Happy Canada Day! And What’s the Latest on NAFTA?

Preserving Global Trade for Canadian Small Businesses

A big weekend is coming up for our two neighboring countries. Canada will celebrate its 150th anniversary on July 1, while America celebrates its 241st on the 4th. Despite the recent bristly relations between our two nations over trade, the latest on NAFTA is, basically, no change – good news for American small businesses.

To what, or whom, do we owe this good news? It turns out, Canada has its very own secret weapon for preserving global trade: The Trudeau administration. Its chief strategy has been to circumnavigate the Trump administration altogether, reaching out directly to US mayors, governors, members of Congress, and business leaders on everything from trade to the environment. And it’s working.

The latest on NAFTA: still good for the US, still good for Canada

Mr. Trudeau has openly challenged the Trump’s tough talk on trade by continually reminding us of the many benefits of NAFTA – for Americans. The number of American jobs and other economic benefits of NAFTA, Mr. Trudeau says, are so significant that the latest on NAFTA, in his point of view, is that there is no possibility it will collapse.

The Trudeau strategy for “Trump management” is unmatched on the world stage, giving Canada much greater success than other allies have had working with the Trump administration, Angela Merkel of Germany is perhaps the most telling example. Maybe it’s because Canada sees how important the US is to its economy. Canada relies on US trade more than just about any other country. The US is by far Canada’s largest trading partner, accounting for 70% of all Canadian global trade. Canada also has a sizable manufacturing sector that is tightly interwoven with American GDB. Even a small tightening of trade between our two countries could have a marked negative impact on the Canadian economy.

A Canadian courtship strategy pays off (sort of)

Trudeau made short order of cultivating a relationship with the Trump administration. In just days after the US 2016 election, he began establishing relationships with people around Trump, including his daughter Ivanka. In February, Trudeau and Ivanka led a panel on women in business and attended a Broadway play together about how Canada sheltered stranded travelers after the September 11 attacks.

Trudeau struck paydirt. Days later, Canadian firm TransCanada was exempted from Trump’s “buy American” executive order, and they were allowed to supply the steel for newly reinstated Keystone XL pipeline project. In his first Congressional address, President Trump mentioned just one foreign leader: Prime Minister Trudeau.

Trump’s withdraw from the Paris Climate Accord put a new fire in the Trudeau government’s belly, causing them to redouble their efforts at courting local American lawmakers directly. And the country is in a unique position to run with this strategy. Trudeau enjoys huge popularity at home and is faced with little organized opposition. While leaders of other US allies, up for reelection, capitalize on Trump’s low approval ratings worldwide by responding to even the slightest of Trump’s many slights, Trudeau enjoys the luxury of being able to politely ignore Trump.

The latest on NAFTA circumnavigation

Today, Canada’s ‘White House circumnavigation strategy’ is in full swing. Canada is careful today to distinguish between the US (we Americans) and the US federal government (the Trump White House). While they maintain cordial relations with the White House, the crux of their strategy is to bypass Washington altogether and work at the state and local level to preserve trading partnerships with US companies.

And it’s going quite well. Here’s a great example:

Governor Andrew Cuomo recently introduced a “buy American” mandate on New York state contracts over $100,000 – bad news for the state’s Canadian neighbors across the border in Ontario. But Ontario had a few cards up her sleeve. It turns out, New York needs Ontario as much as Ontario needs New York. The ‘White House circumnavigation strategy’ was put in motion, and soon regional leaders in Ontario were meeting with state leaders in New York, leaving Washington entirely out of the negotiation process.

New York exports $10 billion a year to Ontario today. When New York’s “buy American” provision was introduced, all Ontario had to do was hint that they could – and would – stop buying New York’s exports. Ontario also now has $160 billion worth of infrastructure investments planned. They hinted that contracts for that work, too, might be off limits to New York businesses. In the eleventh hour, the New York State “buy American” provision was reduced from a mandate to a toothless symbolic gesture. Trudeau’s approach of “going local” has paid off already.

So what’s the latest on NAFTA? What’s Plan B if it should all go down? We like Canada’s attitude: “Plan B? We don’t need no Plan B.”  If the US seeks to pull back significantly from NAFTA, every American governor, mayor and members of Congress can expect a call or personal visit from their Canadian counterparts reminding them of the many great benefits NAFTA brings to the American economy.

Happy Canada Day, and Happy Fourth of July! You can also check out our Independence Day post celebrating the history of American small business.

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