Canada, Mexico, and the USA are in the middle of renegotiating NAFTA, the North American Free Trade Agreement. However, this negotiation has been unlike any other free trade agreement that I’ve seen negotiated because Donald Trump is the president of the US. He’s made negotiating a deal far more difficult than it would be otherwise. His frequent tweets disparaging the Canadian and Mexican negotiators further inflame passions during these negotiations.
I think Trump is extraordinary, and therefore Canadian negotiation tactics must be equally extraordinary, but I think there is fairly clear path forward for Canada.
Trump is Special
So much of these negotiations are dictated by Trump’s personality. Trump is surprisingly ignorant for the leader of a country, but covers for his ignorance by disregarding facts and asserting whatever he wants. Then, he defends those fantasies vociferously. Because he doesn’t seem to care about ethics, he’s not ashamed of this strategy, but instead is proud of it, to the extent that he has bragged about it to Republican donors.
What’s more, Trump is fine with not standing by the deals he does make. He has a long history of stiffing banks and contractors. On top of that, he’s capricious. Even if he concedes a particular position on one day in exchange for concessions from Canada, it’s not clear that he won’t change his mind about that concession the next day. And, I don’t think he’d care at all about anything that his trade negotiators agree to, keeping or discarding their deals as suits his needs.
Finally, Trump seems to be a narcissist—he seems to care a lot about having the camera on him, and reacts in extreme ways to negative press.
Of course, these personality traits make negotiation with Donald Trump difficult. There’s the risk that anything your side concedes is considered final, and anything Trump concedes is considered temporary, able to be withdrawn in an instant. But, these personality traits also provide a huge advantage to anyone negotiating with Trump, and that is the complete freedom to negotiate unethically.
Typically, in negotiations, each side should negotiate in good faith, being willing to give and take, and expect the other side to give and take. In the end, through good faith negotiation, you’d expect the things each side cares the most about to be “won” by the side that cares the most about them, with the less important items to be sacrificed to win the key deals. And, one would also also expect the person you’re negotiating with in good faith to actually want to make a deal.
But, since these negotiations aren’t in good faith, Canada can ignore that. Thus, I believe that the optimal strategy is to do everything possible to extend the negotiations. NAFTA remains in place while negotiations continue and, to all appearances, USA doesn’t want to cancel without a new deal in place. So there’s no need for Canada to rush and no reason to believe that a reasonable deal is possible with Donald Trump at all.
Thus, Canada should simply run out the clock. We should negotiate in bad faith, sticking on every point, flipping back and forth on potential concessions, and taking frequent adjournments to consider the American arguments. We should frequently compliment Donald Trump about his negotiating savvy, feeding his narcissism so that he doesn’t get impatient, waiting for time to tick away on the Donald Trump presidency. When the next person is in place, both sides can go back to negotiating in good faith.
The backup strategy
Blinded by spotlight shining on him, it’s unlikely that Trump will figure out this strategy. But if someone tells him, there’s a small chance Trump may get more aggressive in negotiations, or even back out of NAFTA.
Under such a scenario, Canada does have a reasonable counter-punch, and that’s backtracking on our recognition of American intellectual property laws. America cares a lot about IP—more than any other country in the world—and that’s because a huge part of America’s economy is based on IP. If Canada stuck back there, it could have severe consequences in the USA.
Before the USA-Canada Free Trade Agreement, Canada’s IP laws were far less strict, and we can return to those days. Canada could, for the health of its citizens, declare American drug patents invalid in Canada. Then, we could set up our own drug manufacturing facilities for producing and exporting medicine worldwide. USA controls about 45% of the global pharmaceutical market, and Canada creating generic versions of American on-patent drugs would be a huge economic slap in the face.
If you extend that strategy beyond pharmaceuticals to content and brands (Canada’s own Mickey Mouse!), the impact on the American economy could be huge.
The bottom line
I don’t think the backup strategy should be the primary strategy because I don’t think it’s wise to escalate trade tensions when they’re already so high. Heck, Trump is an authoritarian who seems to really want to subjugate people, and more fascist than not.
So if Canada did go after American IP, there’s a small chance that Trump’s response would be to invade Canada (remember, this is the guy who didn’t understand why using nuclear weapons was a bad idea). Thus, I think a passive aggressive strategy of wasting negotiating time is more likely to result in a positive outcome and less risky than a more aggressive negotiating strategy.