OTTAWA—The Trudeau Liberals are giving tacit support to Ontario Premier Kathleen Wynne’s plan to introduce legislation that would allow retaliation against U.S. states that adopt Buy American policies.
The federal enthusiasm for Wynne’s shot across the bow of the Trump administration’s trade policy contrasts sharply with broad warnings Feb. 7 that Ontario’s move will hamper Canada’s ability to successfully renegotiate a new North American Free Trade Agreement.
Trade analysts on both sides of the 49th parallel said Wynne’s plan would only escalate the growing anger towards Canada that seems to be taking hold in the Trump administration as the seventh round of NAFTA talks approaches at month’s end.
They said it undercuts the charm offensive that the federal Liberals have been mounting for months on U.S. lawmakers in Congress, state governors, local officials and business leaders to sell the economic merits of NAFTA, a deal President Donald Trump has repeatedly threatened to tear up.
International Trade Minister Francois-Philippe Champagne said in an interview that Wynne’s decision underscores the need to reduce barriers to trade and make the Canada-U.S. border “as thin as possible.”
“Since the beginning we have been making sure people understand south of the border that a decision on one side would have an impact on both sides of the border,” Champagne said after testifying before the Senate trade committee on Canada’s decision to join a reconstituted Trans-Pacific Partnership—minus the U.S.
“So I think any initiatives that reinforce the point that a decision on one side of the border would have consequences on both sides is sending a message that we need to work this out together.”
Champagne’s portfolio includes all trade deals except NAFTA, but his top priority is diversifying Canada’s trade portfolio into China and the rest of Asia, Europe and Latin America to offset any potential economic losses should the continental trade pact implode.
A spokesman for Foreign Affairs Minister Chrystia Freeland, the minister overseeing NAFTA, demurred when asked whether the government found Wynne’s decision helpful, instead reiterating Canada’s criticism of Buy America provisions.
“The U.S.-Canada economic partnership is grounded in shared security and prosperity, is balanced and fair, and supports good-paying jobs in both countries. Expansion of Buy America provisions puts these mutual benefits at risk,” said spokesman John Babcock.
“Local content requirements negatively affect our cross-border supply chains, put jobs in Canada and the U.S. at risk, distort investment, and result in higher prices and fewer funded projects.”
Wynne’s decision was panned by Ontario opposition parties as well as Canadian and American trade experts.
Whoever is advising the government to take a tough stand with the US is making a big mistake by underestimating the Trump administration, said Dan Ujczo, a trade lawyer at Dickinson Wright who has worked with both the Canadian and American governments.
“At the federal and provincial levels, it’s great Canadian politics to take on President Trump, but I don’t think it’s necessarily constructive or the type of creative solution that we need right now,” said Ujczo.
The Buy America problem could be solved at the state and provincial level with an agreement to open up each other’s markets for reciprocal access. Such a deal could unite Ontario, Quebec and the eight U.S. Great Lakes states, he said,
“It would be a much better use of Premier Wynne’s time to be setting up those reciprocal relationships with states and provinces as opposed to finger-wagging for electoral politics.”
Cyndee Todgham Cherniak, trade lawyer at LexSage in Toronto, said Wynne’s move is ill-conceived because Ontario is far more protectionist than New York State on procurement. She said Canada should pursue the issue in the World Trade Organization.
”Why not criticize them there—as opposed to starting a trade war Canada can’t win?”
Wynne’s timing couldn’t have been worse given that Prime Minister Justin Trudeau is in Chicago and bound for California this week to promote trade ties, said Eric Miller, president of the Washington-based Rideau Potomac Strategy Group,
“To have a premier who is now directly threatening actions against New York State and mobilizing provinces to do this, it is not necessarily helpful to the broader Canadian cause,” said Miller, who worked for the federal government on the 2009 auto bailout.
“It won’t help the relationship. I’m not sure that Mr. Lighthizer is feeling especially positive towards Canada at the moment.”
A U.S. lawmaker who attended a meeting with Robert Lighthizer on Wednesday said the trade czar expressed frustration with Canada in the NAFTA negotiations, and floated the idea of concluding a quick agreement with Mexico and dealing with Canada later.
Toronto-based trade lawyer Lawrence Herman said Wynne’s decision shows that Canada needs to take a tough stand in the face of American demands on NAFTA .
“Rather than jeopardizing the NAFTA negotiations, this reinforces the importance of having a deal to curtail these actions and keep markets open on both sides of the border.”
—with a file from Alexander Panetta in Washington