More bases needed to maintain Canada-US relations, summit hears

TORONTO — More needs to be done to maintain North American relations in an increasingly competitive and volatile world, and as the U.S. election approaches, attendees at a conference in Toronto heard Tuesday.

Canada needs to lay a stronger foundation today to avoid being caught off guard again by trade deal talks, said Darryl White, chief executive of BMO, which co-hosted the US-Canada summit with Eurasia Group.

“It’s fair to say that the business community and the public were almost caught off guard when NAFTA was revised,” White said.

“We have to be more prepared this time.”

He said Canadians do not understand the level of U.S. opposition to the deal and that it is essential to broaden support for the trade relationship.

“Private and public sector leaders must ensure that the Main Street benefits of deeper partnerships in an increasingly complex world are well understood.”

The importance of maintaining full access to the US market is underlined by how much stronger it is today.

Frances Donald, chief economist at Manulife Investment Management, noted how far the U.S. economy deviates from Canada’s to the point where it is “problematic.”

U.S. retail sales are still growing, while they are falling in Canada Despite a growing population, GDP per capita growth has declined for the past seven quarters in Canada and productivity continues to lag the U.S. to the point where it is 40 years ago.

“The U.S. and Canadian economies are divergent and they diverge quite substantially,” Donald said.

But the US ambassador to Canada, David Cohen, went to some length to reassure attendees that no seismic shift is imminent as the North American trade deal is due for renewal in 2026.

“It’s not a renegotiation,” Cohen said.

“It is a review … there is no interest in the United States in renegotiation.”

There is concern that those expectations could change significantly if Donald Trump is elected, but Cohen said there are institutional forces that don’t change with a single election that should help maintain some stability.

Trade deals also need to be adjusted to make sure they do enough for workers, said Elizabeth Baltzan, senior adviser to the US Trade Representative.

She said globalization’s tendency to simply remove trade barriers has shown its limitations and there is more need to consider geopolitical risks and market concentration, as seen with China’s dominance in manufacturing.

“As we look at how trade policy is changing, we owe it to our democracies, to our people, to make sure policies are responsive to our lived experiences.”

It is important that Canada, the US and Mexico figure out together how to respond to non-market policies and non-democratic countries, she said.

“We have not fully considered these risks, so now we need to have a trade policy that responds to these challenges.”

But as Canada looks to potential trade negotiations, limited defense spending could be a problem, especially if Trump is elected, several panelists said.

Foreign Affairs Minister Mélanie Joly tried to reassure those gathered that Canada has heard criticism and plans to step up spending.

“Canadians now understand that the world has changed and we need to invest more in defence.”

In April, the federal government announced plans to see spending reach 1.76% of GDP by the end of the decade, although this is still below the 2% NATO pledge.

Although the ongoing deficit is a source of tension with some US politicians, Joly said Canada aims to further boost spending.

“I’m convinced we can be on the path to two percent,” she said.

The importance of defense spending comes as the world faces conflict on multiple fronts, said Ian Bremmer, chairman and founder of the Eurasia Group.

“We are in a materially more dangerous place than we were a year ago.”

Bremmer said he thinks it’s slightly more likely that Trump will be elected, but it’s not quite clear yet. He said the foreign policy implications of a Trump presidency might be less than expected because his cabinet might be well stocked with experienced people, but it could lead to more authoritarianism in the U.S. that could affect Canadian systems .

He said Robert Lighthizer, Trump’s last-round trade negotiator, would not be easy to deal with, but it would be possible for Canada to work with him.

“He will be treated professionally by the Canadians and I think that will work.”

He said that with all the uncertainty in the world, it is all the more important to maintain Canada-US relations.

“This relationship is no longer just pleasant, it is increasingly strategically essential.”

This report by The Canadian Press was first published on June 11, 2024.

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Ian Bickis, Canadian Press