Fraser Forum

Looking at 2016: the United States through a Canadian prism

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Political developments in the United States are usually quite important to Canadians, primarily because those developments frequently have significant economic impacts on Canada. In particular, election campaigns in the U.S. can influence Canada-U.S. economic relations by altering the composition and the ideology of the U.S. Congress, and perhaps more fundamentally, by Americans’ choice of their president.

This year promises to bring important, perhaps dramatic, changes to the U.S. political landscape and to U.S. economic policies as a consequence. The most prominent event on the U.S. political agenda is the presidential election in November 2016. At the moment, the two front-running candidates for each party are far from being advocates for liberalizing international trade and investment regimes.

Specifically, both Hillary Clinton, the clear front-runner for the Democratic Party nomination, and Donald Trump, the current (and controversial) front-runner for the Republican nomination, have both come out in opposition to the recently negotiated Trans-Pacific Partnership (TPP) free trade agreement.

More generally, significant segments of the political bases of the two parties seem to be moving in populist directions that support, among other things, increased government protection of domestic U.S. industries and jobs, and more government actions against perceived unfair trade practices by U.S. trading partners including foreign currency depreciations against the U.S. dollar.

Current members of Congress are, therefore, under pressure from many of their constituents to halt, perhaps even reverse, U.S. policy initiatives to integrate economically more closely with trading partners. With important and potentially close elections being contested in 2016 for seats in the House of Representatives and the Senate, the current Congress might well respond to populist pressures in anticipation of upcoming elections and reject the TPP when it comes up for a fast-track vote in 2016. Certainly, a continuation of current political trends in the U.S. does not bode well for improvements in Canada-U.S. trade relations going forward.

There are three areas, in particular, where changes to the current bilateral relationship are arguably most needed.

One is expediting dispute resolution mechanisms so that trade disagreements between the two countries do not create as much long-tern uncertainty and economic damage as is currently the case.

A second is reducing the use of countervailing duties, especially by the United States.

A third is harmonizing product regulations, or at least implementing new initiatives that would mitigate higher costs and barriers to trade resulting from applying regulatory standards of both countries to North American producers.

Historically, major progress on the bilateral economic agenda follows from a strong and favourable personal relationship between the Canadian prime minister and the U.S. president. At this point in the political campaign, none of the plausible presidential candidates have taken a pre-election position supporting a deepening of the current North American Free Trade Agreement (NAFTA).

The guess here is that Prime Minister Trudeau will have a difficult time getting U.S. attention focused on the bilateral trade relationship, even after the voting events of 2016 are over.


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