On July 20 Donald Trump signed three Executive Orders that imposed 50% tariffs on a wide range of Canadian imports, effective August 13. Like his earlier tariffs on steel, aluminum and automobiles, they are a clear violation of the Canada/U.S./Mexico trade agreement he signed in his first term. It seems the United States signature on agreements, or its other commitments, are now worthless which begs the question “should we even try to negotiate agreements when we know America will abrogate them on a whim?”. Fair question, but I think the best course is to try to reach agreement even though we know it may not last (but then, neither will Donald Trump).
So, if we are to negotiate, how do we do so with the current occupant of the Oval Office? In my nearly fifty years negotiating agreements I’ve certainly encountered people on the other side who were impossible to deal with but that could be addressed by having them removed. No such option is available when the impossible person is the President of the United States.
The place to start is in our own heads. Prime Minister Carney gets it right when he says we can’t control what the other side does so we should concentrate on what we can do. Confronted with threats from the other side, an old colleague of mine used to say “you will do what you will do”, with the implication he would respond accordingly. In my experience, the worst threat is far more effective as a threat than when it becomes an action with all its messy detail. That’s as true with a strike threat, a lockout threat or some other “nuclear” threat.
The second thing to do is stop feeding the beast. Piecemeal concessions do nothing except wet the appetite for more. Canada tried that with the digital services tax and received nothing in return. In fact the American attitude is best encapsulated in the recent comments by their lead negotiator who said America was not giving Canada credit for reversing bad policies. I suspect the decision was made to give the concession because it appeared an agreement on tariffs on steel, aluminum and automobiles was imminent, before it wasn’t as Trump had yet another temper tantrum. Either way, no more individual concessions, particularly on those things the U.S. is complaining about (e.g. American liquor off the shelves). Those complaints tell us the pressure is working and shouldn’t be given up until everything is settled. It would help at this moment if Alberta and Saskatchewan joined the rest of Canada and resumed their boycotts of American liquor as well.
Third, take the position that nothing is settled until everything is. A useful tool in this approach is what we used to call package bargaining. While not something to use early in negotiations, once the formalities are over and the parties’ positions clarified, it is a good way to signal areas of possible compromise with linkages to what Canada needs. The standard is either accept the whole package or none of it is on offer. Usually the other side will respond with a package as well.
Finally, prepare for the worst while working for the best. In other words, take seriously the U.S. announcement it will apply 50% tariffs mid August, while still trying to reach a comprehensive agreement. Prepare for the worst by gaming various scenarios for Canada’s response. Do we introduce retaliatory tariffs? Do we find ways to make those products America can’t do without more expensive? Do we limit the export of some or all of those products? What is the likely American response if we do any of these things and can we manage it? And while we’re doing that, reveal nothing. Prime Minister Carney has struck the right note when he says if the tariffs come into effect “nothing is off the table”.
So, if we follow this playbook, will it succeed? In most negotiations the balance would say “yes” but, unfortunately, this is not a regular negotiation. We are dealing with a narcissistic bully whose impulses can upend negotiations at any moment (as we saw with the imminent agreement on steel, aluminum and automobiles) and that may well happen again. We cannot assume with any certainty the American approach is part of some grand strategy because we see over and over again, all around the world, it depends on the mercurial, needy temperament of the President that can upend agreements and relationships for no obvious reason except his need to assert dominance.
So, Canada, keep calm and carry on. We will outlast him.
Just sayin
GH
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This blog didn’t publish/post properly so I am re-posting it.