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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Perimeter Security

We are making progress on a more accessible border with U.S.

Colin Robertson Thursday, Nov. 27 2014 Globe and Mail

Tragedies can divide people and nations. They can also bring them together in shared solidarity as was recently demonstrated by Canada and the United States around our still-developing security perimeter.

In the aftermath of 9/11, the United States retrenched. The 49th parallel became a real border. Since then both countries, at the initiative of Canadian governments – Liberal and Conservative – have worked to create a security perimeter within which people and goods can circulate. Last month, the perimeter concept passed a critical confidence test.

The recent assassination of Canadian soldiers on Canadian soil by adherents of radical Islam (mental health also played a role) could easily have resurrected American fears of a soft-on-security Canada.A week earlier, Politico, the popular Washington insiders’ daily, ran a story describing “the real terrorist threat next door.”

Headlined “Fear Canada,” it rehashed the tale of millennium bomber Ahmed Ressam and the Toronto 18 warning that the U.S. has much more to fear from Canada. Even if the piece had a South Park “Blame Canada” quality, it could have found an audience in perfervid Washington. But it didn’t.

Instead, the U.S. reaction to the assassinations has been empathetic and understanding.

Within days, U.S. Secretary of State John Kerry laid a wreath at our national cenotaph, symbolizing American sympathy and solidarity. This past weekend, at the Halifax International Security Forum, the congressional delegation led by Republican Senator John McCain and Democrat Senator Tim Kaine expressed the same sentiment, acknowledging that such events could also happen in the United States.

So what has changed?

A lot, including the development of a verifiable security “perimeter” – a word once forbidden from the official Canadian lexicon for fear it would somehow undermine Canadian sovereignty.

The “Smart Border” Accord, negotiated by then Deputy Prime Minister John Manley and Homeland Security Adviser (and later Secretary) Tom Ridge, kicked off the process with its checklist of thirty plus deliverables. It succeeded.

Mr. Manley and Mr. Ridge trusted each other. They set deadlines and demanded that their officials reconcile their differences before the two met.

But progress is not always in a straight line. When former prosecutor Michael Chertoff succeeded Mr. Ridge, border co-operation froze. Enforcement became the order of the day.

A more accessible border was Prime Minister Stephen Harper’s first ask of Mr. Obama during the President’s visit to Ottawa in February, 2009. When it went nowhere, Mr. Harper renewed his request and, in December, 2011, the Harper agenda became a shared plan for border and regulatory collaboration.

Converging Canadian and American public attitudes towards security help the process.

An IPSOS poll, released at the Halifax Forum, says that 60 per cent of Canadians and two-thirds of Americans see the world as a more dangerous place, underlining the case for co-operation.

A second look by the Chicago Council on Global Affairs at recent Canadian and American polling concluded that strong majorities – 57 per cent in Canada and 72 per cent in the U.S. – support closer co-operation on border security.

Border and regulatory co-operation is delivering results:

Enhancing collaborative cross-border law enforcement most visibly through the “Shiprider” program where enforcement officers of both nations jointly police the Great Lakes.

Harmonized approach on who can enter the perimeter. Canada is introducing an electronic travel authorization system that will parallel the existing U.S. visa-free system for pre-screening entry from travellers from visa-free countries.

Systematic information sharing on immigrant and refugee applicants, including entry information on third-country nationals thus allowing our two countries to share information on who has entered.

Joint border infrastructure planning to improve passage, including 28 binational ports-of-entry committees created to ensure local input.

Other tangible improvements include additional trusted-traveller lines at our ports of entry. Over a million Canadians subscribe to the “fast-pass” NEXUS program.

There is still work to do.

We need to merge the various trusted-traveller programs (and include Mexico). We need to roll-out the “single window” program so businesses and travellers can provide information to both governments once, not umpteen times in different formats.

The financing of the Detroit customs plaza remains unresolved. “Once inspected, twice (and eventually thrice) cleared” is still more rhetoric than reality. Border officials on both sides still behave with an “enforcement” mentality rather than as expeditors of goods and people.

We need to make permanent border and regulatory oversight within our Privy Council Office. Changes to the U.S. government’s North American oversight, recommended in the recent Council on Foreign Relations report, deserves attention.

But we are making progress and passing real tests. Our continental perimeter, one that will eventually include Mexico, is taking shape.

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