Why Trump's desire for a protectionist wall threatens more than NAFTA: Don Pittis

Completing Donald Trump's Mexican border wall seems as far away as it ever did. But some Canadian trade experts fear the protectionist presidentmay be succeeding in building trade walls that could weaken the entire global economy.

The protectionists haven't won yet. And if the current U.S. administration really wants to throw a wrench into the gears of global free trade, it faces obstacles from both inside and outside its borders.

As delegatesgather in Montreal this week for the sixth round of the NAFTArenegotiation demanded by Trump, no one is expecting a sudden resolution. Instead, success will be measured by whether Canadians can prevent the talks from collapsing.

Learning fromBrexit

After stepping out of a two-day meeting on trade and climate change in Ottawa,OonaghFitzgerald warns of the dangers of walking away from any negotiation.

"As long as you keep the conversation goingthere's the possibility you can be more optimistic," says Fitzgerald, a research directorwith the Centre for International Governance Innovation, a think-tank based in Waterloo, Ont. "The conversation's still open and you're not dealing with the fallout of an abrupt decision that has huge implications."

Drawing a line in the sand and standing on principle can be politically popular, as Trump has repeatedly shown. Last week, for example, the U.S. president seemed to say he wantedadeal for Mexico to pay for a border wall included in the current NAFTAtalks.

For Canada,two of the biggest perils include a Trump-imposed March deadline to complete the renegotiationand his repeated threats to end the talks and scrapNAFTA.

"I think the example of Brexit is apposite right now," Fitzgerald says. "Because you can see that once [you've made]that kind of decision that you're going to move out of an agreement ... you're set on a path and you have to deal with all those consequences."

'Openly protectionist'

To former Canadian international trade adviser Meredith Lilly, the unique situation in the current round of talksis that, for the first time, one of the three negotiating parties is opposed to the principles of free trade.

"The U.S. current administration is openly protectionist," saysLilly, nowSimon Reisman Chair in Trade Policy at Ottawa's Carleton University. Reisman was Canada's chief negotiator for the very first Canada-U.S. free trade deal in the 1980s.

Including a provision in NAFTAthatMexico would payfor the U.S. border wall is evidently a non-starter for the Mexicans.

That, plus attacks on Canadian exports of lumber,wood pulp and aircraft, as well asimpossible requirements on sourcing auto parts in the U.S., seem aimed at exasperatingCanadian and Mexican negotiators.

Did Trump blink?

"I don't thinkanyone is going to withdraw in the next round of talks," Lilly says. "I would be shocked if that occurred."

She takes it as a positive sign that among his contradictoryremarks and tweets,Trump has reportedly conceded that talks will continue past his previously specifiedMarch deadline.

"I have my doubts we are near the end. I think we're right in the middle," she says. "I think to some extent the U.S. may have blinked."

Lilly insists Canada is not without allies in trying to keep the talks alive.

"There are many, manygood reasons that disrupting NAFTAis bad for American business, and it's American business who can make that case most strongly."

A return to power politics

One of the things yet to be resolved in the NAFTA talks is the dispute-settlement process.

Armand deMestral, an experiencedspecialist in international trade law,fears U.S. Trade RepresentativeRobert Lighthizerwants to turnthe clock back to a time when the U.S. wasn't bound by trade rulings at either NAFTA or the World Trade Organization.

"Power politics played a broader role," says de Mestral, professor emeritus at McGillUniversity in Montreal.

But in a world where other trade powers, notablyChina and Europe, have enormous and growing clout, power politics leads to conflict. An agreed system forsettling disputes is crucial for avoiding a new round of escalating tit-for-tat trade battles of the kind that many blame for the Great Depression.

While Trump and Lighthizermight be willing to sacrifice long-term trade peace for the short-termbenefits of rebuilding their own domestic industries,de Mestralsays they representonly a single faction in a U.S. government committed to free trade.

Building walls

Like business, he says, the U.S. Congress broadly favours both NAFTA and the WTO, and it'snot clear Trump could kill either of those deals without the support of both theupper and lower house.

Of course, theremay be ways around that legislative requirement. In the case of the WTO,for example, the Trump administration has stopped appointing members to the body that hears trade appeals. Only three of the seven U.S. spots are filled,and that number will soon get even smaller, says de Mestral.

• Trudeau optimistic NAFTA can be saved, brushes off contradictory U.S. signals

Meantime, he says the best strategy for Canada is to keep talking as long as possible.

"There are people asking, 'What if the U.S. goes crazy?'" says de Mestral, imagining a moment when Trump succeeds inwalling his country off from the rest of world trade.

"Do we simply say, well, for the rest of us it's business as usualand we'll hope that in three years we'll be back with theU.S. at the table?"

He pauses thoughtfully. "But that's speculation."

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