The United States and Canada have shared solid political ties for a very long time. This has promoted the creation of a strong trade relationship between the two countries, especially in the agri-food sector. However, under various regimes, this relationship has been exposed to changes and even friction. Here we get to see how Donald Trump’s term impacted the U.S.-Canada trade relations and what is likely to change under Joe Biden’s presidency.
Various literature on political economy argues that politics play a big part when it comes to international trade. A lack of a strong political bond between countries can easily affect the exchange of goods and services between them. This usually poses a significant risk for the international market.
Agriculture trade is the most affected sector when it comes to international politics. This is because trade disputes are seen to be more prominent within the agriculture sector than they are on the non-agriculture side. This has been evident with the U.S. and Canada, where most of their trade disputes have been centered on the agri-food and forestry sectors. Even with the rules of the World Trade Organization (WTO), agricultural trade policies continue to be one of the most common issues.
Also, agriculture trade is termed to be one of the leading causes of diplomatic and trade disputes between countries. This is because the agri-food sector tends to be very protected. Many countries maintain high tariffs to control trade flows. The ability for countries to set their own health and safety standards is another cause for disputes as this can highly restrict access to agri-food products in the market. Hence, the WTO Dispute Settlement Board mostly finds itself dealing with trade disputes that are within the agri-food sector.
Political ties are crucial in international trade as they allow negotiations between countries to come up with mutual standards and regulations. Most importers and exporters will factor this in their trade decisions. Good diplomatic relations between countries will pose less risk to their international trading activities.
Since the election of Trump in 2017, the political relationship between the United States and Canada has been strained. The hostile relationship was a result of Trump’s introduction of unfavorable foreign policy decisions. He has also openly criticized the Canadian Prime Minister, Justin Trudeau, regarding him as a weak and dishonest leader. This uncomfortable relationship has compromised the bilateral trading relationship between the two countries. These countries have hence found themselves settling trade disputes with NAFTA and even the WTO. An instance is when the U.S. imposed aluminum and steel tariffs on products coming from Canada.
There has also been the prevalent softwood lumber dispute between the U.S and Canada. Even though this began before Trump, it escalated under his presidency to the extent that neither NAFTA nor the WTO was able to settle this dispute. This had to be solved only through political negotiations, after signing a memorandum of agreement by both parties.
The WTO’s dispute settlement system has often helped the U.S. and Canada solve their trade disputes. Despite this, the WTO has faced fierce criticism from Trump’s administration. He has been seen to undermine the WTO’s global trade system by threatening to dismiss any decisions made counter to U.S. interests. He has also gone to the extent of threatening to remove the U.S. from the organization as he accused the organization of being unfair to the U.S. in some dispute settlements.
Trump’s disregard for the global trading system and constant attacks on other countries and their trade policies has promoted trade uncertainty in the U.S. This trade uncertainty with the U.S. has encouraged Canada to diversify its markets more seriously. This is so that they do not have to rely on the U.S. as their primary source. Canadian agri-food imports from the U.S. have therefore been seen to decline throughout Trump’s era continuously.
While still a presidential candidate, Joe Biden had expressed his intentions to mend the relationship between the United States and its allies. As a strong supporter of multilateral trade systems, he will work well with his allies and address any issues with the WTO. He is also aware of the importance of trade deals and maintains that he wants to be part of the CPTPP.
Protectionist forces will still be present. President Biden has pushed a Buy America strategy that excludes Canada. Trade disputes are inevitable, however the tone in which they are handled will be markedly different.
Prime Minister Trudeau being the first world leader to congratulate President-elect Joe Biden for his win was a good sign that this might be the case. They are both seen to share the same views on eradicating trade boundaries rather than imposing them. Joe Biden’s presidency hence looks to minimize some of the politically driven unilateral trade decisions witnessed during Trump’s presidency. Therefore, trade flows between the U.S and Canada are likely to improve under President Joe Biden.
Under Trump’s regime, the U.S.-Canada relationship experienced some tension. This has, in turn, negatively impacted international trade between these two countries. Under Joe Biden’s Presidency there is hope that this will change for the better with better cooperation and stronger alliances.