Free Trade, Partisanship, and Ping Pong Balls

Politics is always tricky to hammer down. Issues have a lot of moving parts, subtexts and implied motives. If you layer on a good slathering of partisan bias, then you could be forgiven for missing the real story. It’s the same technique used by an illusionist. Flap your right hand all about so people don’t watch you palm the ping pong ball with your left.

This week at the G8 Summit in Inniskillen, Northern Ireland, there was discussion on free trade. There was the triumphant announcement that the United States and the European Union are about to begin formal negotiations on a treaty. There was also the admonition that after four years of talk, a Canada-EU treaty was ‘really, really close.’

The usually suspects among the Canadian punditocracy have greeted this news with the predictable requisite amounts of fear, trepidation and angst. Oh no, they lament. What if the Yanks beat us to the punch? Still others display a surprising amount of mental gymnastics by suggesting that Ottawa should be faulted for not getting a deal by now AND that such a deal, when ratified, would result in too many compromises to the Europeans. In the world of political opinion, it is possible to such and blow simultaneously.

There is often a fine line between ignorance and hyperpartisanship. Most times, they succeed in co-existing quite comfortably (thank you very much!). Of course, in the political world, there are no shortage of axes, places to grind them, or targets to swing at.

I have always believed that untruths commit two egregious sins. First, and most obvious, is the damage done by the lie itself. On the other hand, what often galls me more is the lack of effort and sophistication behind them. It’s bad enough that you spin me, but do you have to insult my intelligence as well? Lying is bad enough, but assuming that the target of your lie is stupid as well is beyond the pale.

Pundits always equate their opinion with truth. They try to make the subjective into the objective. A dislike of the taste of liver becomes the equivalent of 1+1 equaling 2.

For the record, I have no eternal truth on this issue of free trade with the European Union. I have an opinion, based on observation, making it as valid as anything you’ll read in a newspaper or hear emanating from the well quaffed talking head on your television.

So, let’s begin…

A Canada-EU trade deal represents too much of a compromise

Perhaps it does. Maybe that’s why it’s taking so long. You might not have read it, but neither have the people who are telling you about it. They are doing the political equivalent of improv. They take suggestions from the audience (Give me a topic…Free Trade with the EU….Okay, now give me a position…I’m against it…Good! Now let’s begin!) then they write their columns and do their interviews.

Is it at all possible that the delay in ratification is a result of one, or both, parties not being satisfied that their national (or supranational) interests are not being met? If Ottawa agreed to everything Brussels wanted from the start, I suspect we’d already have inked the deal.

You can have speed, you can have caution – you can’t have both. People should know better than to suggest such a thing.

We have to hurry or the Yanks will beat us!

Really? Exactly how long do you think it’ll take for a US-EU deal to come into effect? Six months? Twelve? Twenty-four?

Ask yourself how long the Canada-US FTA took to get done. The Americans are desperate for our oil, but how long has the whole Keystone XL approval dragged out? Anybody remember how many years after Free Trade where we still had to deal with softwood lumber?

But let’s not be negative here. Let’s assume that this agreement has been ordained by the Gods and has redefined what Washington considers a ‘fast track.’ Let’s assume that this treaty’s negotiation is the fastest in the more than 200 years of the Republic’s history. Okay, the treaty goes to the Senate.
Huh?

Silly rabbit – everybody knows that for a treaty to become US law it has to be passed by the US Senate. It’s in their Constitution.

Okay – no prob. Obama’s a Democrat. The majority of Senators are Democrats. He’ll tell them how to vote, and it’s all over except for the crying.

Yes – and with a Democratic majority in the Senate, look how easy it was for the White House to ram through healthcare reform, gun control and that little ‘fiscal cliff’ thingy. Let’s not forget that one-third of the Senate is up for re-election every two years, and that US Presidents would rather get a root canal than introduce any controversial topic just before a mid-term.

Let’s harken back to those wild and heady days of 2004, and the Australia-US FTA. President George W. Bush wanted it. The man running to replace him, John Kerry, wanted it. The Aussies wanted it. Slam dunk, right?

On June 24th of that year, Tom Steever of the National Farm Broadcast Service reported the following:

“The Senate Finance Committee on Wednesday dealt a setback to the U.S. Australia Free Trade Agreement and then held up final action on the deal. Key Committee Democrat Kent Conrad of North Dakota succeeded by a single vote in amending the agreement, further tightening beef import safeguards.”

Read that carefully, now – the last sentence. The Senate Finance Committee held up the ratification of a comprehensive free trade treaty between the United States and Australia ‘by a single vote’. Single. One. Solitary. Alone. Yes, it eventually passed, but you get the idea.

The truth is that Washington does not only play political hardball, they invented it and have turned it into a fine art form. If the negotiators  from Brussels succeed in not losing their shirts in the rough housing with Obama’s emissaries, they still have to run the gauntlet of 100 Senators – 33 up for re-election every two years and all ready to turn on their party and their President if their seat depended on it.

Beat Canada to a deal? Yeah…right.

We need this deal more than they do and they know it.

Sure about that? Take a look at the GDP figures for the EU, and then compare them to Canada. Look at what’s going on in Greece. Look at the number of European banks whose main shareholder is the government. Ask anyone holding a bank account in Cyprus how they felt about the recent ‘surcharge’. If you’re not convinced of the picture on the ground there, then fly to Madrid and ask anyone on the street if they are happy that the national unemployment rate is somewhere in the range of 25 percent.

Don’t kid yourself – they need a deal as badly as we do. Probably worse.

The Best Defence is a Good Offence

So far, it’s been looking at things from a different angle. Let’s go somewhere that the pundits haven’t ventured yet. Let’s go on an adventure!

The pundits do get one thing right,that weakness in the face of a negotiation is a monumental error. The question is 'whose weakness'?

In 2011, Statistics Canada reported that Canada's exports to the 27 member EU stood at C$42.29 billion. What you might not realize is that 46 percent of that, or C$19.37 billion, was with only one EU member - Britain. The 2011 figures for the United States are not as dramatic, but of the US$268.5 billion shipped to the EU, 20.8 percent, or US$55.87 found its way to Britain.

In many ways, for both the US and Canada, trade with the European Union is really trade with Britain. Bear in mind that this is the same UK where the majority of people are dissatisfied with EU membership and that there is good reason to believe they would vote to leave the EU in a referendum.

Ask yourself what the value of Canada-EU trade would be if Britain were out of the equation? Well, simple math says it would drop almost in half. Okay, under those conditions, what types of demands could Brussels make on Ottawa (or Washington) for that matter?

If the value of EU trade for Canada plunged overnight from C$42.29 billion to only C$22.92 billion while a trade deal was being finalized, would it not seem altogether reasonable to assume that Brussels might have to concede far more than it would have in the beginning? If the value of the European market to the US dropped by 20 percent in one day, exactly what kind of attitude shift would infect the American negotiators? Would they say that it makes no difference? Would they say, perhaps, that $213 billion doesn’t get the kind of compromises that $268 billion can expect?

A cynical person might suggest that with the possibility of a British withdrawal from the EU being more than a statistical rounding error, Brussels wants a deal sooner than later because a European Union without Britain is less of a draw and a player with fewer high cards to play with either Canada or the US. In geopolitics, as in life, people are not generally amenable to paying full price for half a loaf.

 

At the end of the day…

When all is said and done, trade treaties are all about the politics. If they were based solely on economics, we would have negotiated global free trade decades ago and the WTO mandarins would not be feverishly working to resurrect the Doha Round of talks like some latter day Lazarus.

Treaties are about politics, and politics is a lot like shopping at a yard sale – searching for bargains and haggling over what to pay. The seller wants a King’s Ransom while the buyer wants a freebee. Neither will get their way if a deal is desired. The buyer will pay more, and the seller will settle for less. Desire and desperation will determine where the two sides meet.

Whether you think Canada-EU free trade is a good thing or not is a debatable point. Whether or not you like Stephen Harper and his party is an equally valid discussion. Neither of these discussions, however, suggest the relative strengths and weaknesses of either side. A like of the Prime Minister doesn’t give Canada the upper hand. Conversely, a hatred of Harper doesn’t put Brussels in the driver’s seat. Both parties must contend with their advantages and vulnerabilities, and whatever does come about will reflect just that.

As for the optimistic assurance at the G8 that a Canada-EU deal was ‘really, really close?’ It was the British PM, David Cameron, who said it - not Stephen Harper.