OTTAWA — Protectionism is rearing its head again in the United States, leaving the Trudeau minority government to figure out ways to work with an unpredictable neighbour.
History has a funny way of repeating itself.
It’s a scenario Canada found itself in during the early 1970s. Liberal prime minister Pierre Elliott Trudeau was in charge at the time when his U.S. counterpart, president Richard Nixon, turned his country inward to protect domestic industries during the last stretch of the Vietnam War.
Nixon’s administration slapped protectionist tariffs on Canadian imports with no advanced notice, which strained the “special relationship” the two countries had enjoyed for decades. It also further curdled relations between the countries’ two leaders. The U.S. president dubbed the prime minister a “pompous egghead” and called him a “son of a bitch” behind closed doors. “I’ve been called worse things by better people” was Trudeau’s famous retort to the president’s insults.
Now his son, Prime Minister Justin Trudeau, has found himself in a similar position.
U.S. voters are faced with a choice between incumbent Republican President Donald Trump and Democratic former vice-president Joe Biden. But a Biden win won’t necessarily signal the end of protectionist measures implemented under Trump. They will just look different.
Both candidates represent ideas that could raise new trade-related problems for the Trudeau government, according to Christopher Sands, Canada Institute director at The Wilson Center, a think-tank based in Washington, D.C.
“I think that sometimes in [U.S.] elections, Canadians just sort of watch American politics and think about who they would vote for, and I think that it’s a bit of a mistake, because you think about what you like but not necessarily what’s in Canada’s interest,” Sands told HuffPost Canada.
“Whoever wins, the next four years are going to be bumpy and they’re going to be difficult for Canada — which would be much happier with a stable, predictable, and hopefully prosperous U.S.”
* * *
Trade has been the conduit for bilateral relations since the first Canada-U.S. trade treaty was signed in 1854 — a pre-Confederation deal brokered by governor general Lord Elgin’s energetic campaign of plying southern U.S. politicians with “wine, whiskey, and blandishments.”
But even aggressively generous hospitality has its generative limits between neighbours. Short and medium-term tensions have caused economic and diplomatic headaches throughout the years and duelling protectionism threats have come and gone. It’s a relationship that the Library of Parliament characterized in a research note as one that oscillates between “resilience and strain.”
There hasn’t been a single issue that has done long-term irreparable damage to Canada-U.S. ties. Longtime trading partners, the two economies are intertwined.
Since Trump took office with a protectionist agenda four years ago, unpredictability has been a constant in bilateral trade relations. “America First,” a slogan that gained prominence during the interwar period more than a century ago, was repurposed by Trump’s campaign and administration. It became a touchstone for U.S. policy.
When talks renegotiating the North American Free Trade Agreement (NAFTA) hit a wall in 2018, the United States chose an aggressive tactic by announcing tariffs on Canadian steel and aluminum. Canada responded with retaliatory import tariffs targeting $16 billion in U.S. whiskey, maple syrup, orange juice, yogurt, and toilet paper, among other items.
Trudeau held a press conference at the end of the G7 meeting in Charlevoix, Que., that summer to say Canada “will not be pushed around.” Trump, who had left the summit early to travel to Singapore to meet North Korean leader Kim Jong-un, responded to Trudeau’s comment with a personal attack, calling the Canadian prime minister in a tweet “very dishonest & weak.
The following month, Trudeau cleaved international trade from the foreign affairs minister’s portfolio and created a new ministerial role for international trade diversification. The government pressed on with a renewed push for multilateralism in a Trump era.
The whole point of the portfolio, as its name suggested, was to diversify Canada’s trade relationship with “key global markets,” specifically in the Asia-Pacific region. Jim Carr was tapped for the position. But after the 2019 election, the cabinet role was abandoned, folded into Mary Ng’s portfolio for small business, export promotion and international trade.
“The problem that we’ve all suffered for four years with Trump is that he’s a very disruptive … president who challenges convention and creates a level of uncertainty from the U.S. that I think drives all our neighbours crazy,” Sands said.
The discord between leaders did not appear to make an impact on the value of merchandise trade between the two countries. And Canadians continued to make more than 44.4 million trips to the United States that year, a nearly five per cent increase from the year before. But the trade spat left a dent in steel and aluminum exports.
“Trudeau will have to endure the fact that he just isn’t going to be well liked or well admired by Donald Trump. That’s never going to change.”
According to Statistics Canada, by the time the tariffs were lifted in May 2019, the value of Canadian steel and aluminum exports fell to their lowest level in nearly a decade.
Whenever Trump and Trudeau interact, Sands said, there’s a sense that the U.S. president feels he’s running a bigger country, and that the prime minister can’t help but feel that he’s somehow a little superior and smarter.
“I think the two of them just rub each other the wrong way,” he said, adding that, should Trump be re-elected, “Trudeau will have to endure the fact that he just isn’t going to be well liked or well admired by Donald Trump. That’s never going to change.”
It’s unlikely that Trump, leading a relatively weak Republican party currently in a process of transition to a new base and a new sort of philosophy, would show future restraint because, according to Sands, there’s no one who can actively constrain him.
Gerald Butts, former principal secretary to Trudeau, told HuffPost Canada’s politics podcast that, “the conventional rules don’t necessarily apply” when you’re in negotiation with the Trump administration.
Listen to the full interview on ‘The Elephant And The Mouse: What The U.S. Election Result Means For Canada.’ Story continues below.
Traditionally, when a deal has concluded, he said, “everybody agrees to the deal and walks away agreeing to the deal,” adding that in his experience, talks can wrap up and agreements can be signed. He said, however, that a deal with the Trump administration is never really done.
“It’s always subject to revision. It’s always subject to new caveats and new qualifiers. And you just accept that as a fact of life.”
* * *
Biden came up in an era of the Democratic Party in the ’70s that saw strong union support and weariness toward trade agreements that moved U.S. jobs abroad.
When president Barack Obama signed the American Recovery and Reinvestment Act into law in 2009, he thanked Biden for getting the stimulus package done.
“We could lose a generation of potential and promise… . And our nation could lose the competitive edge that has served as a foundation for our strength and our standing in the world,” Obama said at the time.
That act included a “Buy American” provision for procurement. It codified a preference for U.S.-made iron, steel and “manufactured goods” for government-funded infrastructure projects. At the time, nearly 80 per cent of the total value of Canadian exports went to the United States.
Conservative prime minister Stephen Harper’s government tried to persuade Washington to waive the protectionist measure for Canadian suppliers wishing to bid for U.S. stimulus projects, but talks failed to secure a “meaningful exemption.”
Ontario is home to Canada’s steel industry. According to provincial data, more than 70 per cent of the country’s production capacity is located in the province, employing 16,000 people direct and 53,000 people indirect jobs. For aluminum, Quebec is the centre of the country’s production activity, responsible for more than 70 per cent of the country’s exports, employing nearly 8,000 people. When waves of protectionism reappear in America, Canada braces.
As a presidential contender, Biden pitched a $700-billion (USD) “Made in All of America” clean energy and infrastructure plan in July, promising the creation of “high-quality, high-skill, safe jobs with the choice to join a union.”
It’s a beguiling pitch to voters. Jobs and job security are top of mind in the United States after the country’s adjusted unemployment rate hit 19.2 per cent in April during the first wave of the pandemic. The rate was highest (32.3 per cent) among workers between the ages of 16 and 24 — figures comparable to the unemployment rate at the height of the Great Depression in the 1930s, which was estimated to have peaked at 25 per cent.
The economic crises on both sides of the border, though different, are not over as long as a COVID-19 vaccine is not widely available. More than seven months into the pandemic, the U.S. economy has recovered two-thirds of the ground it lost at the onset. Canada’s economic recovery has fared better, according to TD’s chief economist. But industries including trade, construction, and transport industries have “returned employment at a more rapid pace” in America.
Biden’s ambitious plan slaps a lot of money on the table and bets on infrastructure and research and development to supercharge the post-pandemic U.S. economy.
It’s too early to tell if there’s any room for Canada in Washington’s efforts to “build back better” — a ubiquitous slogan used around the world to support pandemic spending. As the adage goes, when the United States sneezes, Canada catches a cold. The same logic can be applied to when the U.S. economy prospers, Canada (its second largest trading partner) thrives, too.
Still, it remains to be seen if a Biden presidency would waive “Buy American” measures for Canadian suppliers, allowing businesses north of the border to play a role in fulfilling the promise of a clean energy transition.
An exemption from “Buy American” protectionist provisions is possible, but so is a resurgence of retaliatory measures in Canada if one is rejected.
Jennifer Levin Bonder, a Canadian and international relations historian at the University of Toronto, says the main lesson from the entirety of Canada’s economic history is that the country is always “very reactionary.”
“There’s so much unknown, and the truth is that Canada will have to deal with whatever comes, and it’s not going to be easy, no matter what,” she said. “Anyone who tells you we’re back to a beautiful period of calm, smooth sailing is wrong.”
“Whenever America is anxious, whenever it wants ‘America First,’ these anxieties get shared with the rest of the world.”
She pointed back to the late ’60s and early ’70s, when Canada’s “economic nationalism” reached its height in response to Nixon’s protectionist policies. It was in this era when the Canadian government established a new review agency to start monitoring foreign investment. A new emphasis on the production of Canadian content was introduced.
In the ’60s, foreign ownership in Canadian energy, petroleum and coal at the time was as high as 99 per cent. Two oil crises compelled the government to have a heavier hand in developing domestic supply and more self-sufficiency — eventually creating a program that fuelled a longstanding sense of “frustration and alienation” in Alberta.
“These really protectionist policies come out of this period when we were surprised the American don’t exempt us from their changing tax laws,” Bonder said. She said the Canada-U.S. trade relationship has become transactional in the past four years, and trust needs to be restored.
Look at the NAFTA renegotiations, she said, pointing to how relations have evolved to a place where national security tariffs can be slapped on Canadian steel and aluminium during the middle of trade talks.
“Whenever America is anxious, whenever it wants ‘America First,’ these anxieties get shared with the rest of the world.”
* * *
The winds of protectionism have been blowing in Canada thanks to closed borders and renewed attention on supply chains. In August, populist Ontario Premier Doug Ford repeated pledges to “never again” let his province be at the mercy of “other countries” for the supply of critical protective personal equipment (PPE).
Ford expressed astonishment earlier in the year when Trump ordered medical engineering firm 3M to stop exports of N95 respirators to Canada. After Trump decided to reimpose the 10 per cent import tax on Canadian aluminum in July, the Ontario premier was flabbergasted again. He suggested the U.S. president “give his head a shake” and accused Trump of having the gall to backstab Canada during a pandemic.
“In times like this, who tries to go after your closest ally, your closest trading partner, your No. 1 customer in the entire world? Who would do this?”
According to the federal government, the Canadian aluminum industry employs more than 10,000 workers and contributes $3.1 billion to the gross domestic product. Approximately 81 per cent of Canadian aluminum is exported to the United States.
Those July threats of aluminum tariffs didn’t come into force. In September, Washington announced a decision to delay them until after the election. Now, the second week of November is the earliest for when the tariffs could come into force.
James Moore is a former Conservative cabinet minister in the Harper government who served on the Liberal government’s NAFTA advisory council. He suggested dealing with Trump is an entirely different ballgame — one that could either end or continue.
“Depending on who’s in the White House, you know. Stephen Harper, we had our trade issues and files and conflicts with George W. Bush. We had them with Barack Obama,” Moore said. “Donald Trump was a tectonic shift, because the entirety of NAFTA was on the brink of being abrogated by the president of the United States.”
The former industry minister said he hopes the United States, whether led by either Trump or Biden, will come to see the past four years as having been “not a success story” for the country — and that Canada has a role in helping its neighbour open up and reengage with the world.
A world without America is a dark and dangerous place, Moore said.
With files from Althia Raj