cgai.ca 2018 • VOLUME XVI • ISSUE I A publication of the Canadian Global Affairs Institute IN THIS ISSUE: The Great Divergence: North America’s Trade Policies by SARAH GOLDFEDER 17 Global Rules of Digital Trade: Can We Adapt Bordered Regulation for a Borderless World? by LAURA DAWSON 26 Reassessing Canadian Trade in Asia by RANDOLPH MANK 35 POSITIONING CANADA IN THE SHIFTING INTERNATIONAL ORDER MAY 8, 2018 | RIDEAU CLUB OTTAWA, ONTARIO cgai.ca Published by the Canadian Global Affairs Institute Contributing Fellows: Howard Anglin Frédérick Gagnon Robert Muggah Ken Barker Monica Gattinger Michael Nesbitt David Bercuson Sarah Goldfeder Kevin O’Shea Kevin Birn Andrew Griffith David Perry Jean-Christophe Boucher Marius Grinius Vanja Petricevic Brett Boudreau Robert Hage George Petrolekas Brian Bow David Higgins Joël Plouffe Andrew Caddell Roger Hilton Andrew Rasiulis David Carment Rolf Holmboe Tom Ring Anthony Cary Rob Huebert Colin Robertson Andrea Charron Peter Jones Lindsay Rodman Michael Cleland Thomas Juneau Stephen Saideman Howard Coombs Amy Karam Hugh Segal Lindsay Coombs Tom Keenan Elinor Sloan Barry Cooper Brian Kingston Sarah Smith Daryl Copeland Adam Lajeunesse Gary Soroka Jocelyn Coulon Eugene Lang Hugh Stephens Mike Day Julian Lindley-French Alan Stephenson Ferry de Kerckhove Matthew Lombardi Denis Thompson Douglas Dempster Randolph Mank James Trottier Jim Donihee Kyle Matthews Heidi Tworek Ross Fetterly Dennis McConaghy Stéfanie von Hlatky Matthew Fisher Eric Miller Charity Weeden Patricia Fortier John Weekes Prepared for the Canadian Global Affairs Institute 1800, 421 – 7th Avenue S.W. Calgary, Alberta T2P 4K9 www.cgai.ca ©2018 Canadian Global Affairs Institute| ISBN: 978-1-988493-98-5 Volume XVI • Issue I The Global Exchange | 3 I N S I D E 2018 | VOLUME XVI • ISSUE I 6 42 Introduction: Canada’s Interests in Japan in the New, Unpredictable International Trade World of Trade: What’s in it for by ADAM FROST Canada? by FERRY DE KERCKHOVE 7 Canada-U.S. Trade: An Enduring 47 Relationship, NAFTA or Not Trudeau Must Make Haste on Trade by DAVID J. BERCUSON with India by COLIN ROBERTSON 13 Canada-United States Trade 50 Relations: Not Just NAFTA The Pacific Alliance is a Trade Deal by STEPHEN BLANK AND MONICA GATTINGER that Canada Must Not Ignore by COLIN ROBERTSON 17 The Great Divergence: North 54 America’s Trade Policies Africa: Shaping the “Canadian Way” by SARAH GOLDFEDER on the Continent by ANDREW CADDELL 20 Crunch Time: NAFTA a Litmus Test 58 for the United States’ Place in the A NAFTA-EU Economic Agreement: World A Crazy but Ultimately Smart Idea by COLIN ROBERTSON by ROBERT HAGE 22 BEYOND TRADE Canada’s “Progressive” Trade Agenda: Let’s be Careful How Far 61 We Push It Quantum Diplomacy for a New by HUGH STEPHENS Technological Age by RANDOLPH MANK 26 Global Rules of Digital Trade: Can 67 We Adapt Bordered Regulation for a Following the Funding in Strong, Borderless World? Secure, Engaged by LAURA DAWSON by DAVID PERRY 35 78 Reassessing Canadian Trade in Canada Can’t: Our National Asia by RANDOLPH MANK Infrastructure Challenge by KELLY J. OGLE 4 | The Global Exchange 2018 CGAI Advisory Council Rona Ambrose Hon. Rona Ambrose is a former leader of Canada’s Official Opposition in the House of Commons, former leader of the Conservative Party of Canada and currently, a Global Fellow at the Woodrow Wilson Center’s Canada Institute in Washington D.C. Ian Brodie Former Chief of Staff to Prime Minister Stephen Harper and currently, an Associate Professor of Law & Justice at the University of Calgary. Jean Charest Hon. Jean Charest is a former Premier of Quebec and Federal Cabinet Minister and currently, a Partner at McCarthy Tétrault LLP. Laura Dawson Director of the Canada Institute at the Woodrow Wilson Center in Washington D.C. Bruce Donaldson Vice Admiral (Ret’d) Donaldson, is a 36 year veteran of the Royal Canadian Navy, a member of the Royal Roads University Board of Governors and chairs the Salvation Army Advisory Board in Greater Victoria. Richard Fadden National Security Advisor to the Prime Minister from 2015—2016, and from 2009—2013, Director of the Canadian Security Intelligence Services. Dan Hays Hon. Dan Hays is a former Senator and is currently a Senior Partner with Norton Rose Fulbright. Janice MacKinnon Executive Fellow at the University of Calgary’s School of Public Policy and a Professor of fiscal policy at the School of Public Health at the University of Saskatchewan. John Manley Hon. John Manley is President and CEO of the Business Council of Canada and former Deputy Prime Minister of Canada. Jack Mintz President’s Fellow of the School of Public Policy at the University of Calgary, and is Chair and Vice-President of the Social Sciences and Humanities Research Council of Canada. Kathleen Monk Former Director of Strategic Communications for former NDP leader Jack Layton and currently, a Principal with Earnscliffe Strategy Group. Marie-Lucie Morin National Security Advisor to the Prime Minister from 2008 to 2009 before becoming an Executive Director at the World Bank. Bob Rae Hon. Bob Rae, former Premier of Ontario and was the interim leader of the Liberal Party of Canada. Partner at OKT—Olthuis Kleer Townshend LLP. Jeffery Simpson Former Globe and Mail national affairs columnist, Senior Fellow at the University of Ottawa Graduate School of Public and International Affairs and an Officer of the Order of Canada. Chris Waddell Associate Professor and Director of Carleton University’s School of Journalism and Communications. Rob Wright Canada’s Ambassador to China from 2005—2009 and Ambassador to Japan from 2001—2005. Volume XVI • Issue I The Global Exchange | 5 Introduction: Canada’s Interests in International Trade by ADAM FROST uring the 1947 Duncan & John Gray In response, Canada is charting its path to Memorial Lecture then-minister of navigate the challenges of 21st century global D external affairs, Louis St. Laurent, outlined trade. Prime Minister Justin Trudeau’s Liberal guiding principles for Canada’s engagement with government is pursuing a progressive trade the world. In his address, he recognized that agenda as it seeks to modernize existing Canada could not maintain the standard of living agreements, implement newly minted Canadians had come to enjoy in isolation from agreements, and explore potential future the rest of the world. He said, “[we] are opportunities. dependent on markets abroad for the large quantities of staple products we produce and The lead package of this issue examines a cannot consume, and we are dependent on multiplex of challenges and opportunities supplies from abroad of commodities which are presented to those currently crafting Canadian essential to our well-being.” This irrefutably trade policy. Geographically, it spans not only the remains true today. management of relations with the United States and NAFTA renegotiation, but also the Canada’s ability to utilize its vast wealth of geopolitical considerations of bolstered resources has afforded it the opportunity to engagement with Asia and the underappreciated become one of the most affluent and developed opportunities present in Africa and South nations in the world, making the preservation of America. In addition to "with whom", this package such ability of vital national interest. also addresses the "how and why" of trade: the difficulty of adapting trade practices to the digital However, trade in the 21st century is more age and the costs, benefits and limitations of complex than ever before. Technology allows for projecting Canadian values via trade relations. transactions between parties scattered across the globe to occur near instantaneously, and In computer simulated and professional chess complicates the tracking and classification of matches white consistently wins more often than many goods and services. not. The lack of first-mover advantage is a formidable deficit to overcome. Those who are Moreover, global political developments and not leading, are fated to play catch-up. The economic transformation are threatening the challenges facing Canada’s policy-makers liberal world order built and protected by the responsible for protecting and advancing our United States since the Second World War. national interest via trade are legion. To optimally China’s emergence as an economic address these challenges, Canada is best served juggernaut is shifting the global economic by being proactive at the forefront of negotiations. centre of gravity. Furthermore, reactionary The benefits of cultivating a proactive posture are domestic political forces within much of the enticing, and the costs for failing to do so are western liberal democratic world, including avoidable. Canada must adapt to the dynamism the United States, question the value of of the global economic order, or fight to catch-up. continued support for the status quo. Adam Frost is the Associate Research and Development Tectonic change is afoot. Coordinator of the Canadian Global Affairs Institute. 6 | The Global Exchange 2018 network and Great Lakes of the continental Canada-U.S. interior. Trade: An When New France was settled in the early 17th century, French traders and explorers Enduring eventually organized a trade system that was based in Quebec City on the mouth of the Relationship, St. Lawrence River, to New Orleans at the mouth of the Mississippi River, and which NAFTA or Not stretched north of Lake Superior to the by DAVID J. BERCUSON Rocky Mountains in the far West. On the East Coast of the continent, the British colonies lay from the Florida boundary with ave for the Great Lakes, the border the Spanish north to the Gulf of St. Lawrence separating Canada and the United (which included Nova Scotia and its major S States is a political boundary and Royal Navy base at Halifax). Nova Scotia not a natural one. North of the U.S.-Mexico was long considered the 14th colony; it did border, both Canada and the United not join the American Revolution due to the States share continental geographical and naval base and considerable British military physical boundaries and regions that run presence.