Oct 2, 2020
How the U.S. presidential election outcome could shape the future of Canadian trade
Canada needs to 'smarten up' on trade: Ex-NAFTA advisory council member
Canada’s relationship with its largest trading partner has never been perfect, but the result of November’s U.S. presidential election may bring new challenges.
The next president of the United States could hold two high-stakes cards for the future of Canadian trade. One will be in his approach to protectionism, while the other will depend on his handling of America’s relations with China, according to some experts.
Under the Trump administration, Canada rewrote trade policy with the U.S. and Mexico in the new North American Free Trade Agreement (NAFTA). The agreement notably helped secure the longevity of Canada’s automotive sector, though it failed to shield Canadian steel and aluminium products from tariffs.
“The Trump administration sees tariffs as a way to build up the U.S. industrial heartland, which is important to the election,” Mary Lovely, a senior fellow at the Peterson Institute for International Economics, a Washington D.C.-based think tank, told BNN Bloomberg in a phone interview.
She believes that Trump will likely continue to use tariffs in trade disputes with Canada should he be re-elected.
While Canada’s industrial sector was directly impacted by Trump’s tariffs, the country’s commodities sector felt indirect pressure from U.S. and China tensions.
Following Huawei CFO Meng Wanzhou’s December 2018 arrest in Vancouver at the request of the U.S., Canadian canola and pork products were subject to Chinese bans.
This impacted nearly half of all Canadian canola exports to China, according to the Business Development Bank of Canada.
Canada traded $82.3 billion with China in 2019, which is second only to Canada’s trade with the U.S. at $991.7 billion, according to Statistics Canada.
Some economists are cautioning continued trade tensions with either partner could jeopardize Canada’s economic fortunes, which are closely tied to international trade.
“Perhaps to improve relations between Washington and Ottawa, one must also take a look at the trade routes through Beijing,” Charles Doran, a professor at Johns Hopkins School of Advanced International Studies, told BNN Bloomberg in a phone interview.
A Biden presidency would likely favour multilateral deals, while working alongside allies such as Canada or Europe, to influence China’s approach to international trade, he said.
However, Doran cautions a Democratic win of the White House may bring its own set of difficulties.
“Republicans generally have an easier time agreeing to trade deals than Democrats because, Democrats and Liberals insist on labour and environmental conditions that have nothing to do with trade,” he said.
As for undoing international trade damage, it’s possible Biden would roll back tariffs, but to do so he’d have to receive something in return, according to Lovely.
Biden’s agenda pushes for a “Buy American” approach evidenced by a campaign slogan that promises to bring back manufacturing production to the U.S., notably through taxing offshore corporations and procurement investment.
“Biden is sending signals towards greater protectionism,” said Robert Lawrence, Harvard faculty chair of trade policy, and a former economic advisor to U.S. President Bill Clinton, in a phone interview with BNN Bloomberg.
The attempt to bring back supply chains, particularly between the U.S. and Canada where some products cross the border four to five times before they finish, would be challenging, he added.
A notable difference between the two candidates could be Biden’s approach to America’s allies.
“He has over 40 years of experience as first a senator and then as vice-president, where he has demonstrated cooperation with Canada in the past,” James Blanchard, who served as U.S. Ambassador to Canada in the 1990s, told BNN Bloomberg in a phone interview.
Regardless of who takes the White House, one of Canada’s key advantages is its proximity to the U.S., according to Lawrence Herman, counsel at Cassidy Levy Kent, and member of the Deputy Minister’s Trade Advisory Committee.
Various levels of government and businesses in Canada are very connected to their American counterparts, he said in a phone interview.
“It’s through the use of these contacts that Canada can counter aggressive trade policies,” Herman said.