Bill Owens: Trump's Canadian Teeter-Totter

Mar 31, 2017

We are all familiar with the children’s playground equipment known as a teeter-totter. As I pondered Mr. Trump’s Canadian policy, that toy came to mind. During the presidential campaign, Mr. Trump touted the fact that he would tear up NAFTA or renegotiate it. Following the election, he doubled down with little or no substance nor indication as to what his actual concerns or plans were. The selection of Mr. Ross as secretary of commerce and Mr. Navarro as a trade advisor brought a decidedly hostile view of trade agreements to the administration.

Post-inauguration, Mr. Trump started off by approving the Keystone pipeline, allowing it to move forward, which is a positive for our relationship with Canada, but does pose environmental concerns to many. We then had the visit of Prime Minister Trudeau to the White House in early February, and the subsequent call between Trump and Trudeau on February 23, both of which seemed to demonstrate that the relationship was on a positive and fruitful tack. Canada went from sitting on the low end of the teeter-totter, on the ground, to being at least level. There was less commentary about tearing up NAFTA, and more commentary about repairing NAFTA. There was mumbling in the background, of course, from many who believed that the outcome would be new bilateral agreements between the United States and Canada, and the United States and Mexico. This obviously would portend the termination of NAFTA.

There has been push-back in Congress on the Trump administration’s trade agenda in general, and in particular, growing concern about NAFTA. Many states, and thus, many members of Congress, have experienced substantial job creation since 1994 related to NAFTA trade activity. These facts have been often repeated by Canadian members of Parliament and the Trudeau government. There is no doubt that jobs have been lost, but on balance, a strong argument can be made that overall NAFTA has had positive effects.

House Republicans are still pushing the border tax, but my sources tell me in Washington that several senators have indicated the border tax is dead. This then raises some very difficult questions about overall tax reform, since the border tax was the linchpin for Republicans to reduce the corporate tax rates. So the question obviously is, where do they go from here? From a Canadian trade perspective, this is clearly good news. This raises Canada to the upside of the teeter-totter.

The immigration issue is rumbling around as well. Canadians seeking L-1, H1B and TN visas are “job creators” in the US. Will their visas be curtailed or slowed down? On March 16, 2017, an article in the Detroit Free Press reported that nurses holding TN visas were being challenged by CBP for being overqualified. Nurses have received TN visas for decades. However, an RN who holds advanced training or education may now be required to seek an H1B visa. Contemporaneously, USCIS is slowing the H1B process, so one can only conclude this change has been implemented to slow down immigration.

We also have heard reports that CBP officers are increasingly reviewing cell phones and laptop computers in an effort to obtain information. If, in fact, this practice has expanded, then this is a new wrinkle. If the reports are inaccurate, then there is really nothing to get too terribly excited about—unless it’s your cell phone or laptop. At this point, Canada is tilting back towards the ground on the teeter-totter.

Some recent developments, including statements from Wilbur Ross, comments made at the confirmation hearing of Mr. Lighthizer, as well as Mr. Trump’s first major policy statement on foreign trade on March 10, leave Canada firmly on the downside of the teeter-totter. A main focus of the March 10 policy statement was agricultural exports, as it stated “trading partners maintain high tariffs and other non-tariff barriers which block market access to US goods and agricultural exports.” This focuses renewed attention on Canadian dairy price supports. It also lays out a more aggressive approach in holding our trade partners to fulfilling their obligations under existing agreements. These concepts seem fair and reasonable from any perspective.

Mr. Ross has indicated that he intends to commence negotiations on NAFTA late in 2017, and anticipates that it will take about a year to complete those negotiations. It is clear from his language that he foresees major changes in the relationship, with the focus on the automobile industry and agriculture. A further step in that direction occurred at the Robert Lighthizer confirmation hearing on March 14, in which members of Congress urged a “get-tough approach with Canada,” with Mr. Lighthizer focusing on softwood lumber, dairy and intellectual property. Senator Hatch indicated that a more aggressive screening approach for cargo should be adopted, to look for counterfeit and pirated products. There was continued criticism of the border tax by Senator Toomey.

The Province of Quebec announced on March 17, 2017, that it would engage in significant interactions with New York State legislators in an attempt to remove the Buy America provisions in Governor Cuomo’s proposed budget. This issue, which previously has been primarily the domain of the US federal government, poses significant negative barriers to New York-Quebec trade.

As I conclude, the teeter-totter is tilting down on the Canadian side. In providing advice to Canadian businesses looking to engage in US trade, first we need to watch the teeter-totter, then the exchange rate, as getting to where we’re going may take some months. This administration likes riding the teeter-totter; however, for most adults, exiting the playground would be a refreshing change.

Mr. Owens is a former member of Congress representing the New York 21st and a Senior Advisor to Dentons.

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