The most important item on Prime Minister Martin’s agenda will be to win back the trust and goodwill of president George W. Bush. The current government has squandered Canada’s vital foreign political capital because it put too much stock in the ‘Have Your Cake And Eat It’ model of Canadian sovereignty and has become careless about the personal dimension of the relationship.

In 2002, 85% of Canadian exports went to the U.S. market while producers there supplied 75% of all Canadian imports. The total value of this two-way trade today amounts to three quarters of Canada’s gross domestic product. The ‘Have Your Cake And Eat It’ model holds that Canada can have a completely dependent trade and economic relationship with the United States and at the same time pursue policies that are mostly contrary to the foreign, security and defence goals of the United States. The fantasy of this model includes the notion that Washington has no problem with our foreign policy independence and derives so much benefit itself from our trade ties that it would not consider linking some of its foreign and security pain back to the bilateral relationship.

The current divergence has not always been that way. After World War II, Canada worked constructively to broker great power compromises such as NATO, while trade convergence was half of what it is now. Somewhere in the 1970s the lines crossed: we became trade dependent and began to push for even greater international divergence. As CUFTA and NAFTA consolidated strong economic ties, so the 1990s saw the Canadian government bent on proving a foreign and security policy that opposed American policy. Ottawa helped push through Landmines and International Criminal Court treaties enjoying its multilateral empowerment. It opposed missile defence and then the war in Iraq.

One would expect the government of Canada to be at least tremendously cautious with the top personal relationship with Washington. Not so. Ottawa rooted for Gore and then thought it could function as a kind of Canadian loyal opposition to Republican America. Messrs. Cheney, Rumsfeld, Powell know the old game and the new game. In the old Cold War game, Canada’s ‘free rider’ defence status and troubadour foreign policy did not matter to the basic power equation between Moscow and Washington. In the 1990s, Canada’s enthusiastic contribution to everybody’s attempts to constrain the USA were noticed. In the election of 2000 and afterward, the Liberal governments’ disrespectful glow about Bush and his administration registered very clearly.

September 11, 2001 blew away the rest of the ‘Have Your Cake and Eat It’ house of cards. Now the United States wanted capability on our side to defend the continent and wanted close cooperation in continental security and our political support in the war on international terror. Most of Canada’s reaction was organized reluctance. We said ‘no’ or ‘not yet’ to expanding integrated continental air defence to include sea and land defence. The Bush administration started to play hardball. Through regulatory control and administrative fiat it showed it could close down the border. Top bilateral relations were put on hold. Few bilateral grievances could be smoothened out. Canada was snubbed in a major new initiative on counterproliferation. When the Bush administration was asking us quietly whether we would send Peacekeeping forces to Iraq afterwards, we quickly sent the last possible stretch of our forces to Kabul. They noticed.

The worst thing the Paul Martin team can do is wait and see if Bush will be reelected in 2004. Despite Bush’s current challenges, the media hype about his imminent demise is just that. The Bush campaign has seen it before. Bush was underestimated in 1994 when he beat Ann Richards and again in 2000 when he beat Al Gore (Yes, a Washington Post/University of Michigan study in the fall of 2001 verified Bush’s victory in Florida). Bush has big money ready to change the debate just after the Democratic contenders are finished slaughtering each other early next summer. The American economy is mixed and upbeat enough for Bush to genuinely promise better times. On Iraq, the Democrats have shot themselves in both feet. They voted for both the measure to go in and for the $87 billion to pay for it till October 2004.

With the rising loonie, Canada needs to eek a few more percentages of prosperity out of its relationship with the United States. Canada could make progress on the resources sector and on ironing our regulatory differences. But before you can do anything in Washington these days, you must rebuild the personal relationship. Then, you might package a trade deal inside an overall security arrangement to make it of interest to the American side. Paul Martin should have a plan ready to put on the table in the Oval Office in January 2005.