00:00:00.000Good evening Western Standard viewers and welcome to Hannaford, a weekly politics show of the
00:00:21.120Western Standard. It is Thursday August the 27th and for news it's all trade war all the time.
00:00:27.900With us tonight is Yaroslav Baran, a co-founder of the Pendulum Group and strategic advisor to former Prime Minister Harper in the good old days.
00:00:40.820Thanks, Yaroslav. Look, there's a lot that needs explaining here, and you're the man.
00:00:44.540There are two things particularly we should talk about.
00:00:47.140One is what just happened here. Is this high-stakes negotiating, or has the world changed forever for U.S.-Canadian trade?
00:00:54.520And the other thing is this. Does the prime minister have an agenda beyond trade?
00:01:00.420What is he really trying to do? Which one do you want to go with first?
00:01:04.920Oh, why don't we take them in that order?
00:01:06.980All right. So what's really going on here? Has the world changed?
00:01:12.280No, nothing has ever changed permanently. Donald Trump is a dealmaker. He's been trying to cut deals more preferential to the United States' interest than what he had before.
00:01:22.340We can debate all we want about the tactics he uses, but he's trying to work in America's
00:01:29.780self-interest and the trade partners that he's targeting, it's incumbent upon them and
00:01:35.160their leadership, our leadership, to act in our self-interest.
00:01:39.040So we've seen this all over the world.
00:01:41.700He's been cutting deals left, right, and center, Japan, European Union, country X, country
00:01:46.700We haven't done a deal yet, and this is just the latest in our trade war.
00:01:51.180We have to respond in Canada's interest, just as he is introducing new punitive measures against Canada, ostensibly in America's interest.
00:02:01.580So the way you're putting it, it's like the world has changed and we just haven't got the message yet that we think we're still Canada to the United States like it was in 1970.
00:02:11.540So you saw what Mr. Carney put forward as a response to the situation on midnight of Friday when it all came to a stop.
00:02:22.600What was that response and is it effective, given what you've just said about the deal-making aspirations of the president?
00:02:31.300Sure. Well, first, let me qualify my earlier point.
00:02:34.140When I say the world has not changed forever, I mean, this is not a fundamental breach.
00:02:39.780This is not a rupture. But there is certainly a different attitude. For as long as Mr. Trump is in the White House, there is going to be a far more mercenary and pragmatic and utilitarian approach to trade policy.
00:02:51.920There's no such thing as, hey, 25 years ago, Canadians embraced us in gander and welcomed American flights during 9-11. And, you know, this is a forever friendship. No, that is that does not factor into the into the equation.
00:03:07.000everything is practical and everything is deal-making. But again, that does not mean
00:03:11.480that the world has fundamentally changed a seismic shift in geopolitics or anything like that.
00:03:16.520Now, what actually, what was Canada's response? Look, when you're responding to tariffs,
00:03:22.520there are generally two approaches. One approach is a tit-for-tat approach. You tariff my pork,
00:03:28.280I tariff your pork. You tariff my beer, I tariff your beer. You do this to me, I do this. You punch
00:03:33.720me in the nose, I punch you in the nose, not the face, the nose, not the ear, the nose.
00:03:38.920Then there's a different approach, tends to be a more strategic approach, I like to call it the
00:03:46.200bourbon and Harley-Davidson's approach. So you tariff us on things that are sensitive to us,
00:03:53.080we tariff you on other things, not necessarily pork for pork, but you're really protective about
00:04:00.440your bourbon and your Harley Davidson. These are iconic items that you like to export. And
00:04:06.940particularly, these are things that are produced in Republican states, or if it's a Biden government
00:04:12.440in Democrat states. So it's a more strategic approach of equivalency, not a straight up one
00:04:18.120for one or A for A. What we saw here was something of a hybrid of two approaches. First, Canada's
00:04:25.660retaliatory tariffs were all drawn from the basket of goods that the U.S. just tariffed.
00:04:31.960But within that basket, they were strategically selected. So for example, flatware, cutlery from
00:04:39.620New York State. Why? Because there's a big plant and Canada is a big importer of their stuff. My
00:04:45.680flatware, Oneida, is made by this New York State plant. Seafood from Maine, another swing state.
00:04:54.580We've got midterm elections coming up in the states.
00:04:58.000So it's not one for one, A for A, tit for tat, but it is selective within there to try
00:05:04.720to maximize the political pressure on Trump allies.
00:05:10.000So if they want to win New York, if they want to win Maine, if they want to win other swing
00:05:14.020states, we want to inflict a little bit of economic pain on the ground so that their
00:05:18.700congressmen, their senators, their governors start to complain to Trump saying, you know,
00:05:24.200ease up, give this a bit of a break. So in tariff policy, the golden goose is really
00:05:31.000finding a commodity that you can tariff that inflicts pain on your trade partner while
00:05:40.240minimizing or eliminating trade at home. Beer is a good example. If we tariff American beer
00:05:45.660as a countermeasure, there are plenty of alternatives to Bud, Coors Light, etc. You
00:05:52.620You can switch to Molson Canadian, to Labatt Blue, whatever it is that you drink, Canadian
00:10:11.840We are certainly each other's number one trade partners, but when all of this started a year ago, 76% of our exports were going to the States. They were more than half, well more than half of our entire export market. We are not the same to them.
00:10:30.840We are still their number one trade partner, but we are not nearly as consequential to their economy as they are to ours.
00:10:39.380So I would say they would be more in the take it or leave it category.
00:10:59.220He would have wanted a win, but the stakes are so high for the Canadian side in this kind of a trade agreement that Canada cannot accept a very sub, not just suboptimal, but really subpar final trade agreement.
00:11:18.620So, all that to say, the Canadians would have been the ones to walk away, but it's more reasonable for the Canadian side to walk away if they felt that they were not being treated fairly because the stakes are so much higher for Canada than they are for the U.S.
00:11:36.800Well, let's just talk about how high they are. My understanding is that the value of the trade which is tariffed is somewhere in the order of $28 billion Canadian, which is about 4%, 5% maybe of the total trade, and 80% of it is still passing backwards and forwards tariff-free.
00:11:59.500so obviously it's got to do with the auto industry but what is it that was so precious
00:12:07.020that we had to preserve it and indeed walk away from the deal and now i guess we have
00:12:13.420we have nothing so can you unload on that a bit sure yes i mean it's easy or tempting from a
00:12:20.980statistical point of view to say this latest tariff hoopla is only about 5% of our trade
00:12:29.720relationship. So what's the big deal? Everybody calmed down. The problem though is that these
00:12:35.780new tariffs were kicking the very industries that were already down. So our auto sector,
00:12:43.680for example, steel, steel-made manufacturing products, etc. So there are a whole bunch of
00:12:52.260trade commodities that are sheltered and that have been sheltered by the Canada-US-Mexico
00:12:57.140trade agreement. These new tariffs focused on some of those and brought them outside of that
00:13:04.600protection and others, it focused on sectors that already were not protected by KUSMA,
00:13:09.340that we're already suffering, things like our auto sector.
00:13:12.700So it's not necessarily the 5% of our bilateral trade that we should be focusing on.
00:13:19.420It's which sectors we're involved, and it's the ones that we're already hurting.
00:13:24.440All right. Let's talk about Mr. Carney's role in this.
00:13:31.260I noticed that his popularity has soared.
00:13:34.840He's something like 65% in the polls at the moment as Canadians rally around and say,
00:13:41.900we have to retaliate dollar for dollar, tariff for tariff, let's go, elbows up.
00:13:49.000That's a very nice position for him to be in, to think that he has the country behind him.
00:13:54.660It strengthens his position, I would think, in Parliament.
00:13:59.140uh we there are a number of uh of by elections coming up i have a feeling that uh you needn't
00:14:07.740worry about the results in those what do you think yeah it's a double-edged sword uh yes he
00:14:13.440is benefiting from being captain canada from being mr elbows up and so on on the other hand
00:14:18.780his entire brand the reason he was elected was that he is the guy who can get a good deal with
00:14:25.500the united states his entire election really rests on that assumption so the longer he goes
00:14:33.980on without a deal and the more obstacles frankly the worse that the bilateral trading relationship
00:14:41.100gets i mean you can't you're not going to benefit forever from being captain canada eventually
00:14:46.380that's going to turn into we're two years in and there's still no deal you were supposed to be mr
00:14:52.220get a deal for Canada. So I certainly do not think that he is deliberately sabotaging trade
00:14:58.860negotiations to bump up his poll numbers, that the stakes are far too high. Is he benefiting
00:15:04.380politically in the interim? Yes, but that don't last forever. And the longer this goes on,
00:15:12.120the higher the risks that that's going to very suddenly do a turnaround and affect his brand.
00:15:17.880What do you think about the chances of an early election to cement in his support while it is still there to be had?
00:15:27.960It should be tempting for a traditional political animal, somebody like a Jean Chrétien, somebody who was around politics their entire life.
00:15:39.940I would say there would be a much higher likelihood.
00:15:42.940But from what I've seen, Mr. Carney appears to be relatively risk averse.
00:15:48.200He doesn't want to introduce any more variables that he can't ultimately absolutely control into the equation.
00:15:55.360So I think that risk aversion is probably going to extend into this.
00:16:00.200Tactically, it might make sense to have an early election, but there are too many things you can't control at the moment that I think you'll probably err on the side of stick to my mandate, stick to trying to get a good trade deal and don't introduce more risk.
00:16:18.720Now, I want to just challenge you a little bit on that business about being risk averse.
00:16:23.360for a man who's risk-averse, he has gone to great lengths to insult the Americans,
00:16:29.520and in particular, Mr. Trump, in the time that he has become, since he has become prime minister,
00:16:35.540you know, talking about a new world order, which comes at their expense. I mean, this was the Davos
00:16:40.300speech. And you can say you go to a place like that, full of people who think grand thoughts,
00:16:46.680well, maybe they're looking for that sort of speech. But, you know, that got him a lot of
00:16:51.480support and a lot of acclaim. He's built this Canada captain narrative, and he's made no secret
00:16:58.340of his disdain for Donald Trump on several occasions. That was a classic time in South
00:17:04.260Africa where a reporter asked him if he'd called Mr. Trump, and he said, who cares? Later he walked
00:17:10.180that back, but he said it, and he said a number of other things that would lead the American
00:17:16.160president to think that there's something a bit personal here so those are risky things to do
00:17:24.480that's this is a fair question you're asking nigel i would say the um the tone has definitely
00:17:33.680shifted a lot from the times of justin trudeau justin trudeau would relish in what he thought
00:17:40.960were his clever, multilayered insults at Donald Trump. We're definitely not seeing that. Had
00:17:49.680there been several comments that probably were not kindly received in the White House? Yeah,
00:17:56.240I think there were. But by and large, I think Mr. Carney is trying to keep this professional
00:18:01.600and trying to negotiate in good faith. Frankly, I think the Ontario Premier has done more
00:18:07.760over-insulting than the Prime Minister of Canada has. So I don't think that Kearney is trying to
00:18:14.540be provocative with the U.S. I don't. Well, I certainly want to echo your thoughts about
00:18:22.660Mr. Ford. Mr. Ford, of course, thinks that Alberta oil should be on the table. But on the other hand,
00:18:28.280supply management wasn't on the table. So if we're going to go around the room and see who
00:18:33.260really values something that couldn't possibly be up for negotiation.
00:18:37.680We would have to start with him and the Premier of Quebec.
00:18:40.660They sure do like those cartels in butter and milk and eggs.
00:18:47.300They like that protected cheese, don't they?