Bremmer calls for different tactic: Forget diversification, focus on leveraging soft power
Eurasia Group president Ian Bremmer pictured in conversation with Ali Velshi, MSNBC host. / MEANS & WAYS PHOTO
TORONTO—The Canada-U.S. relationship has always been defined by proximity, shared values, and deep economic integration. Yet as the geopolitical and domestic landscape in the U.S. shifts, the nature of that relationship is changing — and Canadian policymakers and businesses must adapt.
The evolving dynamic was the topic of conversation at the U.S.-Canada Summit, hosted by Eurasia Group and BMO on Oct. 8 in Toronto. During a media roundtable, Eurasia Group president Ian Bremmer said while Canadians are focused on “elbows up” and the government is focused on trade diversification, Donald Trump is a very transactional president and therefore a different tactic must be used in order to ensure the best outcome for Canada in the global trade realignment.
That means making the U.S. aware of how these changes are going to affect the States themselves, rather than coming from a combative stance. Bremmer pointed to China flexing its leverage of access to critical minerals to negotiate a deal. On top of this, American CEOs warned Trump directly that businesses would shut down if access to the critical minerals were cut off. “Trump immediately understood,” Bremmer said. “China could keep doing this for years and deal with [U.S. tariffs because] they're in a radically better position.”
That’s not the case for Canada, he said. While it’s true that cutting off energy to the States and limiting access to Canadian potash would devastate the U.S. economy and agricultural sector, Canada’s leverage is not as significant as China’s.
“For Canada to make that argument, you’re not in the same situation politically,” he said. “Canada’s economy is more dependent on the U.S. [than China’s is].”
Not the same as China…
Although he said the threats need to be considered from a sovereignty perspective, it will be difficult for Canada to follow through with the threat like China did if the whole country is not behind it. “China has no problem with defectors,” Bremmer said. “If Carney puts this [threat] forward and half the country is saying, ‘What the hell are you doing?’ that's a disaster. You’re much weaker if you're not coherent.”
There will also be a lot of economic hardship that Canada may not be able to withstand in the long term, he said. “If USMCA becomes a zombie agreement, the level of uncertainty will lead capital flight to the U.S., not Canada,” he said. “I don't believe meaningful diversification is a good strategy.”
Instead, Canada should use the soft power it is known for as leverage, he said. “Canadians are useful on issues that Trump cares about in other parts of the world,” he said. “Carney has created enough competence with the U.S. that they could act as a functional back channel for example with the Europeans.”
Additionally, if Canada wants to increase its economic clout, it should focus on talent attraction. “Canada should do as much as possible to attract talent,” he said, noting that universities should be doing at least five times more strategic communications to bring top talent to Canada.
…but more attractive
“This is the time to attract top talent globally,” he said. “China understands that, and Canada is more attractive than China.”
Despite all of this, Bremmer doesn’t believe the ongoing negotiations are futile for Canada. “Trump doesn’t have fixed positions,” he said, noting Trump wants to have announcements and deals. “He is results based, transactional.”
Bremmer sees Prime Minister Carney as having built a constructive relationship with Trump which is helping, even though it may be seen as deferential. “It provides more flexibility on what negotiations will look like,” he said. “I’m confident that you're getting closer to a deal.”
According to Gerald Butts, vice chairman at Eurasia Group, the best-case scenario for Canada is to secure a reduced tariff rate as Ottawa negotiates with Washington on sectors not covered under a free trade agreement.
“Sometimes, it’s easy to take for granted what you already have,” Butts told BNN Bloomberg during the summit. “There are a lot of Canadians employed in sectors like steel and aluminum. Those sit outside the agreement and those are the tariffs the government is currently negotiating to reduce.”
Butts, who helped negotiate the Canada-United States-Mexico Agreement under former prime minister Justin Trudeau, said the talks are critical. “We were keenly aware every day that it was an existential economic discussion for Canada, and that literally millions of Canadians depend on it for their employment,” he said.
Never more difficult
He added that Canada already benefits from “the lowest tariff trading relationship with the United States of any country on earth,” and warned that managing relations with Washington will remain difficult. “I don’t think there’s been a more difficult time, certainly in my lifetime, to be Prime Minister of Canada,” Butts told BNN Bloomberg.
Prime Minister Mark Carney spoke with Eurasia Group vice-chair Gerald Butts at the U.S.-Canada Summit on Oct. 8. “Our relationship [with the U.S.] will never again be what it was,” Carney said. / MEANS & WAYS PHOTO
Carney, summing up this week’s meeting with Trump, held out hope that a reduction in sectoral tariffs damaging key Canadian industrial sectors may be possible.
“We are still negotiating further gains in major sectors,” Carney said in the Commons. He noted that despite everything, Canada still has relatively free access to the U.S. market because of CUSMA. And “we will get an even better deal,” he said.
The prime minister told the U.S. Canada Summit in an interview with Butts that he and Trump were engaged in a “granular discussion” and he sees “a pathway to specific progress” on some of the sectoral tariffs that have hammered steel, aluminum and other Canadian industries.
But he very much stressed that Canada has to rebuild its economy because the days of free trade with the Americans are over.
“The future doesn't involve a remorseless process of integration,” as it did in the nearly four decades prior, he said. “Our relationship will never again be what it was.”
