What would a bad NAFTA deal look like?

Prime Minister Justin Trudeau’s NAFTA mantra has been that no deal is better than a bad deal.

So what would a bad deal look like?

The answer depends in large part on how you read the threat. If there’s no deal, U.S. President Donald Trump might tear up the existing North American free-trade agreement. But the more fearsome danger comes from punishing tariffs – Mr. Trump has already imposed them on steel and aluminum and warned he’ll adopt new ones on cars that will be the “ruination” of Canada’s economy.

Toronto trade lawyer Mark Warner says that danger is bigger than any of the issues left on the table at the NAFTA negotiations. But University of Ottawa professor Patrick Leblond, the Paul Tellier chair in business and public policy, warns Canada will have to live with a bad deal for decades.

Much of the talk emanating from negotiations has focused on late disputes – Mr. Trudeau’s insistence on a binational dispute-settlement mechanism like the one in Chapter 19, and Mr. Trump’s demand for concessions on Canada’s dairy protections.

Mr. Trump, after all, has used tariffs imposed on national security grounds, under section 232 of the U.S. Trade Expansion Act, to browbeat Canada, Mexico and others to renegotiate trade deals. He overtly threatened more devastating tariffs as a pressure tactic.

So if Canada agrees to a new, updated NAFTA, will he be able to do that again, any time he wants?

“If you don’t discipline the subsequent use of section 232, all you’re doing is giving in to a bully,” said Borden Ladner Gervais partner Matthew Kronby. “And you’re setting yourself up to be bullied again.”

It would obviously be better for Canada to gain a complete exemption from section 232 tariffs, but Mr. Warner argues that’s just not going to happen. So will the deal include a written agreement that the U.S. will lift steel tariffs and forego such tariffs on cars? Or at least be accompanied by a strong political statement that the Trump administration – capricious as it is – won’t use them? There has to be something, or it’s a bad deal...

This was excerpted from 11 September 2018 edition of The Globe and Mail.