David Herle and Alex Swann are principals at the Gandalf Group
After Donald Trump was elected President, Canadian business leaders treated his commitment to renegotiate or scrap the North American free-trade agreement as the same kind of political rhetoric they had heard before from Bill Clinton, Barack Obama and Jean Chrétien. It was assumed he would tweak the agreement to say he had changed it, but leave it fundamentally in place.
Executives are now worried he was much more serious than they had hoped. Canadian business now thinks major changes as it relates to Canada are in the offing, and complete termination of the agreement is not unthinkable.
This worry may be one reason why Canadian business leaders are not more positive about the economy. The vast majority think the economy will grow over the next year. However, despite better than expected results recently, and forecasts for future growth being revised up, very few Canadian executives think the economy will grow strongly. We know from years of research with the C-Suite that the American market remains uppermost in the minds of most Canadian businesses, and NAFTA is seen as a key piece of that.
For that reason, the priorities of Canadian business are to protect and enhance NAFTA, while the Trump administration is coming at this from a protectionist point of view.
Arguably the most important element for Canada is maintaining the trade agreement's "Chapter 19" dispute-settlement mechanism. There is unanimity in the C-Suite that Canada must insist on this. Even if significant concessions were offered by the United States in exchange for scrapping the mechanism, the C-Suite would be loathe to give it up. It has been core to Canadian interests from the beginning, when Brian Mulroney insisted on it in 1988 over U.S. objections, and personally intervened with Ronald Reagan to get it included.
Beyond that, there is a clear hierarchy of C-Suite objectives for a redesigned NAFTA. Few care strongly about protecting supply management and exemptions for Canadian cultural industries, or ensuring a common minimum wage.
The top priorities are clear. Canadian business wants access to government procurement in the United States, and want to remove the spectre of "Buy America" policies that have been floating around state capitals. And the C-Suite wants a freer flow of workers across borders, with more professions eligible for ready access to work visas.
The C-Suite is interested in ensuring a level playing field on the environment. They are not advocating for the lowest possible bar, but standards for all three countries to live up to a commitment by all NAFTA partners to fight climate change. Perhaps this is because they sense Canada is on an irrevocable path to greenhouse gas reduction commitments and they want to ensure NAFTA partners come along. Perhaps the C-Suite believes the world needs strong action on the environment. Either way, it is one of several ways in which the Canadian business agenda for NAFTA is very different from what the Trump administration brings to the table.