Donald Trump became the 45th president of the United States on Friday and his inaugural speech caused great gnashing of teeth and rending of garments in Ottawa and other national capitals around the world. Canadian Prime Minister Justin Trudeau has already shuffled his cabinet,
The theme of Trump's inaugural speech, like the theme of his campaign and the theme of his administration is simple: America First.
From this day forward, a new vision will govern our land. From this moment on, it’s going to be America First. Every decision on trade, on taxes, on immigration, on foreign affairs, will be made to benefit American workers and American families.
– President Donald J. Trump
What does America First mean for Canada?
Well, first let's understand what it doesn't mean: it doesn't mean much change. The US approach to foreign affairs and trade has always been "America First." Trump is just using very blunt language.
The fact is, the North American Free Trade Agreement – the agreement of greatest concern to Canada's government – is a great deal for US companies and workers. Under NAFTA, the US economy has more than tripled and US GDP has grown by $80 Billion as a result of the agreement, according to the Council on Foreign Relations. The Wharton School of Business quotes the Peterson Institute for International Economics saying the US is "$127 Billion 'richer' each year thanks to 'extra' trade growth fostered by NAFTA." NAFTA-enabled trade creates 200,000 US export-related jobs each year – jobs that pay on average 15% to 20% more than the manufacturing jobs the US lost under the same agreement, according to Wharton.
In the years since NAFTA, U.S. trade with its North American neighbors has more than tripled, growing more rapidly than U.S. trade with the rest of the world.
– Council on Foreign Relations
Three things Trudeau must do now
The reality is, the US has always acted out of self-interest. As, it should. If they don't have their own best interest at heart, who will? Well, probably, Canada. Canadian Prime Ministers often seem to spend more time worrying about the rest of the world than they do about Canadians. Pierre Elliott Trudeau, in his latter years as Prime Minister, appeared to grow bored with domestic politics and focused his energies on foreign affairs and global diplomacy. His son, too, has shown more interest in global statesmanship than Canadian economics. He's spent his first year in office announcing millions and billions of dollars in Canadian overseas investment on international aid and development initiatives. Here's three things he needs to do now:
1. Put Canada First. It's time for Trudeau to go beyond a cabinet shuffle and use Trump's brutally plain-spoken focus on US self-interest as an opportunity to take a similarly honest and entirely self-interested approach to trade and diplomacy with the world's largest economy. Canada should look after itself first. Now's the time.
2. Use the leverage we've got. Canada is not as big, rich or powerful as the US. But, we're not without some leverage. We should use every ounce of it. Any protectionist move by the US to throttle down trade between Canada and the US will hurt the US and cost it millions of jobs. Trudeau should make sure both he and Trump are thoroughly familiar with this leverage, and he shouldn't be afraid to use it. Trump respects tough.
- Eight million US jobs depend on trade with Canada, according to the Wharton School of Business. (Nine million, according to the Canadian government.)
- Canada is the US's second largest goods trading partner, according to the US Trade Representative and its goods and services trade surplus with Canada was $11.9 Billion in 2015.
- Canada is the largest consumer of US export goods in the world. ($280 Billion in 2015) Exports to Canada account for 18.6% of all US exports in 2015.
- Canada is the top customer for 35 US states.
- Even when the US buys goods from Canada, 25 cents of every dollar it spends goes directly back to US workers who helped produce those goods.
3. Prioritize non-US trade growth. Not surprisingly, since we share an 8,900 km border, the US is Canada's largest trading partner – accounting for 75% of our exports and 2/3 of our imports, according to the Fraser Institute. Our best interest, however, would be served by reducing our reliance on the US economy where we can. The Harper government put a priority on developing international trade agreements to broaden our trading relationships. Trudeau should go even further, setting a target for non-US trade and tuning his foreign and domestic policy to achieve it.
A crisis is a time of risk and opportunity. This is such a time. How Prime Minister Justin Trudeau handles this crisis will determine his political fate, his future legacy, and Canada's economic wellbeing. He should seize this opportunity to deal with a US president who speaks his mind, talks bluntly and prides himself on deal-making. This is the time to mirror that behaviour, earn Trump's respect, and improve Canada's economic position in North America and the world.