White House Adviser Seeks to Reassure Canada of Trade Ties

By Paul Vieira 

As the Trump administration signals shifts in trade policy, the chair of a White House economic advisory committee told a Canadian cabinet session on Monday that Canada isn't the target of a policy overhaul but rather a model for how to trade with the U.S.

Stephen Schwarzman, the chief executive officer of private-equity firm Blackstone Group LP and chairman of President Donald Trump's Strategic and Policy Forum traveled to Calgary, Alberta, to meet with Canadian Prime Minister Justin Trudeau. Mr. Trudeau is holding a cabinet meeting there, and the potential ramifications of the incoming Trump administration is dominating discussion.

On Sunday Mr. Trump pledged to follow through on his promise to overhaul the North American Free Trade Agreement and to initiate talks with Mr. Trudeau and President Enrique Peña Nieto of Mexico. Mr. Schwarzman told reporters that Mr. Trudeau and Canadian officials shouldn't be "enormously worried" about the new administration's plans.

"Canada's held in very high regard. We have balanced trade between the U.S. and Canada. That's not the kind of situation where you should be worried," Mr. Schwarzman said.

Mr. Schwarzman added that the ties between the U.S. and Canada are "a model for the way trade relations should be. So I think Canada is very well positioned in discussions with the United States."

The U.S.'s trade deficit with Canada is much smaller than that with Mexico, which appears to be a greater target of the new administration's concern about North American trade. In the first 11 months of 2016, the U.S. had a $9 billion trade deficit with Canada, compared with a $59 billion trade deficit with Mexico. During the same period, the U.S. trade deficit with China was $319 billion.

The cabinet meeting in Calgary comes at a time of uncertainty for the Canadian economy, as business leaders, investors and government fret over the ramifications of Mr. Trump's vow to put "America First." Canada's small, open economy has evolved over decades to rely heavily on sales of its manufactured goods, commodities and services to the U.S. to drive growth.

The Bank of Canada warned last week that any material change in U.S. trade policy could bring a potential negative shock. "While the precise trade policy measures to be taken by the incoming U.S. administration remain to be determined, the protectionist tilt is already evident," the central bank said.

Two-way trade between the U.S. and Canada is among the largest trading relationships in the world, totaling $474.4 billion during the first three quarters of 2016, according to data from the U.S. Bureau of Economic Analysis.

Mr. Trudeau shuffled his cabinet this month in preparation for the incoming Trump administration, appointing former Trade Minister Chrystia Freeland as foreign minister. Meanwhile, in meeting with Trump advisers and Republican lawmakers, Canadian officials have tried to underscore the importance of the U.S.-Canada trade relationship, emphasizing that 35 states -- including rust-belt states, like Michigan, Ohio, Indiana and Pennsylvania, that voted for Mr. Trump -- count Canada as its top export market.

So far, Canadian businesses have taken a cautious, wait-and-see approach toward the new administration, reserving judgment until they begin to see new policies. Several important industries, led by motor vehicles and parts, have integrated supply chains across North America, said Jayson Myers, a Guelph, Ontario-based trade consultant and former head of Canada's main exporter lobby. Even if Canada isn't Mr. Trump's intended target, the country could still get hit from measures that complicate U.S.-Mexico trade, he said.

"If it becomes more expensive to do business across the supply chain, the companies will adjust their cost accordingly -- and if costs become too high, [firms] will just put product lines out of business. It would damage the entire North American economy," Mr. Myers said.

At a press briefing in Washington, Mr. Trump's press secretary Sean Spicer said the president wanted to meet with both Messrs Peña Nieto and Trudeau to relay his views on changes to Nafta. Mr. Trump and Mr. Peña Nieto are scheduled to meet at the end of the month, and Mr. Spicer said a meeting with Mr. Trudeau could unfold in the next 30 days.

Write to Paul Vieira at [e-mail]

(END) Dow Jones Newswires

January 23, 2017 20:12 ET (01:12 GMT)

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