Everybody is a trade minister in Mark Carney’s Cabinet.
Donald Trump’s return to the presidency has ripped up decades of Canadian goodwill toward deeper economic integration with the United States. Nearly every senior minister is now involved in managing the fallout of America’s use of trade as a weapon — a situation the prime ministers office is treating as an emergency.
It’s a moment of existential crisis for Canada, a senior Carney government official told POLITICO. Waiting out the Trump administration isn’t an option, the official said, arguing that what’s happening in the United States reflects a generational shift — not a temporary disruption — and that returning to a policy of closer integration with America would be foolish. They were granted anonymity to speak freely about private discussions.
The urgency has translated into sweeping marching orders for Cabinet members. “It’s all hands on deck with trade diversification,” International Trade Minister Maninder Sidhu said, as Carney pushes ministers to fan out across sectors to reduce Canada’s dependence on its largest (and now most volatile) trading partner. “This is why you're seeing multiple ministers in trade.”
Two-thirds of Canada’s economy is powered by trade, and roughly three-quarters of its exports flow to the U.S. It’s a C$1.3 trillion annual relationship that was celebrated on both sides of the border in good times but has become a source of leverage for America, especially with the Trump administration expected to continue squeezing Canadian industries with tariffs.
Europe is Carney’s top priority for deepening existing free-trade relationships. But closer integration with the European Union is a long game, and Canada has no interest in joining the bloc, according to the official, pushing Ottawa to explore other regions.
“Trade diversification is nothing new. People have talked about this for decades,” Sidhu said. “The difference here is other countries' willingness to look at Canada as a reliable, stable trading partner,” he added, saying Trump has had a bigger influence on Ottawa’s strategy than any difference in trade philosophy between Justin Trudeau and Mark Carney.
Canada’s governing Liberal Party is under new management, forcing a cohort of Trudeau-era lawmakers to quickly learn the language of economics to make an impression with the new boss. Social issues have been demoted — as have brown shoes.
Cabinet ministers are competing to establish themselves as closers to meet Carney’s high expectations. The result is overlapping mandates that sow confusion over who owns what.
Canada-U.S. Trade Minister Dominic LeBlanc leads a new portfolio created under Carney, who sliced out North America from the international trade minister’s purview. Both report to Global Affairs Canada, which oversees trade deals and disputes — except for softwood lumber, which falls under the energy and natural resources minister in a separate department.
Industry Minister Mélanie Joly also touches trade, traveling the world courting foreign investment and shopping for submarines — treading into National Defense Minister David McGuinty’s terrain. The foreign affairs minister and prime minister only add to the crowd, all wrestling to demonstrate leadership on Canada’s trade strategy.
Despite the president’s surreal talk of making Canada America’s “51st state” through economic coercion, Carney’s government has taken its time to release a trade diversification strategy.
The roadmap aims to double non-U.S. exports over the next decade — but hinges on still-pending defense and industrial strategies. It must also answer thorny questions about where Canadian products can really compete, and how the country's businesses can expand into multilingual markets.
Initially promised for the fall, the strategy is now slated for release in the new year, Sidhu said.
Trade tensions mount
The trade diversification strategy will arrive close to Carney’s first anniversary in office, a milestone that naturally invites review about whether he’s delivering on his promise to Trump-proof Canada.
The Carney government considers Europe low-hanging fruit for trade diversification because a free-trade agreement with the EU isn’t being maximized, said the senior Canadian government official. Four percent of Canada’s exports go to Europe, while 70 percent flow stateside.
The Comprehensive Economic and Trade Agreement has been provisionally entered into force since 2017. Since then, it's been ratified by 17 countries, but 10 have yet to do so, and full ratification is needed for the full benefits of the deal to kick in.
Defense exports will be integral to the growth of Canada-Europe trade. Canada quietly eased export policy for dual-use goods this year to facilitate trade as Carney joined NATO’s 3.5-percent investment pledge — opening the door to record defense spending.
“Canada has never invested this much money in defense since 1952,” Sidhu said. “So, for the amount of money that we're investing in our industries here, we want to make sure we build up some of that industrial capacity in the defense sector and dual use in aerospace and defense.”
Canada was the first non-EU country to join the EU’s loan-for-weapons Security Action for Europe program this month, opening another channel for defense industry cross-pollination.
The Gulf is the second priority region for Ottawa in the new year, the official said. At least three Canadian Cabinet ministers have scheduled separate trips to the United Arab Emirates in January.
But neither Europe nor the Middle East appear as priority regions in Global Affairs Canada’s annual spending plan on where resources will flow for trade diversification.
The Middle East wasn’t mentioned in the trade diversification chapter of Carney’s inaugural federal budget, suggesting a top-down trade strategy being written on the fly.
Carney, a former central banker of two G7 countries, successfully sold voters this year on his business bonafides as uniquely qualified to navigate economic crises. But Conservatives argue he has fallen short of the brilliant tactician he billed himself to be.
Conservatives want more free trade. They're on side with Liberals on that. But Conservatives say Carney’s trade doctrine, if there is one, looks like it's just throwing things at the wall.
With Ottawa waiting for Washington’s signal to resume bilateral talks, Carney recently conceded that efforts to get a deal in bilateral tariff relief will now likely melt into the mandatory trilateral trade review with the U.S. and Mexico.
“If the prime minister is now giving up on a deal with the U.S. and shifting all of its focus elsewhere, there should be more transparency about the strategy and tradeoffs Canadians and workers are being asked to make, or the pain they are being asked to endure,” Conservative International Trade Critic Adam Chambers told POLITICO.
Take Canada's digital services tax that irritated both the Biden and Trump administrations, and that Carney sacrificed to continue bilateral trade talks in the summer. There’s little to no public transparency surrounding U.S. trade discussions, so to Canadians it looked like Carney gave up leverage, a policy that aligned Canada with European countries, for nothing.
Trade talks halted anyway in October, reportedly over Trump’s dislike of a provincial government's anti-tariff ad featuring Ronald Reagan.
Canada’s shifting focus
Trade war tensions with America are pushing Canada closer to China and India.
Carney is set to visit Chinese President Xi Jinping and Indian Prime Minister Narendra Modi on separate trips in the new year, two dramatic U-turns in recent Canadian foreign policy.
The trips will come after years of hostile diplomatic relations with both countries, aggravated by the detention of two Canadians by Chinese authorities and the Canadian government’s accusation that India was involved in the killing of a Sikh activist on Canadian soil.
Environment and energy are low-risk areas for increased engagement with China. But Carney has laid out guardrails in areas such as artificial intelligence where there isn't interest from Ottawa to deepen ties, citing national security concerns. Canada wants to avoid choosing between the U.S. and China on AI.
As U.S. influence wanes and the world divides into multiple power centers — an inescapable reality recognized by Secretary of State Marco Rubio — Foreign Affairs Minister Anita Anand is tasked with ensuring Canada doesn’t get lost in the transition. Asked about the differences between Trudeau and Carney’s trade strategies, she pointed to Trump.
“We are in times of economic stress, where the world trading system is being reordered, and global hegemony is being redefined from multilateralism to multipolarity,” Anand told POLITICO. “We will, in this moment in time, not retreat and hope that our problems magically disappear.”
She pushed back when asked to describe Carney’s trade doctrine — any crumbs to shed light on a strategy document still stuck in edits, any candor in how ministers are practicing diplomacy as traveling salespeople in countries where allies are doing the same thing.
“I don’t know if I would call it a trade doctrine,” she said. “This is a foreign policy approach that has, as one of its components, trade diversification.”
Carney’s approach to trade is more cerebral than his predecessor, Trudeau, whose progressive agenda annoyed negotiating partners. It's a far cry from the days when Trudeau's socks made headlines.
The prime minister’s byline showed up in The Economist in November, arguing that “bespoke” new alliances are an upshot to foreign policy disruption. He called this era of ad-hoc relations “variable geometry” — an engineering term that “describes mechanisms that can adjust to changing environments is an apt description and a useful guide to action.”
The prime minister also took a shot at “paralysis” in the World Trade Organization. Reform could take “decades,” he wrote. He floated the idea of “a mosaic of partial agreements and creative ‘docking’ arrangements between blocs could develop” — such as a free-trade super club of European and Asian countries.
Carney’s proposition neatly sets up Canada as an interlocutor to bridge economies — reaching for clout in a new multipolar world. But that's another long game.
from Politics, Policy, Political News Top Stories https://ift.tt/ZyU5urf
https://ift.tt/dTaZWQX
0 Comments