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PRINT EDITION
Trump is living in a 'SHAFTA' fantasyland
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By BARRIE MCKENNA
  
  

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Saturday, October 28, 2017 – Page B1

OTTAWA -- It's what trade negotiators call the landing zone. That's the spot where opposing sides can see the outlines of an eventual deal.

Given the U.S. mindset in overhauling the North American freetrade agreement, Canada could alert air-traffic control, turn on the runway lights and mobilize the ground crew. But Donald Trump, unfortunately, is up in Air Force One looking for a completely different airport, in some fantasy land where the United States is a victim of trade.

For years now, a poisonous narrative has become rooted in the U.S. psyche - namely, that the world is ripping off Americans on trade. It is the narrative that helped get Mr. Trump elected, and it is the mantra now guiding U.S. Trade Representative Robert Lighthizer at the NAFTA negotiating table.

Trade has become a winnertake-all sport in which the balance of trade is like the scoreboard at a football game. Post a trade deficit with the rest of the world - as the United States has consistently done since the early 1990s - and you are automatically the loser. No trip to the Trade Bowl for you. A lot of people are complicit in letting this wacky view of the world become dogma. For years, U.S. politicians, corporate leaders, labour bosses and the media have all failed to effectively challenge the underlying premise.

And now the myth is proving tough to bury. This week, a coalition of U.S. and foreign-owned auto makers launched a PR blitz to try to salvage the agreement. The group's slogan: "We're winning with NAFTA." Unfortunately, it's a bit late in the game for big U.S. employers to be singing the praises of trade.

The Trump administration looks at NAFTA and sees SHAFTA, as White House trade adviser Peter Navarro mockingly calls the deal.

Asked if he'll walk away from the agreement, Mr. Trump told the Fox Business Network last Sunday: "We can't allow the world to look at us as a whipping post. Not going to happen any more."

Commerce Secretary Wilbur Ross put it more bluntly: He said the United States is demanding that Canada and Mexico "give up some privileges that they have enjoyed for 22 years" and get nothing in return.

Given the Trump administration's stand, no one should be surprised that U.S. negotiators have put poison-pill-type demands on the table, including a five-year sunset clause, a minimum 50-per-cent U.S.-content requirement in North American-made vehicles and an end to the dispute-settlement system that allows countries to challenge countervailing and anti-dumping duties.

For the United States, the objective is to tilt the playing field to favour its own companies and workers.

And yet no objective analyst would look at the economic landscape of the past few decades and come to the conclusion that the United States is losing the global trade race. With the exception of a few resource-rich city-states and smaller nations, the United States is the wealthiest major country in the world - well ahead of the rest of the Group of Seven, Europe and most of Asia. Its endless purchasing power has made it a magnet for goods from around the world. Its companies dominate the global marketplace.

The trade deficit is not a football score. Few economists buy the premise that a trade deficit means a country is losing. Rather, it reflects an imbalance between what a country saves and what it invests. The more protectionist pain the United States inflicts on us, the lower the Canadian dollar will fall and the less goods and services we'll be able to buy.

The notion that Canada is shafting the Americans is ridiculous, even by Mr. Trump's dubious scorecard. Canada runs a relatively small goods trade surplus with the United States, largely driven by exports of oil and other natural resources that Americans need to run their economy. The broader goods and services trade balance has been tilting increasingly in the United States's favour for more than a decade. In 2016, the United States ran a nearly $8-billion (U.S.) surplus with Canada. In manufacturing alone, the surplus was even more pronounced.

It's hard to imagine a more accommodating neighbour than Canada. We are far and away the largest market for U.S. goods and services, buying $321.4-billion worth last year alone. That is nearly twice as much as China, three times more than Japan and more than Britain, France, Germany and Italy combined. Meanwhile, Canada has been losing export market share to other countries in the U.S. market for nearly decade.

If anyone is getting shafted, it's us.


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