NAFTA: Canada and Mexico need to stick together

Colin Robertson, The Globe and Mail, May 23, 2018

Another NAFTA “deadline” has passed, but the negotiations carry on. And that is what really matters. Canada and Mexico need to stick together, focus on their shared objectives and bear down for what now appears will be a more reasonable negotiating tempo.

The North American free-trade agreement negotiations seem to have gone on forever but, in fact, we have only been at it for 10 months. There have been eight rounds, a December “intercessional” and, in recent weeks, a series of sessions that saw Foreign Affairs Minister Chrystia Freeland shuttling back and forth for days in Washington.

 All this effort has resulted in considerable progress.

Negotiators have scoped out a framework that would include 30-plus chapters and half a dozen annexes. Mexican chief negotiator Kenneth Smith Ramos tweeted that nine chapters are now “closed”, although nothing is final until the whole deal is done. The negotiated chapters cover regulatory practices, administration, sanitary and phytosanitary measures, competition, small and medium-sized enterprises, anti-corruption, environment, energy, telecommunications and trade barriers. Sectoral annexes include chemicals and proprietary food formulas.

The U.S. side took as their starting point the Trans-Pacific Partnership (TPP) that, ironically, President Donald Trump withdrew the United States from after taking office. The Canadian and Mexican negotiators’ used the original NAFTA, arguing that if the U.S. wanted to achieve their TPP gains, they would have to negotiate it.

In recent weeks, negotiations have centred on auto-content rules. Supply chains have made car assembly the most traded commodity within North America. The U.S. wants 75 per cent North American content (it’s currently 62.5 per cent) with 30 to 40 per cent made with labour that is paid more than US$15 an hour. This would affect Mexican competitivenes; their auto workers’ wages average US$3-$4 an hour. Not surprisingly, they are loath to agree. They want a long phase-in period as well as concessions in other parts of the agreement,.

Some suggest that Canada should dump Mexico and then negotiate a bilateral auto agreement with the United States. This would be a strategic blunder. The 1965 auto pact was our first sectoral free-trade agreement and it guaranteed jobs and production in Canada. But it is just one piece in a much bigger and successful North American trading arrangement.

While trade with the United States under NAFTA has expanded threefold and the U.S. remains our preponderant trading partner, the hidden success story is the Canada-Mexico relationship. Mexico is now our third-largest trading partner. Canadians have made big investments in mining, banking and manufacturing in Mexico. And, after the U.S., Mexico is our favourite tourism destination.

During the long and ultimately successful negotiations to reopen the U.S. market to our beef exports – the country-of-origin labeling dispute – we worked in tandem with Mexico. Together, we utilized NAFTA and World Trade Organization dispute-settlement provisions. We formulated our retaliatory list together. We succeeded because we stuck together.

With the low-hanging fruit now harvested, the NAFTA negotiations are into the difficult issues. The auto-content rules are just the first. Mexican support will be vital to sustain dispute settlement and to preserve access for reciprocity in government procurement. We need to be united in pushing back on the sunset clause and preserving temporary entry provisions. And when the U.S. comes after us on supply marketing, patent protection and the threshold level for border duties, Mexican advice will be useful.

Mexico stood up for Canada when Justin Trudeau pirouetted in discussions with leaders in Da Nang, Vietnam, on what is now the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. Some were ready to toss Canada under the bus. The Mexicans persuaded them to give Canada another chance.

As part of our trade diversification strategy, Canada is reaching into the Americas. We want associate membership in the Pacific Alliance (Mexico, Chile, Peru, Colombia) and Mercosur (Argentina, Brazil, Paraguay, Uruguay). Do we think that leaving Mexico in the lurch would help us in these negotiations? The 33 nations south of the Rio Grande also represent a quarter of the votes we need in our campaign for a United Nations Security Council seat.

The Trump approach is to divide and conquer. Ending our alignment with Mexico would play right into U.S. hands. There is still much more that unites Canada and Mexico and much more to be gained by working together. Let us recall Ben Franklin’s advice to those framing the U.S. Declaration of Independence: “We must, indeed, all hang together, or most assuredly we shall all hang separately.”

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Canada USA Relations

‘It’s a very dangerous political place to be for the Conservative Party,’ Ambrose warns Tories not to attack Liberals on NAFTA

By JOLSON LIM      
NAFTA advisory council member Rona Ambrose and other panelists also paint a gloomy picture of future Canada-U.S. trade relations and of U.S. President Donald Trump’s impact on the free trade consensus.
Moderator Colin Robertson, former Quebec premier Jean Charest, former interim Conservative leader Rona Ambrose, and former Chrétien-era communications director Peter Donolo, pictured May 8 on a panel at the Canadian Global Affairs Institute conference at the Rideau Club. The Hill Times photograph by Andrew Meade

OTTAWA—Former interim Conservative leader Rona Ambrose is warning the federal Tories to watch their attacks on the Liberals over the crucial NAFTA renegotiations because it could make them look “anti-Canada” which is not a big “vote-getter.”

“It’s a very dangerous political place to be for the Conservative Party of Canada to attack the Liberal government, which is working hard to come to a deal that’s in the best interest of Canada,” she told a packed room Monday at the Canadian Global Affairs Institute conference at the Rideau Club. “That would mean almost like you’re having to look like you’re taking the other side, which is Donald Trump’s side. That is not a politically smart place to be.”

Ms. Ambrose, who is now a Liberal-government-tapped member of the NAFTA Advisory Council and is based in Washington, D.C., with the Wilson Centre, said the NAFTA issue doesn’t garner a lot of votes and it isn’t a No. 1 issue for constituents or even the No. 10 issue. Ms. Ambrose was speaking at a panel discussion called ‘Positioning Canada in the Shifting International Oder.’ The panel focused on managing Mr. Trump’s ‘America First’ approach to foreign affairs and international trade, moderated by former diplomat Colin Robertson.

Ms. Ambrose was responding to Peter Donolo, former longtime communications director to former prime minister Jean Chrétien, who told the same audience that he believed the political consensus on NAFTA will eventually disappear and that Canada-U.S. relations will become a “live issue” again.

He said U.S. President Donald Trump’s approach to politics, often based on demonstrating “his opponent’s face has been grounded into the dirt” and humiliated, will not go over well with Canadian politicians.

“The term win-win is not in Mr. Trump’s lexicon,” said Mr. Donolo, now vice-chairman of Hill and Knowlton in Toronto. “I don’t think Mr. Scheer or Mr. Singh, who have been part of this elite consensus on NAFTA negotiations, are then going to congratulate Prime Minister Trudeau and his government for a great deal on the NAFTA renegotiation when that’s not the way politics works.”

Mr. Donolo predicted the political atmosphere is going to look like how it was when the United States invaded Iraq in 2003, when political parties were split on whether to participate in the conflict.

He pointed to how Mr. Trump’s rhetoric and actions have swayed Mexican politics, where leftist leader Andrés Manuel López Obrador is now leading in polls and is running on challenging Mr. Trump.

“There will be firm sides drawn and there won’t be a national consensus issue; where it will end, I don’t know. It’s not a healthy development.”

Ms. Ambrose, Mr. Donolo, and Jean Charest, former Quebec premier and Progressive Conservative leader, all spoke in Ottawa while Foreign Affairs Minister Chrystia Freeland (University-Rosedale, Ont.) and trade officials are in Washington for another critical round of talks, the last such discussions before renegotiations are halted to accommodate for presidential elections in Mexico in July and the midterm congressional race in the U.S. in November.

The negotiations fall under a global political backdrop of right-wing, populist, and trade-skeptic movements rising in many western democracies, including the United States, the United Kingdom, and France.

But in Canada, conservative politicians haven’t swung to the hard right and remain enthusiastically supportive of free trade, despite the belief, including from Ms. Ambrose, that movements in other countries have influenced some Canadians.

While Ms. Ambrose said she remains optimistic that a trade deal can be reached, she also painted a gloomy picture of Canada-U.S. relations, even if Mr. Trump doesn’t receive a second term in 2020.

“This romantic notion that the Americans are our best friends and biggest allies; that’s not the reality anymore,” she said.

“That’s not how they’re treating us in the trade arena. It’s how they’re treating us in other arenas. And it speaks to the fact we have to recognize their agenda, when it comes to ‘America First,’ is Canada is not just second, Canada’s maybe third, fourth, or maybe fifth down the line.”

Ms. Ambrose also said she doesn’t believe that Mr. Trump’s politics will be confined to one-term or that he’s a one-off politician the country won’t ever see again.

“I think the people who support him are alive and well and in fact growing, the type of politician that he is. We see some of these elements right in our own country. We see it in a number of western democratic countries,” she said.

But she also noted that a recent deal between the U.S. and South Korea was celebrated as a victory by both governments, possibly signalling that the Trump administration won’t take as hardline of an approach to trade deals in the future.

Ms. Ambrose said striking a deal on auto parts in the ongoing round of negotiations would mark a major breakthrough because it would give Mr. Trump a major political victory and a win for his political base, located in the country’s industrial heartland.

“If we can get something around autos, which is the absolutely sweet spot for Donald Trump…I think that is a win-win for Canada and the U.S.,” Ms. Ambrose said. “And I don’t think we’ll see him rub our faces in the dirt over that.”

Ms. Ambrose said Trump voters don’t care about wonkier issues such as the Chapter 19 dispute resolution mechanism, but striking a deal on auto parts will leave negotiations in better shape heading into election season.

“I’m a little more optimistic if those are the last things on the table,” she said. “As a politician, you’re looking at these things and going ‘Okay, we really want to get rid of Chapter 19, but what is that going to gain me in the states where I need votes.’ Not much because they don’t even understand it.”

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NAFTA After Washington ministerials

The Vice-President of the Canadian Global Affairs Institute says participants in a discussion aimed at modernising the North American Free Trade Agreement have become highly invested in successfully concluding the negotiations

Negotiations aimed at rewriting NAFTA continued last week and are expected to resume again in about a week.

Colin Robertson, the Vice President and a fellow of the Canadian Global Affairs Institute, says we’ve seen, for the first time in 25 years, a gathering together of support in the United States saying let’s keep NAFTA. Polling will tell you that most Americans favour free trade with Canada and Mexico and see it working in their interests.

Colin Robertson discusses the recent round of negotiations:

“We’ve just concluded a marathon session of ministerial meetings in Washington, and the main subject of discussion was rules of origin surrounding the most traded commodities in question.

“We’ve closed the chapters on some significant subjects such as sanitation, phyto-sanitation and environment, and we’re close to closing the chapters on content rules on barriers to trade on important commodities.

“Donald Trump ran saying that NAFTA was the worst deal ever and threatened to tear it up on day one, but now, on day 100, I think there’s an appreciation within the administration that NAFTA would serve their interests and I think the administration has invested a significant amount effort into these negotiations.

“We’ve had eight formal rounds and effectively a ninth round and I think there’s a sense on the administration’s part that, if they can get a deal, it would serve their political interests, their political constituencies, particularly farmers and auto workers so I think they would like to now have a deal but it has to be under their terms.

“From a Canadian perspective, there’s broad agreement across Canada that NAFTA has worked for Canada and that we would like to continue it.

“This is shared across party lines and all premiers have been involved in pushing their counterpart governors and members of the legislature at the state level to underline how important the agreement is to their interests.

“Farm groups have also been involved in this; business groups; labour unions have also been making the case from the Canadian side to their American counterparts.

“There’s been a similar exercise conducted by the Mexican government and that is having some effect.

“We’ve seen for the first time in 25 years a gathering of support in the US, saying let’s keep NAFTA – they do think that having a trading relationship with Canada and Mexico does make some sense.”

 

As reported by Bruce Cochrane, Farmscape.Ca

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