Softwood Lumber and NAFTA Hearings

There’s no summer vacation for Canada on the trade file

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House Committee International Trade: The relationship with Mexico

Standing Committee on International Trade


NUMBER 069 
l
1st SESSION 
l
42nd PARLIAMENT 

EVIDENCE

Thursday, May 18, 2017

[Recorded by Electronic Apparatus]

 

Thank you, Mr. Chair.

    My remarks will cover the upcoming trade negotiations, the Canada-Mexico relationship, and the need for middle powers like Canada and Mexico to stand up in support of the rules-based, liberal international system.

    With regard to the North American accord, we need a new North American accord. NAFTA worked to the benefit of all three parties—Canada, U.S.A., and Mexico—but it is time to bring the NAFTA negotiated before the digital age and the arrival of e-commerce into the 21st century.

    The trans-Pacific partnership would have largely accomplished this, but the Trump administration has withdrawn from this Obama administration initiative, so we need to adjust to the current circumstances. A new agreement would include and set the standards in emerging areas like e-commerce and the growing digital trade. We can also make improvements to integrate into the agreement standards on labour and the environment.

    We need to address labour mobility, including the mutual recognition of accreditation. Then we can make maximum use of the talent pool that North America enjoys, but that we need to harness, to make us the most competitive region in the world. This means provision for trade adjustment so that those who are displaced by trade decisions or by efficiency improvements in automation, robotics, and artificial intelligence are guaranteed the opportunity to improve their skills or have training in another area. In doing so, we have the opportunity to create, just as NAFTA did in its time, the new model for trade agreements: a realistic but progressive trade agreement that gives a helping hand to those who are displaced or who lose out.

    A trilateral trade negotiation leading to a new North American economic accord would respect the sovereignties of the three nations. It would be a very different model from that of the European Union with its centralized and heavy bureaucratic oversight. Rather, we would continue with the current approach of ad hoc working groups to ensure and evergreen the agreement to allow for continuous improvement in areas like transportation.

    In the coming weeks, we’ll hear a lot of noise and nonsense about Canada and Mexico out of Washington. We need to distinguish between what is real and what is theatre. To paraphrase the great Gretzky, we need to go “where the puck is going”, and keep our eyes on the net and on the goals that we want and can score.

    With regard to Canada-Mexico, NAFTA transformed the Canada-Mexico relationship from one of cordial distance based on a shared neighbour into that of family. Today, there is an annual, increasing flow of two million Canadians to Mexico, especially during the winter months. Canadian investment, mining, manufacturing, and banking have increased manyfold, while trade has more than tripled—even faster than with our traditional partners in Europe and Japan. Today, Mexico is our third-largest trading partner, but it’s not reciprocal. Mexican investment in Canada never took. There is one notable exception: Grupo Bimbo’s acquisition of Canada Bread in 2014. It now operates 17 bakeries and employs over 4,000 across Canada.

    The imposition of the visa in 2009 affected more than half of Mexican travel to Canada, effectively chilling tourism, study, and investment. The lifting of the visa this past December and its replacement with the electronic travel authorization has resulted in a significant increase in Mexican travel to Canada. We are already reaping rewards and more tourists, but we should be doing more in terms of tourism promotion. We expect more students, especially given President Trump’s comments about building a wall on the Mexican border. We should encourage recruitment visits here by middle and high schools, university and vocational schools, and provincial education ministers.

    Beyond students, we could do a lot more in joint research projects in manufacturing and agri-food. In the longer term, ease of entry into Canada would also generate more investment, but we need to target Mexican investment that matches Canada. Most promising are the automotive and automotive parts sector and the energy and energy services sector.

    Goldman Sachs estimates that by 2050, Mexico will overtake China in terms of per capita GDP. There is already a middle class of 40 million in Mexico. Mexico is our springboard into the potential of the Americas. We already have preferred observer status in the Pacific Alliance that includes Mexico, Peru, Colombia, and Chile. In the short-term, before the end of the year, Prime Minister Trudeau should lead a “Team Canada” mission with premiers, business leaders, and university presidents to Mexico to deepen Canada-Mexico relations and to underline our solidarity with Mexico in negotiating a new North American accord.

    The picture of solidarity, Mr. Trudeau with President Peña Nieto in Mexico City, would be appreciated in Mexico. Its significance would also be recognized in the United States, and it would give encouragement to our many allies in the Congress, the states, the business community, and even within the Trump administration.

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    A vigorous partnership with Mexico is already working to our mutual benefit, but we still have to realize the full potential of the Canada-Mexico relationship.

    In terms of worry about middle powers, we live in a world of disarray. The rules-based, liberal international system and supporting architecture that Canadians helped engineer in the period after the Second World War has kept the peace and created the conditions for extraordinary growth and prosperity. Today, it is under strain and in need of reform and rejuvenation, and the middle powers need to step up. China and Russia would like to see a return to spheres of influence and a concert of great powers. This would not serve Canadian or Mexican interests.

    The United States, which guaranteed this system and built it on its military might, wants more burden-sharing by like-minded states. This we must do, because the hard truth is that the U.S. carries and sustains the system under which Canadians and Mexicans have thrived. We need to stand up with like-minded middle powers such as Mexico and reaffirm our support and commitment to the rules-based, liberal international system. A new, progressive approach to sustainable trade and labour mobility in partnership with Mexico and other democratic middle powers is the place to begin the necessary reform and rejuvenation.

    Thank you, Mr. Chair.

 

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NAFTA Renegotiation: The Process

What it’ll take to renegotiate NAFTA

The “worst trade deal” in U.S. history, as President Trump refers to the North American Free Trade Agreement, may get a shake-up soon.

The Trump administration wants to renegotiate the 23-year-old trade deal, the first of many steps standing between Trump’s promises and actual changes to the document.

The process won’t be easy. Negotiators will have to consider the wildly different political environments in Canada, the United States and Mexico. And by extension, they’ll have to navigate the myriad business interests that will lobby for favorable tweaks. Throw in the 2018 midterm elections in the United States and the presidential election in Mexico, and experts think the process could take years.

Here’s what lies ahead

The process begins

in the U.S.

Meanwhile, Canada

begins their plans

… and so does Mexico

President Trump will send Congress formal notice of his intent to renegotiate NAFTA. This will set a start date for the negotiations and list specific changes he wants to make to the trade deal.

Canada’s process is less formal. The negotiating team will consult with the provinces — which have a good deal of power in Canada and may have to eventually implement some of the agreement’s provisions — and relevant industry leaders.

 

Mexico’s setting of priorities largely occurs behind closed doors. The negotiating team traditionally confers with private-sector leaders, most notably the Consejo Coordinador Empresarial — similar to a Chamber of Commerce — though this is not legally required.

 

Congress then has at least 90 days to review the president’s memo and offer suggestions. The bulk of this review occurs within trade negotiation subcommittees in the House and the Senate, but other committees that cover trade-sensitive products will weigh in, too.

Its Parliament is largely looped out of the process. Because it’s controlled by the same party as the prime minister, Parliament’s approval of the final deal is all but ensured.

 

The negotiators will also confer with members of Congress, especially those whose constituents rely heavily on exports to the United States.

Finally, all three countries meet for negotiations

Representatives from the three governments — probably the U.S. trade representative for the United States, the minister of foreign affairs for Canada and the secretary of foreign affairs for Mexico — will begin negotiations.

This process could take months or even years, and the representatives will continually be consulting with their home country’s political leaders to adjust priorities and check in about concessions. Once they come to an agreement, the deal will go back to the countries’ legislatures for implementation.

Congress votes

Parliament votes

Congress votes

Both houses of Congress will give an up-or-down vote on the new trade agreement. No amendments are allowed.

Both houses of Parliament will give an up-or-down vote on the new trade agreement. No amendments are allowed.

 

The Congress will vote on the agreement if it contains substantial changes. If the changes are more superficial, the president alone has the authority to implement the new agreement.

If necessary, state, province and local governments will then pass laws that implement the agreement. This is most likely to occur in Canada, where power is much less centralized than in the United States and Mexico.

What happens if negotiations fail?

It is possible, though experts think it’s unlikely, that this process will fail — that the countries will be unable to reach a deal and NAFTA will fall apart.

“Canada is so dependent on the U.S., they simply have to have a deal,” said Philip Cross, a trade researcher at the Canadian nonpartisan Fraser Institute. And Mexico is in a similar economic position.

The United States has a wider variety of trading partners and is therefore less dependent on NAFTA, but for many U.S. industries, such as agriculture, the trade agreement is still vital to staying afloat.

But if negotiations fall apart, countries could withdraw from NAFTA with a simple six-month warning, the same process Trump came a few meetings and a U.S. map away from triggering.

Correction May 4, 2017: A previous version of this article misstated that there is a 60-day warning before a country can withdraw from NAFTA. It is, in fact, six months.

Sources

Mexican process informed by Alvaro Santos, a law professor at Georgetown University, and Fausto Hernandez Trillo, an economics professor at Centro de Investigación y Docencia Económicas. Canadian process informed by Philip Cross, a trade researcher at the Fraser Institute; Colin Robertson, a former Canadian diplomat and vice president at the Canadian Global Affairs Institute; and Andrea Kay Bjorklund, a law professor at McGill University. U.S. process informed by Monica de Bolle and Gary Hufbauer, fellows at the Peterson Institute for International Economics. Noun project icons from H. Alberto Gongora, Illarion Gordon, Antoine Dieulesaint, Shashank Singh, Chelsea Carlson and Gregor Cresnar.

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NAFTA Renegotiation

NAFTA GETS NASTY

Wendy Mesley reports on how trade between the U.S. and Canada got some unwanted attention this week

http://www.cbc.ca/news/thenational/nafta-gets-nasty-1.4091817 00:00 05:29

Screen Shot 2017-04-30 at 3.04.47 PM

Common interest will ensure Canada-U.S. trade conflicts get solved: Chris Hall CBC

Beyond the ‘noise’ of Trump’s rhetoric are compelling interests for trade co-operation, experts say

By Chris Hall, CBC News Posted: Apr 29, 2017 5:00 AM ETLast Updated: Apr 30, 2017 2:35 PM ET

NAFTA renegotiations won't be completed quickly, says former ambassador to the U.S. Raymond Chrétien, which provides an incentive for the Trump administration to complete a deal with Canada on softwood lumber.

NAFTA renegotiations won’t be completed quickly, says former ambassador to the U.S. Raymond Chrétien, which provides an incentive for the Trump administration to complete a deal with Canada on softwood lumber. (Sean Kilpatrick/Canadian Press)

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Sunday Scrum: Mixed signals on NAFTA 9:45

Poster of video clip

Canada remains confident a deal can be reached with the United States on softwood lumber without repeating the drawn-out trade litigation of the past.

Natural Resources Minister Jim Carr says reaching a new long-term deal is the best option, even as he repeats his warning that jobs will be lost in Canada as a result of the U.S. lumber industry’s lobbying for new duties on Canadian imports.

“The complications are that you have lobbies at work, lots of political pressures. But our experience is, in all of these conversations, at every level of the United States government and beyond … people see the common interest.”

The U.S. Commerce Department imposed preliminary duties of between three and 24 per cent on Canadian softwood imports this week. More anti-dumping duties are expected in the future.

‘We won’t sign a bad deal’

Trump’s Commerce Secretary Wilbur Ross said that the White House had hoped to get this dispute out of the way before NAFTA negotiations begin.

Michael Froman, who served as former president Barack Obama’s top trade negotiator, told CBC News that a deal was in reach, but the Canadian side felt it could get better terms with Trump.

Trudeau Trump 20170213

Prime Minister Justin Trudeau and President Donald Trump shake hands after a joint news conference at the White House in Washington in February. (Sean Kilpatrick/Canadian Press)

But in an interview with CBC Radio’s The House, the natural resources minister said there was “no good deal possible from the Canadian perspective” with the Obama administration.

“We weren’t prepared to sign a bad deal. We won’t sign a bad deal. If we have to wait it out we will,” said Carr. “And we’ll use all the options available to us, but I don’t think that’s in the interests of either Canada or the United States.”

Even so, Carr believes there’s an opportunity to get a deal. It’s a view shared by Quebec’s lead negotiator, Raymond Chrétien, who served as Canada’s ambassador to Washington in the 1990s.

“I’m confident that there’s a window perhaps for a negotiated settlement for the following reason: Mr. Trump has indicated that he wanted a quick … renegotiation of NAFTA, but this is not possible in my view,” Chrétien said.

“So why not solve the lumber dispute before you tackle the more comprehensive, complicated NAFTA negotiations? So hopefully there’s a small window there, and I’m sure that in Ottawa they would welcome a softwood lumber deal.”

Pushback from U.S. exporters

Softwood is not the only trade irritant Trump is highlighting. He’s blamed Canada for being unfair to American dairy producers. He’s still threatening to rip up the North American Free Trade Agreement unless he can negotiate a fair deal for American workers.

USA-TRUMP/MONUMENTS

Trade experts say U.S. President Donald Trump’s aggressive posture on trade has alarmed the U.S. agriculture sector, which relies on foreign markets. (Kevin Lamarque/Reuters)

Laura Dawson, director of the Canada Institute at the Wilson Centre in Washington, D.C., said Trump’s rhetoric this week claiming NAFTA has been horrible for the U.S. and a disaster doesn’t match the reality that the trade deal “has been pretty darn good” for the U.S.

“When Donald Trump’s announcements were coming out this week, the U.S. agriculture sector pushed back really hard. U.S. farms depend on exports to Canada and Mexico, and they were having none of this. So he’s gotten a lot of pushback.”

Dawson said the Trump Administration is trying to stir up American opposition to free trade following the failure to get rid of Obamacare and as it meets congressional opposition to a budget plan.

That’s why Dawson thinks Trudeau’s approach is the right one, reminding Trump in one of their phone calls this week of the negative impact that scrapping NAFTA would have on jobs and businesses on both sides of the border.

Partner with Mexico

Dawson said Canada should also work with Mexico as both countries prepare to discuss changes to NAFTA.

Trump Trade

Mexican President Enrique Pena Nieto shakes his fist as he talks about the value of made-in-Mexico products. Canada and Mexico should work together in advance of NAFTA talks, says trade expert Laura Dawson. (Rebecca Blackwell/Associated Press)

“Mexico has really strong retaliatory power in the United State. Every bit of corn the U.S. exports is bought by Mexico. If they stop buying U.S. corn that would be a big deal for U.S. agriculture. Similarly, the security front — if they stop co-operating on the U.S. southern border … that’s a big deal for the United States.

“So I think Canada needs to be a partner for Mexico.”

Colin Robertson, a former Canadian diplomat in the U.S., wrote this week for the Canadian Global Affairs Institute that managing the Trump file — and getting it right — has to be Trudeau’s first priority.

“While much of Mr. Trump’s rhetoric is merely noise, what is dangerous about the noise is the effect it is having on business confidence, both domestic and foreign.”

What’s gone beyond noise now is the dispute over softwood lumber. Carr said the federal government is prepared to assist those in the forest sector who are affected.

“There will be closures. Sawmills will be under pressure. But nothing yet is certain except that we are prepared with a number of policy options that we will work out with our provincial counterparts, and we will be ready.”

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NAFTA and the Next Election

The next big federal election agenda item has been set: Trump and trade

By the time Canadians next go to the polls, all the players will be lined up to fight over the biggest trade agreement in a generation

US President Donald Trump and Canadian Prime Minister Justin Trudeau hold a joint press conference in the East Room of the White House in Washington, DC, February 13, 2017. (Saul Loeb/AFP/Getty Images)

Here we go again. Another federal election that will hinge on free trade.

This is not so much a prediction as it is a simple matter of following the timelines. By 2019, the next federal election, the NAFTA re-negotiations will either be in the dramatic end game or the very contentious ratification phase. The Liberal government will be consumed by the deal, as it already is today. The Conservatives and the NDP will both have new leaders desperate to define themselves by the biggest economic deal of a  generation. What to protect and what to give up? Unions will want a new deal on car manufacturing and will try to stick it to Mexico. Dairy farmers in Quebec will be fighting for supply management. You will hear the phrase “country of label origins” so often it will sound like the name of a band. Softwood lumber, beef, pharmaceuticals—oh, the lawyers are already priapic at the possibilities. We’ll even have the soundtrack of Brian Mulroney singing “When Irish Eyes Are Smiling” to Donald Trump. Get ready to negotiate like it’s 1988.

“At the earliest I think the renegotiation—with or without Mexico—will take at least a year, probably 19 months,” says Colin Robertson, the vice president of the Canadian Global Affairs Institute and a former diplomat who implemented NAFTA back in 1993. “After that we have to go for ratification, which adds on another year plus. My guess is that NAFTA, or whatever we call it, doesn’t get wrapped up until spring or summer 2019, meaning it will be front and centre in our October 2019 election.”

READ MORE: A Trump trade war with Mexico would be a disaster for both sides

But wait. Isn’t this all supposed to unfold a lot quicker than that? Didn’t Donald Trump say this was just a matter of a few “tweaks”? How long could that take? Isn’t Trump all chummy with Justin Trudeau over their Women’s Business Council?

If you believe that then you might as well believe your microwave is spying on you. Just listen to the Trump people who are in charge of the NAFTA renegotiation. They are not predicting a trade war with us; they believe they are already in one. We just refuse to believe it.

“We’ve been in a trade war for decades,” new U.S. commerce secretary Wilbur Ross told Bloomberg News recently, as he clarified why the U.S. is launching a radical series of trade negotiations that will include a head-on collision with China and ripping up NAFTA. Comparing trade negotiations to war is standard fare for the Trump administration, where hyperbolic, confrontational rhetoric is the vernacular. Turns out the art of the deal is really a euphemism for an eye-gouging brawl.

Ross and Trump are obsessed with the dangers of trade deficits. It is their white whale and they’re likely just as mythical. The fact is, most economists agree that trade deficits are not necessarily bad for the U.S. economy nor do they reflect some camouflaged version of a trade war, as Ross asserts. There are many reasons why the U.S. imports more than it exports, and some of those reasons actually help the economy. But billionaires like Trump and Ross don’t trifle with details. Every minor issue is elevated to its maximum threat level, so a trade imbalance becomes a trade war. That’s why when Trump casually remarked that the coming changes to NAFTA will merely be “tweaks,” he was so off brand. Trumps don’t tweak, they transform—or, at least, they say they will. Ross has now corrected the record. “It’s not going to be a shooting war,” he continued to Bloomberg, as if the bench mark for an acceptable negotiation was merely a lack of bullets. “If people know you have the big bazooka, you probably don’t have to use it.”

So there it is. Either Wilbur Ross has a bazooka in his trade pocket or he’s just really excited to negotiate with Canada. Whatever it is: by his own admission, a trade war is coming. That warning was reiterated this week during the confirmation hearing for Robert Lighthizer, the incoming trade secretary. Both Republicans and Democrats pressed him to crack down on trade with Canada, including digital piracy, counterfeit products and softwood lumber. “I’ve had a variety of issues with respect to Canada that have been raised by senators,” Lighthizer said. “There are a number of things we have to address with respect to Canada.”

None of this is a surprise to Team Trudeau. They have done the pragmatic thing and fanned out across the U.S. this week like the snowstorm Stella itself—blanketing politicians with information about the benefits of an open border and free trade with Canada. To their credit, they have not been lulled into complacency by the purring of the Trump lions. They have set up a special Trump team inside the PMO, shuffled the cabinet to get competent and connected people like Chrystia Freeland and Andrew Leslie in key spots, and taken advice from everyone who can help, from Derek Burney to Brian Mulroney. Conservatives I have spoken to have grudgingly acknowledged that the PM is doing all the right things.

The only person griping is NDP leader Tom Mulcair, who believes that unless Trudeau is out there calling Trump a fascist, he’s nothing more than a quisling. Mulcair can say stuff like this because he’s now in his Easy Rider phase, wildly gunning it down the last miles of his political highway and sticking it to the man. Go man go. He deserved better from his party and if he wants to bring back some hippie anger to the NDP, damn the consequences.

READ MORE: Why Canada—and its economy—has plenty to fear from Trump

For the Prime Minister, though, all things must be put through the political calculator, especially with Canada’s largest trading partner. We don’t get to pick the U.S. President any more than we pick our own parents, so Trudeau’s tactical charm offensive is a legitimate response. This week the Prime Minister is in New York to reinforce the close bond of Canada and the U.S. during 9/11. Last week he was in Texas at an energy conference talking about oil. Meanwhile, other ministers, MPs and premiers are hitting 11 states, from Kentucky to Wisconsin, Indiana to Florida. It’s better to jaw-jaw than war-war, as Winston Churchill liked to say.

The problem is, it might not make much difference. The next election will still be about the trade deal: What was won, what was lost, what concessions were made, what victories were gained. Look at the timeline. The President needs to gives Congress 90 days’ notification in order to kick start the renegotiation of NAFTA, but he can’t rush too much because Wilbur Ross’s team still isn’t in place. Still, for the sake of argument, let’s follow Ross’s “bazooka approach”—the fast-track option—and assume the President gives notice in the next few weeks. Then what?

Here are the blocks of time you have to bake into the process at the bare minimum. Congress needs 180 days’ warning before signing the deal, as the Globe and Mail has reported, and another 105 days for the International Trade Commission to look over the deal and put out a report. Then there is another 6o-day period for amendments. That’s already 435 days, deep into 2018—and that’s if everything goes smoothly.

No serious person thinks it will go smoothly, even if Congress tries to fast-track the timelines. Contentious issues like softwood lumber, automobiles and, wait for it, water, could blow this thing up. The free trade deal with the European Union took years and it was almost derailed by the Walloons. We don’t even know who the U.S. version of the Walloons will be, but in America, Walloons are super-sized, so expect a few hurdles. Just look back at the former trade deals with the U.S. as precedent.

“We finished negotiations of the Canada-U.S. Free Trade Agreement in October 1987 and then made some more changes in December before signature in January 1988,” says Robertson. “Then we fought an election on it. Then on NAFTA we finished negotiations in early 1993 and put it through the implementing legislation, finishing in June 1993. Then came the October election and we had to do the labour and environmental accords. Clinton only got the U.S. Congress to pass it in November 1993, a year after he was elected and signed in December.”

Talking to Robertson about trade timelines makes a mockery of the idea that there are simple tweaks out there. There aren’t. The first U.S.–Canada Free Trade Agreement took four years. When we brought in Mexico to make it NAFTA, it took another four years. The Trans Pacific Partnership, which Trump just crushed, has been 11 years in the making. People talk about the Doha Development Round, which started in 2001, as if was a mythical character in a box-office flop called Fantastic Trade Beasts and Where to Find Them.

Saul Loeb/Getty

Let’s add one more wrinkle here: Washington gridlock. Even though Republicans control the House, the Senate and the presidency, the debate over replacing Obamacare has revealed the unified government to be more like a dysfunctional family at a Christmas dinner. “Trump is no Lyndon Johnson,” says Robertson, “and while he is better than Obama at working congressional leadership, my friends tell me there are already antagonisms at the staff level between the Speaker/majority leader in the Senate and the White House.” Pass the gravy.

READ MORE: Trudeau can’t afford to just play Trump one-on-one

Not everyone thinks it will go this long. I spoke with Eddie Goldenberg, Jean Chretien’s former senior political advisor, who believes the process could wrap up faster. “The Trump Administration will do its best to finish before the midterms in the U.S., so it is unlikely that the negotiations will be continuing during the next Canadian election campaign,” he says. Maybe. But as Robertson points out, the implementation and ratification will take another year-plus. “If there is any election issue,” Goldenberg says, “it will be about the government’s record—positive or negative—with respect to the outcome of the negotiations.”

That is true and the battle lines will quickly be drawn. The NDP needs to regain the union vote as it tacks back to the left and will likely oppose much of the deal unless it is radically changed to protect Canadian jobs, something no one here has signalled. But until Jack Layton, opposing free trade was the ticket to the NDP’s best success, and that formula will no doubt be back. The Conservatives are in a full identity crisis now, and will have to figure out if they want to play tough with the U.S. and go back to the Sir John A. MacDonald days of a National Policy—essentially copying Trump’s Buy American stance with a Buy Canadian—or if they want to follow the pro-free trade Mulroney-Harper path, which is more likely but offers less differentiation from the Liberals. Either way, the free trade deal will be the target. Everyone better grab a bazooka.

Trade with the U.S. has defined many Canadian elections, from 1867 to 1911 to 1988. Might as well get ready now and pencil in 2019 as another election fought over free trade.

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Getting Ready for NAFTA Negotiations

For Canada, all hands on deck during NAFTA renegotiations

The rules of the road for trade with our biggest trading partner are about to be renegotiated. We need an all-of-Canada effort to get ready.

The stakes are critical: Three-quarters of our exports head south to the United States. Trade with the United States represents almost a third of our GDP and it sustains close to one in five Canadian jobs.

In the coming days, U.S. Commerce Secretary Wilbur Ross will formally advise Congress of NAFTA renegotiations, setting in play a 90-day consideration by House and Senate committees. By the latter part of the year, Mr. Ross expects that we will be into “real” negotiations that he predicts will take at least a year.

Following his White House meetings with Prime Minister Justin Trudeau last month, President Donald Trump described the Canada-U.S. relationship as just needing some “tweaking.” But, as Mr. Ross told Bloomberg this week, “there is a lot of meat to be dealt with,” including addressing the digital economy and revising the rules of origin.

After meeting recently with her Mexican counterparts in Toronto , Foreign Minister Chrystia Freeland said that Canada’s preference is for trilateral negotiations. Mr. Trump prefers bilateral deals but Secretary Ross says he is “open-minded” about the form. Regardless, Canada and Mexico need to stay close to avoid the divide-and-conquer techniques that are integral to Mr. Trump’s “art of the deal.”

Getting Canada’s act together means real collaboration between the federal and provincial governments and close, continuing consultations with business, labour and civic society. We need consensus on two questions:

  • What do we want from the negotiations?
  • How do we get there?

The more creative we can be, the better. The expertise of sectoral advisory groups proved vital to the successful negotiation of the Canada-U.S. free-trade agreement (1988) and NAFTA (1993-4). They should be resurrected and made permanent. We need to co-opt the best brains in our research community to rapidly crunch data and provide timely analysis for our negotiators.

The Canadian strategy going into the talks must be bold. A new agreement should be broad and comprehensive, providing for the free flow of people, goods and services with enforceable standards for labour and the environment. Let’s take the best from the stillborn (at least for now) Trans-Pacific Partnership. Prime Minister Justin Trudeau spoke to our mutually beneficial energy relationship in putting forward a Canadian policy that is both pragmatic and progressive.

Most of the American “asks” are readily identifiable. As Mr. Ross told Congress during his confirmation hearings, the United States wants to reduce its trade deficits and to restore manufacturing through increasing the “Made in America” content for rules of origin.

The United States Trade Representative annual National Trade Estimates report lists United States’ complaints with Canada. These include extending the intellectual property protection for pharmaceuticals; ending supply management for dairy and poultry; and inspecting for counterfeits, especially for Chinese goods shipped to U.S. destinations through Canadian ports like Vancouver or Prince Rupert.

The easiest solution on rules of origin would be to move to a customs union, but the Americans are unlikely to buy in unless it is a strictly Canada-U..S agreement. Otherwise we need to redefine rules of origin as “Made in North America.” American manufacturers should be our allies, especially those in the automotive industry, where supply-chain integration dates from the 1965 Canada-U.S. Auto Pact.

We should agree to counterfeit inspection in return for extended pre-clearance of goods and easier business travel access. Reforming supply management is long overdue, but let’s get something in return, such as access to U.S. shipbuilding contracts.

Where they were once divided, today Canada’s premiers are of like mind on the value of trade, leading missions across our oceans. Now they need to focus on our biggest customer, especially through cultivating their governor counterparts in regional meetings and through visits to their states. Premier Rachel Notley sets the bar through consistent visits to the US capitol and other US cities.

Access to procurement is vital, especially at the state and provincial government level and, for the premiers, this should be job one. Working with governors, they did a procurement reciprocity deal around the Obama infrastructure investments in 2010. Now we need to make it permanent.

The Americans like us, indeed, more than we like them. The Trudeau government has created good working relationships within the Trump administration. But complacency is a mistake. Mr. Trump’s priority is “making America great again.” The business of America is business. Canada needs to be ready.

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NAFTA Negotiations and Mexico

Bureaucrats ‘literally working around the clock’ to prep for NAFTA talks

‘We’re in a period of great uncertainty,’ one top bureaucrat told Senators last month. The foreign ministry is preparing for anything and everything as a trade renegotiation inches closer.

Justin Trudeau and Donald Trump walk with each other at the White House on Feb. 13. Photograph courtesy of Donald Trump’s Twitter account

By PETER MAZEREEUW

PUBLISHED : Wednesday, March 8, 2017 12:00 AM

The federal government is working day and night to prepare itself as the new Trump administration in the United States eyes restructuring the North American Free Trade Agreement, according to a senior official in Canada’s foreign ministry.

“If my colleague Martin is looking a little tired these days, it’s because he and his trade policy colleagues are literally working around the clock to consider all of [the] different scenarios,” David Morrison, Global Affairs Canada’s assistant deputy minister in charge of the Americas, said of Martin Moen, GAC’s director general for North America and Investment, at a Senate Foreign Affairs and International Trade Committee meeting on Feb. 16.

“We really don’t know at this point how the U.S. wishes to proceed,” Mr. Moen told Senators.

Mr. Morrison said he believed the U.S. government is just now starting to think about how to deliver on President Donald Trump’s promise to renegotiate the NAFTA, or tear it up.

He responded to questions from the Senators about Mexico’s place in any renegotiations—Mr. Trump has lambasted the NAFTA as favouring Mexico over the U.S.—by saying Mexico is “most definitely not being left out of the conversation.” Mr. Moen noted that the existing three-way deal allows just two of the partners to address some trade issues, such as trucking or the sugar trade, without drawing in the third.

Some Canadian government officials speaking anonymously to Reuters in January and former ambassador to the U.S. Derek Burney have suggested Canada distance itself from Mexico, perceived to be the true target of Mr. Trump’s dissatisfaction with the NAFTA, which came into force in 1994.

In response to chatter about whether Canada should go it alone with the U.S., Foreign Minister Chrystia Freeland (University-Rosedale, Ont.) underlined at a panel discussion hosted by the Canadian Council for the Americas on Feb. 21 in Toronto that “NAFTA is a three-country agreement,” and “Were there to be any new negotiations, those would be three-way negotiations.”

In any case, Mexican Foreign Minister Luis Videgaray, who also spoke at the event, said he understood if Canada avoided some of Mexico’s one-on-one concerns with the U.S. Each country would have its own agenda, the CBC reported him saying.

Ms. Freeland’s foreign ministry is preparing for the possibility of bilateral agreements with the U.S. and Mexico if a three-party deal can’t be struck, Mr. Morrison told the Senate committee.

“We’re in a period of great uncertainty, and in a period of uncertainty it’s prudent to prepare for all eventualities, and that’s of course what we’re doing.”

The federal government’s position is that NAFTA has benefited all three countries, said Mr. Moen, adding, “when we talk with business associations in the United States, with specific companies, with local governments, they all agree.”

“Regardless of rhetoric, Canada and many in the United States understand that a secure, stable, and prosperous Mexico is indispensable to Canada’s own prosperity and security,” said Mr. Morrison, listing security, human and drug trafficking, health pandemics, and energy systems integration as issues “best addressed collectively.”

 

Ninety days-plus to go

Mr. Trump has repeatedly said that the NAFTA gives Mexico an advantage over his country, and has moved American jobs to Mexico.

He has been less critical of trade with Canada, calling it “a much less severe situation than what’s taken place on the southern border” during his press conference in Washington with Mr. Trudeau last month. Mr. Trump said the U.S. wanted to “tweak” its trading terms with Canada.

What that means is anyone’s guess. The U.S. and Canada have major or minor trade disputes centred around softwood lumber, dairy and chicken, drywall, wine, and proposals for country-of-origin labelling rules that would require products from north of the border to be tracked separately and labelled as foreign-made.

When Conservative MP Gerry Ritz (Battlefords-Lloydminster Sask.), his party’s trade critic, pressured the Liberal government in the House last month to make public what’s on the table for renegotiation in any NAFTA talks, Liberal MP Andrew Leslie (Orléans, Ont.), the parliamentary secretary for foreign affairs, didn’t do so, but answered that his government would be ready for talks if and when the U.S. was ready to sit down.

That is still at least a few months away. Mr. Trump’s White House held an informal meeting with congressional leaders last month to discuss the NAFTA renegotiation, but has yet to start the clock on a 90-day window in which they will formally negotiate over how the U.S. should try to change the deal.

In Canada, Mr. Trudeau is leading a government-wide political charm offensive to match his foreign ministry’s efforts on the policy side. He restructured his cabinet, many think to better match it to the task of dealing with a Trump administration, and dispatched his top aides and cabinet ministers to the U.S. to build ties with the Trump team and the new Congress. Many of the Liberal-led House committees are also planning to travel to Washington to meet their counterparts in the next few months.

peter@hilltimes.com

@PJMazereeuw

Top Canadian industries exporting to the U.S. last year

Source: Innovation, Science, and Economic Development Canada

Auto manufacturing—$60.6-billion

Oil and gas extraction—$60.3-billion

Petroleum refineries—$12.1-billion

Aerospace parts and manufacturing—$9.1-billion

Pharmaceutical and medicine manufacturing—$8.5-billion

Sawmills and wood preservation—$8.2-billion

Aluminum production and processing—$7.6-billion

Resin, synthetic rubber manufacturing—$6.7-billion

Ferrous metal (non aluminum) smelting and refining—$5.9-billion

Other plastic product manufacturing—$5.3-billion

 

Mix with Mexico, or go it alone?

With U.S. President Donald Trump aiming his disappointment with NAFTA at Mexico rather than Canada, analysts and government officials are weighing in on whether Canada should push for a revised two-way or three-way deal.

 

Take a step back from the trilateral:

“We should not indulge in ridiculous posturing—like getting together with Mexico to defend our interests, when Canada has very different economic interests than Mexico. It is a fundamental error to conflate them.”

—Former ambassador to the U.S. Derek Burney, Maclean’s, Jan. 30

 

“We love our Mexican friends. But our national interests come first and the friendship comes second.”

—An unnamed source quoted by Reuters on the sidelines of a cabinet retreat in Calgary, Jan. 24.

 

“Mexico is in a terrible, terrible position. We are not.”

—An unnamed Canadian involved on the trade file quoted by Reuters Jan. 24.

 

 

Don’t throw Mexico under the bus:

“Our relationship with Mexico is important. We should stand with the Mexican government and help them deal with the discriminatory trends that they are now seeing.”

—Green Party Leader Elizabeth May, speaking to reporters Jan. 30,

 

“Canada may not be in the crosshairs in the same fashion as Mexico but we have no immunity from Trumpian threats. Canada and Mexico need to hang together or, surely, we will hang separately.”

—Former diplomat Colin Robertson, The Globe and Mail, Jan. 16

 

“The Trump presidency should bring Mexico and Canada much closer together, not tear us apart. Whatever trade or investment measures the U.S. applies to our country may end up harming Canada as well and destroying the competitive advantages that the North American value chain has brought since NAFTA came into force 23 years ago.”

—Andrés Rozental, former deputy foreign minister of Mexico, The Globe and Mail, Jan. 27

 

“NAFTA is a three-country agreement. Were there to be any new negotiations, those would be three-way negotiations.”

—Foreign Minister Chrystia Freeland, speaking at a Feb. 21 Toronto panel discussion

 

“Throwing friends and neighbours and allies under the bus is a position for a weak leader. This is not the Canadian tradition.”

—Former prime minister Brian Mulroney, CBC’s Power and Politics, Feb. 21

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Canada and Mexico

If Canadians are wary about the incoming Donald Trump administration, think about the Mexicans. For them, Mr. Trump presents a clear and present danger.

His threats have moved beyond promises to deport “two … it could even be three million” and to build a “Great Wall” across the entire land border that “will be paid back by Mexico.”

Threatening to impose a 35-per-cent border tax, president-elect Trump has cajoled American, Japanese and German companies to abandon their investment plans in Mexico. The peso has plummeted to its lowest levels ever against the U.S. dollar.

To prepare for a President Trump, President Enrique Pena Nieto recently appointed a new Foreign Minister, Luis Videgaray, and yet another new ambassador to the U.S. (the third in nine months). In speeches to Mexico’s diplomatic corps last week, both Mr. Nieto and Mr. Videgary said that in any negotiations with the U.S., the entire bilateral relationship would be on the table, and that Mexico will not pay for the wall.

For Canadians to feel smug or secure would be a mistake. We may not yet be a direct target, but we are within Mr. Trump’s range of vision.

Inevitably, we would become collateral damage, especially when it comes to protectionist border measures. A survey last month of Trump supporters revealed that 73 per cent expect either a better deal or withdrawal from NAFTA within the first 100 days of the Trump presidency.

Mr. Trump promises more enforcement capacity to secure U.S. borders and, at last week’s Senate Homeland Security confirmation hearing for secretary-designate Gen. John Kelly, both Democrats and Republicans told him not to ignore the northern border and pressed for more security. Eight of its 15 members come from northern border states.

Nor would Canada be exempt from any new border tax, said Mr. Trump’s press secretary last week. The National Bank of Canada has estimated a 10-per-cent border levy would cause Canadian exports to slump 9 per cent within a year.

Canada and Mexico need to make common cause in the face of Trumpian excess. A visit to Mexico, before the summer, by Prime Minister Justin Trudeau would visibly underline our enduring partnership at a time when Mexicans are feeling vulnerable and alone.

While our borders are different and our responses will reflect our particular circumstances, we need to stay close, especially in any NAFTA discussion with Washington.

An active advocacy campaign – a joint effort led by our consuls, suppliers and their customers – needs to inform Americans, especially those living in the 31 states won by Mr. Trump, that their first or second markets are either Canada or Mexico.

Studies conducted for the Canadian Embassy and by the Wilson Center estimate that our commerce accounts for over 14 million American jobs. Underlining our integrated continental market is the fact that 40 per cent of the finished goods that Americans buy from Mexico, and 20 per cent of what they buy from Canada, is “made in the U.S.A.”

Linda Hasenfratz, CEO of Linamar, got it right when she warned there is “too much emotion and not enough fact” out there. Ms. Hasenfratz, who also chairs the Business Council of Canada, argues that adding cost and inefficiency would undercut our global competitiveness. The ultimate cost will be borne by the consumer.

We should look at expanding Canada-Mexico trade in produce – their tomatoes and vegetables for our beef and pork. There are major Canadian investments in Mexico – producing trains, planes and automobiles – as well as banking and mining operations. We need an active investment outreach to encourage Mexican firms to follow the lead of Grupo Bimbo, the world’s leading baker, that owns Canada Bread.

Then there are the people-to-people ties. With the visa lifted we can and need to encourage more Mexican tourism and study in Canada.

Any renegotiation of NAFTA should begin with including the improvements already negotiated through the Trans Pacific Partnership (TPP): preclearance of goods; increasing the number of professionals eligible for fast-track passage and temporary employment; and a trilateral approach to new infrastructure to enhance North American competitiveness.

If Mr. Trump repudiates NAFTA then we should keep it (U.S. withdrawal does not kill NAFTA like it does the TPP) and look for prospective new partners, including Britain, the Pacific Alliance (that includes Chile, Colombia and Peru) and to new partners across the Pacific.

Canada may not be in the crosshairs in the same fashion as Mexico but we have no immunity from Trumpian threats. Canada and Mexico need to hang together or, surely, we will hang separately.

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NAFTA , Trump and Trade

Trump wants to overhaul NAFTA? Bring it on

Colin Robertson

The Globe and Mail Wednesday, Dec. 07, 2016

President-elect Trump wants to “renegotiate” NAFTA. Bring it on.

The gains we made from NAFTA (1993), spectacular during its first decade, have mostly plateaued. The Trans Pacific Partnership agreement would have updated our continental accord but now that Mr. Trump has shelved it, re-opening NAFTA makes sense.

For Canada, a North American economic pact is vital. The U.S., our biggest trading partner since the Second World War, currently accounts for about 75 per cent of our trade. Our trade with Mexico has grown sixfold since NAFTA.

For Canada, our main objective in re-opening NAFTA should be the freer movement of people, goods and investment within North America. Last year more than $700-billion in goods flowed across our southern frontier and more than 150 million people crossed our shared border by land, air and water.

As with any negotiation, to get we have to be prepared to give. Let’s be bold. Let’s put our costly dairy supply-management, a perennial U.S. target, on the table in return for better procurement access, including shipbuilding.

Last week’s Auditor General’s report on the Beyond-the-Border Action Plan – the latest in a series of initiatives aimed at improving border access – identified shortcomings that should be Canadian priorities with U.S. negotiators. The Entry/Exit and trusted traveller programs, including customs self-assessment and the Single Window initiative, are all behind schedule. Some of this is our responsibility but we also need to see more openness to change from the U.S.

Despite recent efforts at regulatory reform, our supply chains still suffer from the “tyranny of small differences.” Regulatory reform could benefit from a Trump re-boot.

The provinces, who were not in the room for the NAFTA negotiation, should be full partners in the coming sessions because many of the necessary improvements fall under their jurisdiction. The premiers should reach out to their governor counterparts with specific proposals around reciprocity for procurement, especially given Mr. Trump’s promised “Big Build” program.

The North American advantage is our people and a new trade accord should include:

  • Bringing the list of professions eligible for fast-track cross-border access into the digital age. The skilled trades workers who are enabling North American energy independence also need to move back and forth with ease.
  • Speeding up the re-qualification system for professionals needed on the job now.

Mr. Trump wants a better deal for American workers.

Main Street America never appreciated the value of NAFTA in part because U.S. leaders did a lousy job in explaining – and sharing – the value of continental trade while failing to adequately help those left behind through global competition and technological changes.

We did it better in Canada but an overhaul of the NAFTA accord on Labour Cooperation is in the interests of all three countries. Why not make a joint commitment to adjustment assistance and retraining as a basic right for workers?

Mr. Trump’s promise to build a wall and to increase deportations to Mexico has led some to wonder whether we’d be better to go it alone with the U.S. leaving Mexico to fend for itself. Divide and conquer is integral to Mr. Trump’s Art of the Deal. Working with Mexico will avoid that trap.

Mexico is now our third largest trading partner. We have major investments in Mexico and, with a middle class of 44 million people, Mexico is a market that will only increase. By 2050, Mexico is expected to rank fifth in global economic weight.

Mr. Trump wants another look at country-of-origin-labelling (COOL), a protectionist measure that curtailed our meat exports. Working closely with Mexico, our joint efforts resulted in Congress repealing COOL last December.

On COOL and those many issues where Canada and Mexico share common cause – including trade, climate and energy – we need to continue working together. On the border and security, we will diverge at times, reflecting our own interests but we should work in tandem. Our shared and overriding principle with Mexico should be no surprises and constant communication at all levels.

Re-opening a deal that is past its best-before date is an opportunity that all three nations should embrace. It’s time to bring NAFTA into the digital age.

A former diplomat, Colin Robertson is vice-president and fellow at the Canadian Global Affairs Institute.

NEW PODCAST: ‘THE GLOBAL EXCHANGE’
NAFTA and Trump: a Discussion on the Future of Trade

On today’s ‘Global Exchange‘ Podcast, we invited two experts on trade to discuss the implications of a Trump Presidency for NAFTA, TPP, and the status-quo trade regime as it stands today. Join Colin, John Weekes, and Rob Wright as they probe the future of trade in an era of rising populism and protectionism.

Bios:

  • Colin Robertson (host) A former Canadian diplomat, Colin Robertson is Vice President of the Canadian Global Affairs Institute and a Senior Advisor to Dentons LLP.
  • Rob Wright – Rob Wright served as Canadian Ambassador to China from 2005-2009, and as Ambassador to Japan from 2001-2005. From 1995-2001 he was the Canadian Deputy Minister for International Trade.
  • John Weekes – Canada’s ambassador to the WTO from 1995-99 and a chief negotiator of the NAFTA trade agreement.


Related Links:

 

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Canada and Mexico

 

Why Canada should work to strengthen its ties to Mexico

Colin Robertson, The Globe and Mail, October 14, 2016

The Trudeau Government should prioritize its strategic partnership with Mexico. The June visit of Mexican President Enrique Pena Nieto to Quebec City, Toronto and Ottawa set a plan for closer collaboration. Both nations need to deliver on specific initiatives, especially those that emphasize our people-to-people ties.

The signature of the 1993 North American Free Trade Agreement (NAFTA) established a framework through which we have become each other’s third-largest trading partner. It is built largely through the investment of Canadian banking and resource industries in Mexico and through continental supply chains in manufacturing industries. Together, we make planes, trains and automobiles.

With a 44 million strong middle class, Mexico’s market will only increase. By 2050, Mexico is expected to rank fifth in global economic weight.

There is no shortage of collaborative instruments. The Canada-Mexico Partnership, with its private-public membership, has been in place since 2004. Its agenda covers the waterfront: energy; agri-business; labour mobility; human capital; trade, investment and innovation; environment; mining; forestry; and recently we have commenced annual security discussions.

With the election of the Trudeau government, we have developed a common North American approach to climate.

And, last December, after collaborating at the World Trade Organization, we persuaded Congress to roll back the protectionist US country-of-origin labelling requirement that threatened both of our country’s meat exports into the USA.

Canadians have begun once more their annual migration south. More than two million Canadians spend over 22 million nights in Mexico, making it our second most popular destination after the USA.

But despite the declared ambition and collaborative framework, the relationship seems less than the sum of its parts. The arbitrary imposition of a visa in July, 2009 offended Mexicans. It damaged the vital people-to-people ties that underwrite lasting relationships.

Mexicans stopped coming to Canada, complaining that the information required for the visa was excessive, intrusive and the processing time too long. Tourism and student study from Mexico sank. Mexican investors looked elsewhere. Today, we get more visitors from South Korea and Australia than Mexico, even though those flights are at least three times as long.

The visa will be replaced in December with the much-delayed Canadian Electronic Travel Authorization (eTA) system.

In anticipation of this change, the Trudeau government should work with the provinces to aggressively market student study in Canada.

We have more than 400 interinstitutional agreements and Canada’s International Education Strategy identifies Mexico as a priority market. What is missing is Mexican students; there are only 5,000 among the 200,000 foreign students in Canada.

To give the initiative momentum, why not have Governor-General David Johnston lead a group of Canadian university presidents to Mexico to promote joint study opportunities and co-operation in innovation? Mr. Johnston, a former university president, represented Canada at the inauguration of Mr. Pena Nieto and recently played host to him in Quebec City.

High-level visits are catalysts for action. Justin Trudeau should also put Mexico on his travel agenda for 2017. Why not make it a trade and investment mission with the premiers?

The Trans Pacific Partnership agreement, that effectively updates NAFTA, will depend on whether U.S. President Barack Obama can secure its congressional approval during the lame-duck session. To prepare, we should be discussing with Mexico what provisions we can jointly salvage and make bilateral, to our mutual benefit.

Mexican ministers are making regular visits to the United States to make the case for continental trade and the jobs they create. Canadian ministers should join them.

As the Trudeau government contemplates a renewal of Canadian involvement in peace operations, it should look first to the challenges in our own hemisphere.

Citing its “global responsibilities,” Mr. Pena Nieto has committed Mexico to peace operations. Helping Mexico with training of peace troops would be a useful contribution as we increase our own participation.

Last week’s failed referendum on a peace pact in Colombia will oblige renewed efforts to end the more than half century conflict that has displaced 6.7 million Colombian citizens. Canada and Mexico should pursue the talks begun earlier this year on a possible joint peacekeeping role.

Can we also help Mexico with its southern frontier problems as a result of the continuing turmoil in Guatemala, Honduras and El Salvador?

Both governments need to pick shared initiatives on which we can achieve tangible results. Success will develop more trust and create a better basis for a shared approach when dealing with the new U.S. administration.

Over the years, the Canada-Mexico story has resembled a spasmodic series of tango-like bursts of intensity followed by long siestas. This time, let’s keep the dance going and put the emphasis on our people-to-people ties.

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