According to the Oxford English Dictionary, the word ‘tweak’ can mean “make fine adjustments” or, more ominously, “pinch and twist sharply; pull with a sharp jerk.” It remains to be seen which of these definitions President Trump had in mind when he committed to “tweaking” the bilateral trade relationship that the United States enjoys with Canada. As a former ambassador for trade negotiations and the deputy chief trade negotiator for the Canada-US free trade agreement, Hill+Knowlton Strategies’ Principal Advisor Gordon Ritchie recommends being prepared for both.
Among the perennial issues which American stakeholders and officials see arising from, or left unresolved by, the original Canada-US FTA negotiations and the subsequent NAFTA negotiations are the procurement provisions of NAFTA which allow for Canadian companies to bid on U.S. government contracts; the dispute resolution mechanism; foreign investment thresholds in the telecom and financial services sectors; softwood lumber, supply management for dairy; as well as the provincial alcohol/liquor regimes. Any or all of these issues could be subject to ‘tweaking.’
Wrestling with the elephant… again
In Wrestling with the Elephant: The Inside Story of Canada-US Trade Wars, Mr. Ritchie noted: “With the Americans, it is never over until it is finally over…Just as the pen was poised over the paper to ratify an agreement, the American negotiator would demand just one more ‘final’ concession. Then, another. Then another final, final point that required ‘clarification,’ always in the Americans’ favour. I used to joke that they must all work from a negotiator’s manual that laid out…never, never let yourself be accused of failing to squeeze out the last drop of advantage.”
Anyone who believes that President Trump’s strategy will be different need only read his writings on negotiations. For example, in Think Big: Make it Happen in Business and Life, Mr. Trump wrote: “To be super successful you have to use leverage to extract top dollar for what you do. You’ve got to threaten to inflict some pain before you get some gain. In every successful real estate deal I have had to make my opponent feel the pain of what he would lose if he did not do the deal with me, and the pleasure of going forward on the deal and giving me what I want.”
Notwithstanding the assurances that President Trump offered during his joint press conference with Prime Minister Trudeau in Washington, it is important to recognize that many ‘tweaks’ would require substantive changes to the existing trade agreements. This is particularly true where the Trump Administration continues to suggest that it will make significant, even dramatic, changes to the NAFTA as it relates to Mexico. Once Canada is brought to the negotiating table, and the NAFTA text is ‘reopened’, various special interests could throw new (or old) issues into the mix.
‘Steely’ determination of Trump negotiations
In another passage from Think Big, Mr. Trump discussed his view that the United States should use the “greatest deal-makers in the world” from the private sector to conduct their negotiations instead of “well-meaning but naïve academic people…who do not know what they are doing in tough real-life situations.” He then added: “They have never faced tough, winner-take-all, fight-to-the-death negotiations against ruthless and vicious adversaries. If the government used our best negotiators, it would solve a lot of our problems and the United States would come out on top.”
When President-elect Trump nominated Wilbur Ross to be his Secretary of Commerce, his formal announcement read in part: “Wilbur Ross is a champion of American manufacturing and knows how to help companies succeed. Most importantly, he is one of the greatest negotiators I have ever met, and that comes from me, the author of The Art of the Deal.” More recently, President Trump said Secretary Ross would represent the U.S. in the NAFTA negotiations “along with a lot of really great people…we’ve really assembled tremendous talent, some of the best in the world.”
At his confirmation hearing before the U.S. Senate’s Commerce Committee, Secretary-designate Ross testified that he would work collaboratively and collectively on trade policy with the U.S. Trade Representative nominee, Robert Lighthizer, as well as the White House Director of the National Trade Council Peter Navarro. It’s less clear what role will be played by Trump transition advisor Dan DiMicco. On NAFTA specifically, Ross testified that “all aspects of NAFTA will be put on the table,” adding, “you don’t have a deal on anything until you have a deal on everything.”
Secretary Ross, USTR Lighthizer, and Mr. DiMicco are all veterans of the intensely competitive global steel industry wars, and, with Dr. Navarro, have strongly held views with respect to how the United States should deal with its major trading partners. In September 2016, Secretary Ross and Dr. Navarro co-authored an analysis of the Trump campaign’s economic plan in which they identified the principles of the ‘Trump Trade Doctrine’ as being: “any deal must increase the GDP growth rate, decrease the trade deficit, and strengthen the U.S. manufacturing base.”
The Ross/Navarro study contains only a single reference to Canada, but it is, significantly, within the context of how the United States can address its trade deficit: “Consider that roughly half our trade deficit is with just six countries: Canada, China, Germany, Japan, Mexico, and South Korea. If we look at the bilateral relationships of America with each of these countries, improvement in our trade balance is clearly achievable through some combination of increased exports and reduced imports, albeit after some tough, smart negotiations – an obvious Trump strength.”
Of course, President Trump will have the final say on any ‘tweaks.’ In The Art of the Deal, he wrote: “My style of deal-making is quite simple and straightforward. I aim very high, and then I just keep pushing and pushing and pushing to get what I’m after.” Once Secretary Ross is confirmed, NAFTA will move forward and escalate quickly. Stakeholders must therefore engage with officials in both countries on an urgent basis. As Canada’s Ambassador to the U.S., David MacNaughton, told the media, while he’s cautiously optimistic “you never know in these things.”