC News Posted: Feb 07, 2018 4:00 AM ETLast Updated: Feb 07, 2018 10:36 AM ET

Prime Minister Justin Trudeau is expected to use his meetings with influential American CEOs to remind U.S. lawmakers about the importance of NAFTA

Prime Minister Justin Trudeau is expected to use his meetings with influential American CEOs to remind U.S. lawmakers about the importance of NAFTA (Adrian Wyld/Canadian Press)

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Prime Minister Justin Trudeau is gearing up for four days of critical meetings with lawmakers and business leaders as he heads out on yet another trade and investment mission to the U.S.

But Trudeau has one closed-door discussion planned that’s certain to get more attention than the rest.

On Thursday, he will be meeting with Jeff Bezos, CEO of Amazon. The tech giant is in the middle of its search for a second headquarters — and Toronto is on the short list.

Trudeau will be under pressure to make a strong pitch on Toronto’s behalf during his face-to-face meeting with Bezos.

Amazon plans to spend up to $5 billion US on its second headquarters, which it says will create 50,000 new high-paying jobs.

More than 200 cities in Canada and the U.S. bid for the facility, but Toronto is the only Canadian city still being seriously considered for the new location.

Canada’s largest city is up against several major U.S. hubs, including Boston, New York and Chicago.

Familiar trade pitch

The Bezos meeting is just one aspect of Trudeau’s trip south of the border.

Over the next four days, he will visit Chicago, San Francisco and Los Angeles to promote NAFTA and the importance of the Canada-U.S. trading relationship.

Former Canadian diplomat Colin Robertson calls these types of missions essential to the Canada-U.S. relationship.

“I think the one thing Donald Trump has taught us is that you can’t take the U.S. for granted,” he told CBC News.

TRADE-NAFTA/

U.S. President Donald Trump welcomes Trudeau at the White House on Oct. 11, 2017. ‘The one thing Donald Trump has taught us is that you can’t take the U.S. for granted,’ former Canadian diplomat Colin Robertson said of the current U.S. president. (Jonathan Ernst/Reuters)

“We do not make enough trips into the United States, given the relative weight of the United States and its importance on the Canadian economy.” 

The pitching begins in Chicago, where Trudeau will deliver a keynote speech today at the University of Chicago and participate in a discussion with David Axelrod, former U.S. president Barack Obama’s chief election strategist.

Before the event, he will sit down with several political leaders, including Illinois Gov. Bruce Rauner and Chicago Mayor Rahm Emanuel, who also served as Obama’s first chief of staff.

Trudeau is expected to use the meetings to remind U.S. lawmakers of the importance of NAFTA at a critical point in the re-negotiation process.

The sixth round of NAFTA talks ended in Montreal last month with all sides agreeing that progress has been slow.

Since then, new signs of hope have emerged that suggest a deal may be possible.

Canada’s ambassador to the U.S., David MacNaughton, told an audience in Ottawa on Monday that he’s pressuring negotiators to wrap up discussions in the next two months.

On Tuesday, U.S. Secretary of Agriculture Sonny Perdue told a U.S. House of Representatives committee that he believes a deal could be reached by December.

‘Go north’

Trudeau will shift his focus to the tech sector on Thursday as he heads to San Francisco, where he will meet with Bezos. But he also will sit down with other influential business leaders, including the CEOs of online shopping giant eBay and pharmaceutical developer Amgen.

The tech sector leg of the visit wraps up with a dinner at the Business Council to discuss new investment opportunities in Canada.

Trudeau’s pitch likely will include the fact that Canada has joined the new Comprehensive and Progressive Trans Pacific Partnership (CP-TPP). The U.S. did not sign on to the pact, which also includes Japan and Australia.

“I think this might be of interest to some American exporters,” said Michael Kergin, Canada’s former ambassador to the U.S. “They can use some subsidiaries in Canada to work through the Asian markets as well.”

Kergin also said the business tax cuts introduced by U.S. President Donald Trump last month won’t necessarily hurt Trudeau’s pitch to the high tech sector.

“Knowing where you can get good markets and good people to work with you … I think is more important than the tax issue,” he said.

Trudeau also may look to urge Canadians working in tech industries in the U.S. to start coming home.

“There’s a ‘Go north’ campaign on right now,” Robertson said. “All the bright young engineers from Sheridan College that worked at Pixar … and from Waterloo that went down to Silicon Valley. If we can bring some of them back … that would be great for Canada.”

While in San Francisco, Trudeau will meet with more lawmakers, including California Gov. Jerry Brown.

Trudeau ends his trip with two days in Los Angeles. While there, he will deliver a second keynote address — this time to a primarily Republican audience at the Ronald Reagan Presidential Library and Centre for Public Affairs.

Trudeau's U.S. tour

The prime minister is set to meet with some of the most influential leaders in the tech industry as he launches a four day trade and investment mission to the U.S. (Rob Easton/CBC)

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Pacific Alliance is right for Canada

Colin Robertson Globe and Mail February 4, 2018

Among the spaghetti bowl of trade deals currently on the Canadian menu, associate membership in the Pacific Alliance should be an easy choice.

The government and House of Commons International Trade Committee are currently holding consultations. Here is what they should consider:

The Alliance members – Chile, Colombia, Mexico and Peru – are business-minded. They embrace the rules-based, democratic order. Their economic well-being affects the economic health of Canadian companies, especially in resources, infrastructure and finance.

The “Pacific pumas” have more than 221 million consumers. Their combined GDP is equivalent to the world’s sixth-largest economy. Canadian investment in the alliance is estimated at $50-billion.

The alliance’s goal is to achieve free movement of goods, services, capital and people. The members are integrating their stock markets, and are even sharing embassies in certain countries.

Canada already has free-trade agreements with individual alliance members, so some ask why we should become an associate member.

The first answer is that we must take our opportunities when they come.

We would have first-mover advantage within the best trade agreement in the Americas, just as we will have with trans-Pacific countries through the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and trans-Atlantic through the Comprehensive Economic and Trade Agreement (CETA). That means a bigger payoff as we establish a customer base ahead of the opposition. The cumulative rules of origin would weave the individual free-trade agreements (FTAs) with alliance nations into a seamless web. That would mean improved competitiveness of Canadian products.

Second, the Pacific Alliance is consolidating itself as a platform for economic integration within the Americas.

Canada would become a leader within the Pacific Alliance by virtue of being the biggest economy in the most liberalized caucus of trade nations in the world.

While the alliance is mostly about trade, it is also about building deeper co-operation through regulatory integration and addressing emerging issues such as the digital economy. What better place to advance the progressive trade-agenda goals in gender, labour, environment and small and medium-sized enterprises, than in this group of progressive democracies. And we have already begun. Last year, the Canada-Chile FTA was revised to include gender rights.

Third, stronger links with the alliance would give us better place and standing in the Americas. History and migration have given us strong links across the Atlantic and the Pacific. Our ties south of the Rio Grande, by comparison, are less so.

The Pacific Alliance commitment to transparency and anti-corruption within Latin America is the better model than its protectionist counterpart, Mercosur – Argentina, Brazil, Paraguay, Uruguay – and a contrast to the periodic illiberal governance in places like Venezuela. Canadian participation in the alliance would reinforce its attraction to the rest of the Americas.

But there are potential challenges to membership. For example, the alliance’s mobility provisions – free movement among the member states – might not work for Canada.

One option could be to negotiate trusted-traveller programs for business. Our guest-worker program with Mexico could serve as a model. Operating for more than 40 years, it now brings more than 22,000 seasonal workers to Canada annually.

The provinces must be active partners in considering the Pacific Alliance, just as they have been in the negotiations of the CETA, CPTPP and the talks to renegotiate the North American free-trade agreement (NAFTA). Trade is increasingly less about tariffs at the border and more about standards and regulations in areas of provincial or shared responsibilities.

Trade liberalization acts as a catalyst to domestic economic restructuring. Most are winners, but there are also losers. We have developed institutions between the levels of government to find and implement solutions, including adjustment assistance and retraining. We must continue and refine this.

Against a backdrop of “America First” protectionism and no foreseeable conclusion to the zombified Doha round of talks at the World Trade Organization, we need alternative markets. Middle power groupings, such as the Pacific Alliance, pick up the slack and help sustain the rules-based trading order.

Other key Pacific partners – Australia, New Zealand, Singapore and South Korea – are actively considering associate membership. It is always better to be a driver setting the course in the front seat, rather than a late passenger along for the ride. Canada should move now on associate membership in the Pacific Alliance.

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