International trade: New sandbox rules

Sixth Estate

Author: Dale Smith


With the new United States-Mexico-Canada Agreement (USMCA) signed and awaiting ratification, the rules around international trade are shifting for Canada. Before the Bell engaged with stakeholders and experts to discuss how Canadians can capitalize on the USCMA, what it means for our industries, and what global opportunities remain for the government’s progressive internationalism agenda.

During the Pulse segment, hosted by Susan Delacourt, the questions of whether the USMCA was a success and where trade was headed for Canada were up for discussion.

“I think the answer to that, at least for now, is more managed trade and less free trade.”

Sarah Goldfeder, principal, Earnscliffe Strategy Group

Rachel Curran, principal at Harper and Associates, said that the government succeeded in limiting the damage that Donald Trump planned to do to the trading relationship between Canada and the U.S.

“Given what we were working with, it was a worse agreement for sure, but it’s probably not as bad as it might have been,” said Curran. “We didn’t do a bad job, all in all, in the end.”

Sarah Goldfeder, principal at Earnscliffe Strategy Group, said that in the current era, Canada is moving more toward managed trade than free trade, not just because of the United States, but also what was achieved with the Trans Pacific Partnership (TPP).

“What we have in the world right now is one very large player, playing by their own set of rules, and imposing the goods and services that come out of that country under this separate set of rules upon the rest of the world at a much lower cost,”said Goldfeder, referring to China.

Goldfeder said that all industrial economies are figuring out how to deal with China, and how to trade with it in a way that makes sense for their own economies. “I think the answer to that, at least for now, is more managed trade and less free trade.”

André Plourde, dean of the faculty of public affairs at Carleton University, said that in a world with more managed trade, and the complexity that it brings in terms of rules, it’s less likely that we’ll see more bilateral deals than multilateral ones.

“I’m hoping that the next round is more multilateral, more like the Trans Pacific Partnership,” said Plourde

He also noted that the two major trade agreements outstanding are with China and India. “Are we really close to being ready as a country to doing trade agreements on a bilateral basis with these two countries?” Plourde asked. “It’s not clear to me that’s the case.”

During the Policy segment with Catherine Clark, Mark Agnew, director of international policy with the Canadian Chamber of Commerce, said that work remains to be done on USMCA, particularly during the congressional ratification process in Washington.

He also cited challenges for dealing with China, which faces not only tariff barriers but also a number of non-tariff barriers.

“There are [Chamber] members who have concerns about the role of state-owned enterprises, and the fact that the Chinese state is able to back their companies in a way that isn’t a reality for companies here,” said Agnew. “Also with some of the conditions that exist when you’re trying to do business there, be it around intellectual property protection issues, forced technology transfers — it’s not an easy market to do business in.”

Joy Nott, partner in trade and customs at KPMG, said that the lack of certainty during the USMCA negotiation process was crucial for her clients to navigate.

“We’ve moved from a game of checkers to three-dimensional chess,” said Nott. “You used to think about one particular market, the geo-politics, regulatory and trade opportunities in that market, and you made your strategy. Now, everything is inso much flux.”

Nott says that clients are looking to minimize the changes that they need to make, but she is concerned that they are missing opportunities to be bold and reconsider their strategies.

Peter Hall, vice president and chief economist at Export Development Canada, said that the uncertainty isn’t inhibiting trade, it’s inhibiting investment.

“It’s a strange paradox that they’re in at the moment because they don’t know where to invest, but they need to invest,” said Hall. “They need to invest is because the economy is red hot, and they’re running up against capacity constraints that are being furnished by an economy that is in ramp-up mode right now.”

Hon. Andrew Leslie, MP for Ottawa Orleans and the Parliamentary Secretary to the Minister of Foreign Affairs, agreed with the notion that most Canadian firms had become too comfortable relying only on the U.S. for trade.

“Now there’s a forcing function, which is encouraging us to go elsewhere, and now we have the instruments to get it done,” said Leslie. “We collectively should be focusing our attention, while preserving our good relationships with the United States; let’s go somewhere else and find new opportunities as well.”

Leslie added that one of the biggest risks in the coming year is around getting Canadian products to market, not just the U.S. but elsewhere, as well as increased attacks on the rule of law.

CommerceGraham Scott