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Trade champion laid to rest
The Canada-US trade relationship lost its greatest champion when former Canadian Prime Minister Brian Mulroney was laid to rest in Montreal on Saturday.
Mulroney was the architect of the original Canada-US free trade deal, which he and President Ronald Reagan signed in 1988. He negotiated the NAFTA agreement, which extended the arrangement to Mexico, although it was signed by Prime Minister Jean Chretien and President Bill Clinton in 1994. Then, after the 2016 election of President Donald Trump, who threatened to tear up the deal, Mulroney played a key behind-the-scenes role in helping keep the negotiations between Prime Minister Justin Trudeau and Trump’s team from going off the rails.
In an interview last year for a forthcoming book, Mulroney spoke about the importance of the efforts he and Trudeau made to save the trade relationship: “Had it collapsed, the economic backbone of Canada would have collapsed, because today, NAFTA is a grouping of three countries, and 500 million people, which represents seven percent of the world's population, and it generates 28 percent of the entire wealth of the world every single year, and the millions of jobs that goes with it.”
The relationship will be in jeopardy again if Trump wins in November. Trump has promised to impose a 10% tariff on all imports to the US.
To prepare for that eventuality, dozens of Canadian diplomats descended on Washington this week to meet with American lawmakers. Nobody knows what a re-elected Trump would do about trade with Canada, and he has other things on his mind.
Should Canada give three F’s?
You’re leaving your role as president of the Canadian Chamber of Commerce after 17 years, which has been a transformative time. What is the biggest economic challenge facing Canada's trade with the US?
Perrin: The politics of trade has undergone a sea change in the US under the last two presidents. Previous presidents, from Ronald Reagan on, viewed America's interactions in the global economy as an opportunity to foster American prosperity, and they saw an integrated North American economy as a source of strength. More recently, however, US politicians have started to turn inward, increasingly viewing their country as a victim, and not as the primary beneficiary of international engagement. This change has led them to increasingly align themselves with domestic protectionists who want to build economic walls along the US border.
Unfortunately, this turn inward has coincided with a complacency here in Canada about our most important bilateral relationship. Even the best of friends can't afford to take each other for granted, or they will soon drift apart.
As Canada's relationship with the US has moved from being strategic to being transactional, American leaders are increasingly looking at each issue as a standalone, and they are making their decisions, not on what is in America's long-term best interest, but on where they can find immediate political advantage at home.
We need to rebuild that strategic relationship. It's vital for Canada to be seen as bringing solutions to the major problems confronting the United States, as opposed to simply pleading to be exempted from the latest punitive measure. We need to demonstrate, both in Washington and far away from it that Canada should be treated not as a problem, but as a partner.
Perrin Beatty, outgoing president and CEO of Canadian Chamber of Commerce. REUTERS/Rebecca Cook
You recently said: “Canada is increasingly being viewed by our partners in the region as a well-meaning but unserious player on the international stage." In what ways has Canada become an "unserious player," and what needs to happen to change that reputation?
Perrin: Unfortunately, we have come to see ourselves as a moral superpower whose job is to tell everyone else what they are doing wrong. And we expect them to be grateful to us for it. Too often, we are driven more by a desire for good feelings than for good results. In contrast, other countries are both faster-moving and more engaged in the issues their interlocutors consider most important. The consequence is that, where the US and other countries used to ask, “How do we get the Canadians involved?” their question is now, “Should we inform the Canadians?” The fact that we learned about the AUKUS agreement at the same time as everyone else is just one example.
The Russian invasion of Ukraine two years ago should have been seen by Canada as world-changing, and our response should have been both meaningful and swift, with us marshaling what we have to offer in defense of the democracies. For example, Canada has an abundance of the “three F’s” – food, fuel, and fertilizer – and critical minerals that are essential to global stability. What we lack is the infrastructure, the vision, and the will to bring them to global markets to give countries an alternative to sending dollars to despots. This could be Canada's moment, but only if we are prepared to seize it.
You were a former defense minister under Mr. Mulroney, so you know about dealing with a dangerous world. But now, everyone is looking at the impact of the US election. Are we headed into a period of instability, conflict, and the dismantling of both trade and defense alliances that have been built since World War II?
Perrin: The problems we face, from global poverty to pandemics to wars to global climate change, all require an effective, coordinated international response. Instead of that, we are witnessing countries turning inward on themselves, as well as the increasing ineffectiveness of global institutions like the UN, the World Trade Organization, and the WHO in actually resolving issues that go to our very survival.
When I was privileged to be in government, there was a sense that, when the leaders of the G7 – leaders who included Reagan, Thatcher, Mitterrand, Kohl, and Mulroney – came together, problems would be resolved. Today, when international meetings take place, you get the feeling that our problems are bigger than our leaders. In fairness, the world is a much more complex and dangerous place today, but that's precisely why we need leaders whose vision, determination, and morality are up to the challenge. As your question suggests, we're at a crossroads that will determine whether we will be able to maintain the institutions and strategies that have guaranteed democracy, peace, and prosperity since the Second World War. The stakes have never been higher.
AI is both a transformative opportunity and a destabilizing threat. What is your view of how will impact business?
Perrin: Like businesses the world over, Canadian businesses will be transformed either for the better or for the worse by AI. AI, like the nuclear genie, can't be put back into the bottle. Our challenge is first to understand it, then to decide how to mitigate its potential bad effects, and then to determine how to unleash its positive aspects. In this instance, the technology is developing at a pace that far outstrips our capacity to understand it and manage it well. However, calls to initiate some sort of a standstill until we have thought these things through are naïve and unworkable; all that would happen is that the unscrupulous players would widen their lead.
The challenge for Canadian policymakers is how to successfully work with others on coordinated policies that limit the dangerous aspects of AI without denying its benefits to our industry and our society.
If there is a second Trump Presidency, what should Canada expect from the 2026 review/renegotiation of USMCA trade deal?
Perrin: Many Canadians expected that when Joe Biden became president, he would reverse the Trump protectionist measures. However, that assumption overlooked the fact that, in the past, Republicans were more in favor of free trade, while Democrats were more protectionist. In fact, the Biden administration has actually deepened some of the protectionist policies initiated by Donald Trump.
The danger is that the election will be a contest between two candidates trying to demonstrate who is more protectionist. Canadians must respect the right of US voters to determine their own government, just as we would insist on the Americans respecting our rights, but we need to demonstrate that it is in Americans' self-interest to foster a stronger relationship with their closest neighbor and best friend. And we must do that, not by special pleading, but by coming up with solutions to problems.
Finally, what is the best-case scenario for the US-Canada relationship in terms of economic prosperity and security? Is there a way to slalom through the protectionism, AI disruptions, political polarization, climate challenges, and conflicts and see a time of increased joint prosperity?
Perrin: The best-case scenario is that we restore a strategic partnership with the world's greatest superpower. We've let the relationship slide for too long, and it won't be easy to regain that position. But I believe it can be done if we muster the vision and the will to make it happen.
Last thing: You worked for Brian Mulroney, who recently passed away. He was the architect of the North American Free Trade Agreement and worked closely with Ronald Reagan. What lesson can today’s leaders learn from that time?
Perrin: As Canadians commemorate Brian Mulroney, our leaders should ask what they can learn from Canada's last great transformative prime minister. Brian Mulroney understood that governments don't create jobs and prosperity, businesses do. He also knew that the best way to solve problems was not to shut people out but to bring them in.
It's impossible to say exactly what policies a different government would follow, but what we do know is that our economy and our country are under severe strain today. The leader history will remember best will be the one who brings people together again in what remains the most fortunate country on the face of the globe.
Graphic Truth: US trade deficit with Canada & Mexico
The US trade deficit in goods with Canada and Mexico reached an all-time high in 2023 of over $220 billion — and despite what you may hear from certain former US presidents, that’s a good thing. Yes, more money than ever is leaving the US and going to the neighbors. And in exchange, American consumers get more stuff from their neighbors than ever before and for better prices than they can find at home.
Team Canada, Part Deux
Justin Trudeau’s “Team Canada” ventured south this past week to remind Americans that their trade relationship with the Great White North is vital. The new effort was announced by Trudeau in January, signaling a determination to prepare for the outcome of this year’s presidential election. His government, you’ll recall, was criticized in 2016 for being unprepared for Donald Trump’s win. But the Team Canada approach to NAFTA renegotiation was widely seen as a success since it led to the USMCA in 2020, which will be reviewed by all the parties in 2026.
The indefatigable Innovation Minister François-Philippe Champagne was accompanied on his weeklong trip by Mary Ng, minister of international trade, and Kirsten Hillman, Canada’s ambassador to the US. They traveled to Michigan, Ohio, Georgia, and Washington, DC, meeting with politicians and talking about the importance of cross-border supply chains.
Americans are listening, Champagne said, “because it’s about jobs, millions of jobs.”
Still, the prospect of a renewed trade war with the United States remains worrying for Canada, and Trudeau’s team is no doubt hoping that Biden’s poll numbers continue inching north.Graphic Truth: Trade across the pond
The UK has struggled to rebuild its trade relationships with partners across the pond post-Brexit. Since leaving the EU in 2020, new trade agreements with Canada or the US have stalled, forcing it to accept many of the same terms it had under the EU.
For Canada and the UK, the terms of their EU agreement expired at the end of 2023, leaving them in uncharted territory. Trade talks broke down over disagreements on cheese, beef, and the automotive industry. The two retreated to the EU terms after negotiators walked away from the table, but Canada still slapped a 245% tariff on British cheese, and the UK refused to budge on restricting hormones in beef, essentially barring both industries from each other's markets.
The UK has been striving and failing to secure a free trade agreement with the US. Last week, the UK’s business secretary blamed Washington’s reluctance to sign a free trade agreement for his country’s failure to hit post-Brexit trade targets. This was telling: Being free to forge its own free trade agreements was a major argument for Brexit. But the US is prioritizing specific deals in areas like semiconductors and critical minerals, and after negotiations fell apart with the UK in December, the Biden administration said it would not revisit the topic until after the 2024 elections.Seaway strike hits both sides of the border
A strike by 361 workers at the St. Lawrence Seaway is impeding trade in Canada and the United States. Workers from five Unifor locals are asking for better pay amid the affordability crisis and have cited recent wins by autoworkers as inspiration.
The walkout, which began Sunday, affects the Seaway system connecting the Great Lakes to the Atlantic, facilitating trade from provinces and states, including the Canadian prairies and US Midwest, as well as Ontario, Quebec, and northern states such as New York.
The range of commodities stalled is vast, including grain, soybeans, barley, iron, steel, cement, stone, oil, petroleum products, and more. With most of the Seaway’s locks and ports closed for business, Bruce Burrows, CEO of the Chamber of Marine Commerce, says the strike will cost the economy upward of CA$100 million a day. Goods are being held up, ships backlogged, and trade shuffled — where possible — to trucks and rail.
The Seaway itself is a major source of revenue and jobs across the US and in Canada, accounting for over 240,000 positions and roughly CA$47 billion a year. US industry is already saying the strike has cost jobs in the country and expressed frustration at the slow bargaining process.
Canadian Labor Minister Seamus O’Reagan is hesitant to consider back-to-work legislation but is pressuring the two sides to reach an agreement on their own at the bargaining table. He says he’s in contact with US Transportation Secretary Pete Buttigieg, whose team is tracking the situation.
A recent strike by port workers in Vancouver lasted nearly five weeks. With harvest season in full swing, much of the produce that would normally be shipped along the St. Lawrence Seaway is at risk. That’s putting increased pressure on both Seaway management and the union, which resume talks on Friday, to strike a deal.
The Graphic Truth: Shipping volume through the Russian Arctic
Climate change has opened Arctic shipping channels that can be navigated by freighters without icebreakers for several months a year – and year-round with icebreakers. Canada and Russia dominate the region, but Moscow is much more aggressively exploiting the economic opportunities there.
Taking the high-latitude route over Russia can shave 5,600 miles off a voyage from Europe to China, and as sea ice melt accelerates, the economic viability grows. Total shipping volumes along the Arctic route rose steadily between 2019 and 2020, and immediately after Russia invaded Ukraine, despite the frigid March conditions, the Arctic corridor saw its highest-ever volume of shipping in 2022.
Canada and the United States, meanwhile, have faced criticism for underinvestment in Arctic security. Canada, for example, lacks sufficient early warning systems to detect missile attacks coming over the North Pole — which is dangerous, given that the Arctic is essentially split between Russia and NATO countries.
We look at trade passing through the Russian Arctic corridor above.
Hard Numbers: German far right comes up short, Ukraine dreams of drones, a space rock arrives on earth, world trade slows
54.9%: In an upset, Jörg Prophet, of the far-right Alternative for Germany party, lost a promising bid for mayor of Nordhausen the office on Sunday, as incumbent Kai Buchmann kept his job, winning 54.9% of the vote. The AfD has been polling at 21.5% nationwide, but has even more support in Thuringia, which is where Nordhausen is located.
$1 billion: Ukraine wants a drone army, and it’s looking to spend more than $1 billion to get one. Drones, Ukrainian leaders say, are great for reconnaissance, dropping bombs, and self-exploding on impact – all useful things in Kyiv’s war of defense against Russia. But what are drones not so good at? Holding territory.
6.21 billion: That’s how many kilometers (3.86 billion miles) a NASA capsule traveled to deliver the largest-ever asteroid sample to American soil. The capsule landed in a Utah desert on Sunday. Scientists hope the sample will help us better understand how the solar system formed and why life occurred on Earth.
3.2%: World trade volumes dropped 3.2% in July compared to the same month last year — the steepest decline in almost three years. High inflation is crushing demand for exports, while the resulting interest rate hikes are choking off credit, fueling fears of a global economic slowdown.