Canada

How smaller nations can sway global conversation

The Canadian who led negotiations on the new NAFTA is on a mission to change the rules of trade.

Steve Verheul shakes hands with a man while smiling.

OTTAWA — Steve Verheul, the legendary Canadian negotiator, is on a mission to transform international trade policy.

Few bureaucrats in Ottawa can claim a global network that rivals Verheul’s Rolodex of policymakers, business leaders, lobbyists and fellow deal-makers. He’s launched a second act outside of government.

Verheul is now a principal at GT and Company, a strategic advisory firm, and a fellow at the Public Policy Forum think tank.

His CV includes long stints in crucial roles: Canada’s top agriculture negotiator at World Trade Organization talks; chief negotiator in free trade negotiations with the European Union; and the same role in the fractious NAFTA renegotiations that punctuated Canada-U.S. relations in the Trump era.

When he sat for a rare media interview, Verheul had some stories to tell POLITICO. Here are five takeaways from that conversation:

1. Global trade policy must get more ambitious about climate

Canada’s most recent agreements — with the Europeans, Americans and trans-Pacific nations — feature full chapters on the environment, but they didn’t address the bigger issue. “If a government is taking actions for environmental reasons, in many cases, it’s making itself less competitive than some of the other countries it’s trading with, who may not be doing those kinds of things.”

The most important issue today: How do you maintain a proper competitive relationship between countries if one is doing a lot more on the environment than another one is?

2. Canada can work with smaller nations to force major power trade concessions

The WTO agricultural negotiations that collapsed in 2008 still offer a blueprint for modern trade relations. Back then, Canada teamed up with smaller players to force concessions on agriculture subsidies. Here’s how Verheul says they engineered a win:

“Without the U.S. and the E.U. in the room, or Japan, we agreed the E.U. should take the biggest cut. It was 90 percent. Japan would take the second biggest cut. It was 80. The U.S. would take a 70 percent cut, and everybody else on the developed world side would take 60 percent. Developing countries even less. Obviously not proportionate.

“You could argue it’s not fair. But it would have the biggest impact in terms of addressing the issue. We developed that internally with a few other countries. Eventually brought it to the U.S. and the E.U. and Japan and others.

“The E.U., because it fit their domestic agenda, agreed right away. The U.S. was somewhat reluctant, but because they had a somewhat lower number in our proposal than the Europeans, they figured that they could make that cut. Japan was very reluctant and somewhat unhappy, but recognized they couldn’t oppose it if the U.S. and E.U. were going to be onboard.”

3. Canada has to get creative outside of formal trade structures

Major powers will always be talking to each other, but the lack of a productive WTO means a country like Canada must take the initiative — gather informally with like-minded countries and reach consensus on ideas before pitching them to the biggest economies.

“You really have to make an extra effort to initiate that, given that you’re not all sitting around tables in Geneva on a regular basis,” he said. “The potential is still there to get that kind of discussion going.”

4. Talk is cheap, but the payoffs are huge

Verheul never turns down a stakeholder meeting request. His goal was always to talk to everybody with skin in the game, including those who disagreed about divisive issues such as supply management — not to mention provinces and territories sometimes at odds with each other.

The goal was unity at the Canadian table. Verheul says no country consulted nearly as much — not even the Americans, whose stakeholders he regularly briefed during NAFTA renegotiations.

“You start to converge. And at the end of the day, you tend to end up with a strategy that’s going to have buy-in on all sides. I’ve always felt that gave us a huge advantage in any negotiation,” he said. “We were a fairly unified force on the issues. I would get these requests, often at midnight or past midnight, to meet with stakeholders.”

5. Breakdowns lead to breakthroughs

Verheul relayed an anecdote from Comprehensive Economic and Trade Agreement negotiations with the Europeans. He was bargaining with Mauro Petriccione, a giant of European trade whom Verheul said was “a really great counterpart and a good friend.”

They were talking about a “rather difficult issue” when suddenly the meeting came to an abrupt stop.

“I wasn’t showing the kind of flexibility he was looking for. He slammed his books down, and stormed out,” said Verheul.

The punchline: “He stormed out of his own office.”

The Canadian didn’t budge. “I figured, well, we’ll just stay here. I’m sure he felt a little bit sheepish having to return to his own office, having walked out. And then we got back to work.”