Canada and its Trade Deals

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USMCA not done yet

A proposed deal – not NAFTA 2.0 but, in deference to U.S. President Donald Trump who initiated this 13-month odyssey, the United States-Mexico-Canada Agreement.

Judging by the market reaction, the USMCA should be good enough to thaw the chill shared by investors, both Canadian and foreign, since the negotiations began. We are not out of the woods – congressional approval of the necessary implementation legislation is no slam dunk and there is still the threat of further Trumpian protectionism, whether direct or through collateral damage.

The dairy lobby is aggrieved but they dodged a bullet. Supply management, a protectionist system badly in need of reform, is preserved. We gave the Americans about half-a-percentage more of the market than they would have received had Mr. Trump not pulled out of the Obama-initiated Trans-Pacific Partnership.

Even with the additional quota negotiated for the EU in the Canada-EU trade pact (CETA), more than 90 per cent of our dairy market is still protected for Canadian producers. It is also a sure bet that the federal and provincial governments will open their wallets to provide adjustment assistance to the afflicted, although for taxpayers’ sake there must be demonstrable proof of injury. There is no reason why our dairy farmers cannot become as successful internationally as our beef and pork, grains and pulse producers, especially given the growing appetite for protein in the Indo-Pacific.

The dairy lobby’s cry of pain is reminiscent of that heard from vintners after the Canada-U.S. free-trade agreement (FTA) of 1988 opened up their market. Today their products are both very drinkable and sell more than ever before. The tentative new agreement means that U.S. wines will now share shelf space on British Columbians’ shelves with B.C. wines, but B.C. protectionism is the kind of non-tariff barrier that we rail against in other markets. Redress was overdue and it reminds us that, when it comes to protectionism, no nation has clean hands.

Canadian auto manufacturers have cause for celebration. It appears we have evaded Mr. Trump’s threatened 25-per-cent tariff and, even if trade is slightly more managed, the new rules of origin and the wage component could well create more opportunities, especially for Canada’s highly competitive parts manufacturers – our real niche in the global auto trade.

There is the potential for slight cost increases in pharmaceuticals with the extension of patent protection but provincial administrators are now very skilled at using their cartel power to get the best price from drug manufacturers. E-commerce shoppers can celebrate because purchases under $150 will now pass much more freely and our customs inspectors can focus on bigger game, including keeping counterfeits out of North America.

Our negotiators deserve a glass of sparkling wine (Canadian) but the USMCA is far from being a done deal. While majority governments in Canada and Mexico will be able to secure legislative implementation, passage in the next U.S. Congress is no sure thing.

We need to continue the advocacy campaign into the regions and within the Washington beltwayMost Americans still have no idea that their main export market is Canada and that jobs and prosperity depend on mutually beneficial trade and commerce. More than 300 Team Canada outreach missions made contact with more than 300 members of Congress, 60 governors or lieutenants-governor and most of the Trump cabinet. To protect Canadian interests this must become a permanent campaign.

 The premiers and provincial legislators must continue to play a critical role in reaching out to their counterparts and this should be a main discussion topic at the upcoming first-ministers meeting on trade. We need to increase our presence in the U.S. – a representative in every state should be our goal. Here again, the premiers can help through establishing offices in the states that matter most to them. Ontario is the province most dependent on the U.S. market. Instead of seeking federal handouts, Premier Doug Ford could learn from Quebec. La belle province has long had representatives in U.S. states. These representatives complement the work of our consulates.

Our dependence on the U.S. market – 75 per cent of our trade goes south – was used as leverage by Mr. Trump since only 18 per cent of U.S. exports head north. It is another reminder that we really do need to invest in trade diversification. We have deals with the European Union and with key Pacific partners, most notably Japan. How to realize opportunities opened by these agreements must be another discussion at the first-ministers conference. As with our permanent U.S. campaign, trade diversification must be a Team Canada effort.

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Saudi-Canada and the USA

Who would have imagined that a tweet could have sparked such a crisis in Saudi-Canada relations? In this still-developing saga, there is a lesson, questions and a challenge.

The lesson is obvious: Diplomacy by tweet is a bad idea.

The too-clever-by-half tweet on the Friday before the August long weekend was likely written to assuage constituent pressures – the Montreal family of the imprisoned Badawis. But was it given sufficient scrutiny by our professional diplomatic corps?

The tweet would have been fine had it been sent by Amnesty International or Human Rights Watch. Diplomacy needs nuance and circumspection to effect actual change. While a useful social-media tool for priming an event or announcement, 280 characters are insufficient for launching a human-rights initiative to transform Saudi conduct.

The questions: Did Mohammed bin Salman, the Saudi Crown Prince calling the shots in the desert kingdom, check with U.S. President Donald Trump before proceeding with his attack on Canada? Given their close personal relationship – Mr. Trump’s first foreign visit was to Riyadh – was there a conversation before the Saudis launched the diplomatic equivalent of DEFCON 3 on the United States’ closest ally? If so, what was said?

Prime Minister Justin Trudeau needs to call Mr. Trump to discuss the Saudi situation. If it turns out that Mr. Trump gave the Crown Prince a wink and a nod to proceed, then Mr. Trudeau needs to make it clear that this is not acceptable.

The challenge for Canada is what to do next.

The Saudis are ratcheting up their campaign. Their social media have called Canada an oppressor of women and the homeless. The tweeted picture of an Air Canada jet headed for the CN Tower – shades of the Twin Towers – was reprehensible. The Saudis are also calling in their chits. The Arab League, Organization of Islamic Co-operation and the Gulf Co-operation Council have all dutifully lined up behind Saudi Arabia. The Saudi Arab News says Mr. Trudeau should send a delegation on “the first plane” to make amends or there is a “real risk of upsetting the entire Muslim and Arab worlds.”

The Washington Post editorialized (with an Arabic version) that the extreme nature of the Saudi punitive actions requires solidarity from like-minded countries who see human rights as a fundamental value.

The response to date from our Group of Seven partners is disappointing. The U.S. State Department suggested the two countries – “both close allies of the USA” – work it out, as though Canada and Saudi Arabia were on equal footing. Susan Rice, who served as president Barack Obama’s UN Ambassador and then National Security Adviser, got it right: ”the administration left Canada swinging in the wind.”

Foreign Affairs Minister Chrystia Freeland now has to manage the fallout and continue her efforts to persuade like-minded countries to take a principled stand.

Are there sanctions we and our allies should be taking against the Saudis for their human-rights abuses, including treatment of women, oppression of religious freedoms and their intervention in Yemen? And why not invite its Foreign Minister to Canada? Perhaps he could join Ms. Freeland for a walk through our splendid Canadian Museum for Human Rights in Winnipeg.

Ms. Freeland has given some good, punchy speeches defending the rules-based order recently, in Washington and in Singapore. Words matter. On her next trip to Europe, she should speak about human rights and remind our allies that they are fundamental to civil society. Mr. Trudeau should make human rights a principal theme of his UN General Assembly speech in September.

It is doubtful the Trudeau government intended to launch a new initiative targeting Saudi human rights. It already has a charged foreign-policy agenda – tense NAFTA negotiations, NATO commitments, climate talks, G7 chair obligations, peace operations in Mali and now refugee claimants from the United States. But Saudi bully-boy tactics shouldn’t give the kingdom a free pass on human rights.

As we have learned through our initiatives to help the Rohingya in Myanmar and to constrain the Maduro regime in Venezuela, advancing human rights in countries that don’t care is a difficult proposition. But if a feminist foreign policy and advocacy for human rights is to mean anything, we have to stand up, even if we stand alone.

US refuses to back Canada in Saudi Arabia dispute

As the diplomatic feud between Canada and Saudi Arabia worsens, the United States has remained notably silent, leaving Ottawa both perplexed and frustrated.

It all began last week with a tweet from Canada’s foreign minister criticising Saudi Arabia’s human rights record.

That unleashed a barrage of punitive measures from Saudi Arabia including expelling Canada’s Ambassador, recalling its own Ambassador from Ottawa, freezing business and trade ties and ordering home thousands of Saudi students studying in Canada.

The US State Department has urged the two sides to use diplomacy to resolve the dispute but President Donald Trump’s silence for its northern neighbour hasn’t gone unnoticed in Canada.

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Canada should spend more on defence

Obnoxious he is, but when it comes to NATO burden-sharing, U.S. President Donald Trump has a point. With the United States shouldering almost two-thirds of defence expenditures by the alliance members, the other 28 members, including Canada, can do more.

At this week’s North Atlantic Treaty Organization meeting, Prime Minister Justin Trudeau should commit to meet the NATO defence commitment guideline − 2 per cent of gross domestic product − by 2024. In doing so, he could also commit to increasing Canadian development assistance to 0.7 per cent of GDP, the target first recommended by former Canadian prime minister Lester Pearson. If the United Kingdom can manage these commitments for defence and development, so can Canada.

While these pledges will discombobulate some, it would further validate the Trudeau government’s declaration that “Canada is back” as a constructive internationalist.

In terms of readiness, Canadian Forces already have achieved significant interoperability on land, air and sea with U.S. forces. We do this through NATO as well as NORAD (the North American Aerospace Defense Command), our 60-year-old binational aerospace and maritime surveillance agreement. We also achieve it through joint exercises and active operations in theatres such as Afghanistan and Libya and now in Latvia.

But we should do more.

This means spending more, not because Mr. Trump says so, but because Canadian sovereignty requires it. In their commendable, recently tabled report on NATO, the House of Commons National Defence Committee recommended that Canada meet the NATO target. They also encouraged developing quantitative and qualitative evaluations that better represent national contributions beyond the 2-per-cent metric.

There will be many opportunities for reinvestment. Three initiatives would immediately serve Canadian interests:

1) Increase the reserves: The Canadian Forces face recruitment and retention problems. This would bring in more young people as well as those who want to complement their current employment. They will learn a trade and serve their nation.

2) Assert our sovereignty, especially in the North. We need to pick up the pace for construction of icebreakers by using all of Canada’s shipyards and building more Arctic offshore patrol ships and supply ships for use in all three oceans. We should also invest now in the next generation of submarines – they are the ultimate stealth weapon to deter unwelcome intrusions into our maritime space. And why not build a pair of hospital ships to provide humanitarian relief in the increasing number of climate-related disasters that beset coastal nations?

3) Meet new threats. Canada should join the three NATO Centers for Excellence to address hybrid threats (Helsinki, Finland), cyber threats (Tallinn, Estonia) and strategic communications (Riga, Latvia). Their work would fit right into the government’s innovation agenda, while also bolstering the strategic partnership with the European Union.

The threats we face are real. These include a hostile Russia that has occupied Crimea and invaded eastern Ukraine. Russia also actively undermines democratic institutions using chemical, hybrid and cyberweapons, tools that are also used for subversion, crime and terrorism. Terrorism, fuelled by failed and failing states and perverted ideologies requires constant vigilance. Nuclear proliferation requires ongoing containment.

For the democracies, NATO continues to be the best defence against threats, new and old. While the alliance is trans-Atlantic, its footprint is global, with partner nations including Japan, Australia, New Zealand and South Korea.

But like any institution that turns 70 next year, NATO can be improved.

A useful starting point is the recent report of the GLOBSEC NATO Adaptation initiative. To meet and master the many technology and affordability challenges from “hybrid warfare to hyperwar”, the authors recommend a strategic review for next year’s summit so that NATO is “prepared, fit and able to act across the seven domains of grand conflict: air, sea, land, cyber, space, information and knowledge.”

Canada, like the rest of the Alliance, took the peace dividend after the fall of the Berlin Wall and end of the Cold War. The Chretien government used the savings to pay down debt and put our financial house in order. Alas, the end of history did not arrive and the triumph of democracy was premature.

Now we need to reinvest in our collective security. For only when our arms are sufficient beyond doubt, John F. Kennedy said, can we be certain, beyond doubt, that they will never be employed.

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Canada US Relations after Charlevoix

After the diplomatic disaster of the Group of Seven summit in Charlevoix, Que., it is now clear that for Mr. Trump it is not about leading – the traditional role of the U.S. President – but about winning at any cost. Relationships are not for cultivating, but only for using to Trumpian advantage.

Canada and like-minded countries need to stick together, act in tandem and push back against Trumpist protectionism. It means taking it to him where it hurts and targeting his base: in particular the farm community. At the same time, we need to tell Americans, who will suffer job loss and higher prices, that they have only their president to blame.

For more than 500 days now, Justin Trudeau has made nice to Mr. Trump. The advice from former prime minister Brian Mulroney was correct – that the relationship with the president is the most important relationship for a prime minister and that Canada-U.S. relations, alongside national unity and national security, are the files that require a prime minister’s constant attention.

Among liberal democratic leaders, Mr. Trudeau was seen as the one who had the best relationship with Mr. Trump. He was the Trump whisperer. But Mr. Trump’s behaviour at Charlevoix, Que., was abominable.

The tweets before Charlevoix, Que., took personal shots at both Mr. Trudeau and French President Emmanuel Macron, the other leader who has cultivated Mr. Trump. The tweets afterward, insulting Mr. Trudeau, are beyond the pale. As Mr. Trudeau said, we are a polite people but we are not pushovers.

Canadians are justly outraged, but we have deep interests at stake, so we need to proceed with care and planning.

First, we need to get our act together domestically. Mr. Trudeau needs to consult with the premiers and business to get their advice on our retaliation list. What is their assessment of increased protectionism on their province and industries? What about life after the North American free-trade agreement? We will be hurt. We will need to provide adjustment assistance for the afflicted. But how would Americans like it if Canadians began to spontaneously boycott American goods, especially U.S. farm produce, and stopped travelling south for holidays?

Second, we need to take advantage of the free-trade deals that we already have in place and put real effort into matchmaking; business with business. As a matter of our national security (two can play this game), we should quickly pass the implementing legislation to bring the new Comprehensive and Progressive Trans-Pacific Partnership into effect. With Canada’s implementation, the agreement would immediately come into force.

If this means keeping parliamentarians at work into July so be it. Provincial legislatures may also have to be recalled. While they are at it they should pass their enabling legislation for the Canada-Europe Comprehensive Economic and Trade Agreement. This is a matter of grave national economic urgency. Canadians need to see that their legislators are acting in the national interest.

Third, we need to act in tandem with our G7 partners and like-minded countries, such as Mexico, as we collectively retaliate to the recently imposed steel and aluminium tariffs. Canada and Mexico learned the value of acting collectively when they worked together to persuade the U.S. Congress to rescind its protectionist country-of-origin labelling requirement in 2015.

American legislators respond to local pressure. They need to feel the heat of retaliation. Canada has a lot of allies, especially in the Republican congressional caucus. They don’t like Mr. Trump’s direction and are already moving to curb the trade powers that were ceded to the executive branch during Franklin Roosevelt’s administration. Hopefully, we will see then the beauty of the checks and balances at work. The U.S. founding fathers designed their system to prevent a president from becoming a king.

The more Mr. Trump attacks his fellow G7 and fellow democratically elected leaders the more difficult it makes it for them to go along with him when it counts. That includes, however unlikely, a deal with North Korea.

The road that Mr. Trump is going down makes no economic sense. George W. Bush reluctantly imposed limited steel tariffs in 2002 (Canada was exempt) and lifted them a year later because it was costing American jobs, not creating them.

Canadians are used to compromise and consensus, especially in how we handle the relationship with Uncle Sam. Manage it well and we can tell them when their breath is bad. Mr. Trump has a bad case of halitosis. We need to tell him so and serve him the bitter medicine he has brought on himself.

CPAC Prime Time Politics Monday, June 11, 2018

Colin Robertson and Christopher Sands on Canada–U.S. Relations00:10:34Quick View

PRIMETIME POLITICS

Colin Robertson and Christopher Sands on Canada–U.S. Relations

 The G7 Summit in Charlevoix ended in dramatic fashion on Saturday with U.S. President Donald Trump directing strong criticism at Prime Minister Justin Trudeau over Canada’s response to U.S. tariffs. CPAC’s Martin Stringer is joined by two experts in foreign affairs and diplomacy to assess the current state of the Canada–U.S. relationship. Colin Robertson is vice-president and fellow at the Canadian Global Affairs Institute and a former Canadian diplomat. Christopher Sands is director of the Center for Canadian Studies at the Johns Hopkins University School of Advanced International Studies. (June 11, 2018) (no interpretation)

 

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NAFTA: Canada and Mexico need to stick together

Colin Robertson, The Globe and Mail, May 23, 2018

Another NAFTA “deadline” has passed, but the negotiations carry on. And that is what really matters. Canada and Mexico need to stick together, focus on their shared objectives and bear down for what now appears will be a more reasonable negotiating tempo.

The North American free-trade agreement negotiations seem to have gone on forever but, in fact, we have only been at it for 10 months. There have been eight rounds, a December “intercessional” and, in recent weeks, a series of sessions that saw Foreign Affairs Minister Chrystia Freeland shuttling back and forth for days in Washington.

 All this effort has resulted in considerable progress.

Negotiators have scoped out a framework that would include 30-plus chapters and half a dozen annexes. Mexican chief negotiator Kenneth Smith Ramos tweeted that nine chapters are now “closed”, although nothing is final until the whole deal is done. The negotiated chapters cover regulatory practices, administration, sanitary and phytosanitary measures, competition, small and medium-sized enterprises, anti-corruption, environment, energy, telecommunications and trade barriers. Sectoral annexes include chemicals and proprietary food formulas.

The U.S. side took as their starting point the Trans-Pacific Partnership (TPP) that, ironically, President Donald Trump withdrew the United States from after taking office. The Canadian and Mexican negotiators’ used the original NAFTA, arguing that if the U.S. wanted to achieve their TPP gains, they would have to negotiate it.

In recent weeks, negotiations have centred on auto-content rules. Supply chains have made car assembly the most traded commodity within North America. The U.S. wants 75 per cent North American content (it’s currently 62.5 per cent) with 30 to 40 per cent made with labour that is paid more than US$15 an hour. This would affect Mexican competitivenes; their auto workers’ wages average US$3-$4 an hour. Not surprisingly, they are loath to agree. They want a long phase-in period as well as concessions in other parts of the agreement,.

Some suggest that Canada should dump Mexico and then negotiate a bilateral auto agreement with the United States. This would be a strategic blunder. The 1965 auto pact was our first sectoral free-trade agreement and it guaranteed jobs and production in Canada. But it is just one piece in a much bigger and successful North American trading arrangement.

While trade with the United States under NAFTA has expanded threefold and the U.S. remains our preponderant trading partner, the hidden success story is the Canada-Mexico relationship. Mexico is now our third-largest trading partner. Canadians have made big investments in mining, banking and manufacturing in Mexico. And, after the U.S., Mexico is our favourite tourism destination.

During the long and ultimately successful negotiations to reopen the U.S. market to our beef exports – the country-of-origin labeling dispute – we worked in tandem with Mexico. Together, we utilized NAFTA and World Trade Organization dispute-settlement provisions. We formulated our retaliatory list together. We succeeded because we stuck together.

With the low-hanging fruit now harvested, the NAFTA negotiations are into the difficult issues. The auto-content rules are just the first. Mexican support will be vital to sustain dispute settlement and to preserve access for reciprocity in government procurement. We need to be united in pushing back on the sunset clause and preserving temporary entry provisions. And when the U.S. comes after us on supply marketing, patent protection and the threshold level for border duties, Mexican advice will be useful.

Mexico stood up for Canada when Justin Trudeau pirouetted in discussions with leaders in Da Nang, Vietnam, on what is now the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. Some were ready to toss Canada under the bus. The Mexicans persuaded them to give Canada another chance.

As part of our trade diversification strategy, Canada is reaching into the Americas. We want associate membership in the Pacific Alliance (Mexico, Chile, Peru, Colombia) and Mercosur (Argentina, Brazil, Paraguay, Uruguay). Do we think that leaving Mexico in the lurch would help us in these negotiations? The 33 nations south of the Rio Grande also represent a quarter of the votes we need in our campaign for a United Nations Security Council seat.

The Trump approach is to divide and conquer. Ending our alignment with Mexico would play right into U.S. hands. There is still much more that unites Canada and Mexico and much more to be gained by working together. Let us recall Ben Franklin’s advice to those framing the U.S. Declaration of Independence: “We must, indeed, all hang together, or most assuredly we shall all hang separately.”

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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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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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Crunch Time for NAFTA: A Test for the USA

The NAFTA negotiations this week in Montreal will give us a good sense of whether a new agreement is possible. Canada and Mexico are coming to the table with ideas on the “poison pills” but is the United States ready to negotiate?

The test will come on three issues:

– Can we preserve dispute settlement as a check against unfair protectionism?

– Can we find an equitable formula around trilateral content rules for cars, our most traded commodity?

– Will government procurement stay open to all three nations?

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

Foreign Minister Chrystia Freeland’s “hope for the best, prepare for the worst” is a fair characterization of NAFTA’s prospects. The Trump administration continues to ramp up protectionist actions against foreign competition. In recent months, the United States has hit Canada with punitive tariffs on lumber, jets and now newsprint.

U.S. President Donald Trump’s repeated threats to rescind NAFTA is galvanizing hitherto-silent U.S. support into action. 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. Senators and members of the House of Representatives, especially those in the Midwest and from Texas, are now pressing the President to do no harm to NAFTA.

Canada and Mexico have launched unprecedented outreach campaigns. Canadian envoys have met with more than 65 governors and lieutenant-governors and more than 265 congressmen. We are finding allies. We will need them if Mr. Trump rescinds the agreement or if any new deal reaches Congress.

Canada and Mexico must stay engaged in what should become a permanent campaign to cultivate the biggest market in the world.

But the future of NAFTA now depends on the outcome of the American internal debate.

Canadians faced their moment of truth on trade in 1988. We fought an election over closer economic relations with the United States. It brought prosperity, not, as the critics warned, a loss of sovereignty. Mexicans faced a similar moment in 1994 when they embraced the NAFTA.

For both Canada and Mexico, freer trade proved that we could compete, not just with the U.S., but internationally.

Freer trade also became a catalyst for domestic economic reform.

For Canada, the restructuring included the introduction of a national value-added tax, the GST. Federal and provincial governments cut their deficits. For Mexico, NAFTA restructuring supported democratic change in 2000 after 71 years of one-party rule. More recently, it helped spur the “Pacto por Mexico” reforms to education, finance, labour and energy.

For Americans, NAFTA is a litmus test of its place in the world. Will they replace the rules-based order, created and sustained by the United States for 70 years, with Mr. Trump’s vision of America First? Will Americans set aside their traditional generosity towards other countries with one based on mercantilism and beggar-thy-neighbour?

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. It’s a world of big rolling over small. Middle powers like Canada and Mexico need to push back.

Previous U.S. administrations, both Republican and Democrat, saw U.S. internationalism not as an act of charity, but as reflecting U.S. values and principles. As practised by Roosevelt through Reagan and Obama, the United States used its weight to better the global condition, willing to give more than it received. This is the “indispensable nation” that Ms. Freeland described when she laid out the Trudeau foreign policy last June. She described a United States that sustains the global order, for the greater global good, through a network of alliances, trade agreements and international institutions.

Mr. Trump’s “America First” breaks with this American tradition. Will Congress and the courts go along with Trumpism? While Canada and Mexico prepare for the worst, we must stay engaged with the many Americans who see the world, and America’s place in it, differently than Mr. Trump. Ultimately, Trumpism is a test of how Americans see themselves and their place in the world.

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