Canada and its Trade Deals

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Canada must harness its new trade deals

COLIN ROBERTSON THE GLOBE AND MAIL

Hold the cheers for the trade agreements, whether CETA, CPTPP or USMCA. There is still work to be done before Canada’s governmentcan claim victory for the acronyms we now associate with our new trans-Atlantic, trans-Pacific and North American trade pacts.

All three are important, but with three-quarters of our trade being within North America, the United States-Mexico-Canada Agreement (USMCA) is critical. Tuesday’s U.S. midterm elections will tell us whether the Republicans retain their majorities in both the House of Representatives and the Senate, but it will be January before we know the make-up of the key committees – House Ways and Means and Senate Finance.

We will likely see cherry blossoms in Washington next spring before U.S. President Donald Trump tables the USMCA implementing legislation for committee consideration and then up-or-down approval by Congress. Will Democrats, who consistently opposed trade agreements including the original North American free-trade agreement (NAFTA) back the Trump deal?

In tandem with Mexico, we need to continue the intense retail campaign, targeting states and districts, to remind legislators and their constituents that our trade creates jobs and growth. Our efforts, combined with our American allies, have had an impact. Despite Mr. Trump’s anti-trade rhetoric, recent surveys by Pew and the Chicago Council on Global Affairs show a majority of Americans appreciate the value of free-trade agreements.

Meantime, the legal scrub of USMCA continues. This wrangling over differing interpretations of what each party thought was agreed is critical. The fine print will matter when, inevitably, we call on dispute-settlement processes.

A year after it took effect, the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) is working, with the EU already expanding its trade with Canada. But the deal is still provisional. While it passed the EU parliament in February, 2017, every EU country must also pass it. Most, including our Group of Seven partners France, Germany and Italy, have yet to do so. Prime Minister Justin Trudeau needs to nudge his counterparts to get on with it.

The Trudeau government moved smartly this fall in implementing legislationfor the Comprehensive and Progressive Trans-Pacific Partnership Agreement (CPTPP). Now that six of the 11 member countries have completed ratification, the agreement takes effect on Dec. 30. As Trade Diversification Minister Jim Carr noted, Canada is the only G7 country with free-trade agreements with all other G7 members.

But now, as with our EU deal, we need to realize its potential.

We are a trading country, but we still rely mostly on our biggest enterprises when it comes to trade and investment. Governments strive to make it easier for small and medium-sized business to widen their customer base, but it is a slog. Financing, forms and apprehension about “foreign” ways are still barriers to taking the leap into global markets. Do we need to integrate the trade commissioner service more closely with our export financing agencies?

Asian markets, in particular, also want to see an official face – prime minister, premiers and ministers – on trade delegations. Can we not better co-ordinate these visits into a systematic Canada Inc. effort?

In Asia, sales also depend on relationships. This means developing a regular schedule to cultivate customers. Can we do more to utilize the deep ties created by immigration, tourism and study?

Canada still depends on foreign investment. Regulations on state-owned enterprise investment are sensible, but we need to revisit them if we are to achieve closer economic relations with China.

We loudly proclaim that we are open for business, but are we? Actions by Ontario’s new Ford government are baffling. Cancelling a German-managed wind turbine project earned a rebuke from the German ambassador. Snubbinga visiting delegation from Baden-Wurttemberg was petty.

Beyond the international trade pacts there is our domestic homework.

The barriers – trade and regulatory – between provinces are the unfinished business of Confederation. Successive national governments promise to fix it but, after 151 years of tilting at this windmill, the differences remain. A Senatestudy, Tear Down these Walls, describes the problem. If nothing else comes out of the First Ministers’ meeting on trade that Mr. Trudeau promised to hold this fall, it should be to move on our internal trade barriers.

We need to act. According to the World Bank, exports of goods and services as a percentage of Canada’s GDP slipped from more than 44 per cent in 2000 to less than 31 per cent in 2017. By harnessing our new trade deals and fixing things on the home front, we will expand our economy and make Canada more competitive.

NAFTA and Dairy

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Eureka! At last, we have a renegotiated NAFTA

Free Market Reflections with Steve Dittmer

While it seems like forever to us, these kinds of diplomatic trade battles usually take several years to settle, not just a little over a year. Of course, President Trump wasn’t around before now, pushing people’s buttons and impatiently demanding results like a business tycoon.

Prime Minister Justin Trudeau made a major point that the agreement meant economic stability and certainty for Canadian businesses and investors. Foreign Minister Chrystia Freeland had held her ground all along, reminding folks she was after a good deal for Canada.

And she got her most important priority — keeping the dispute resolution procedures in place — and next, getting what is effectively an exemption on any upcoming 25 per cent auto tariffs, getting 2.6 million units duty free, compared to the 1.6 million currently exported.

From a distance, it is hard to say how much damage the dairy sector will have to absorb. I know some folks will say 3.59 per cent is not a big deal but when an industry is fundamentally oversupplied, even a couple per cent is significant. We learned that lesson years ago in the beef industry. The market is much more sensitive when the supply is close to the edge than when demand is out ahead of supply. Apparently, the supply management and subsidies were left intact, so the government will have an easier time figuring out how to compensate producers for their losses.

That supply management and subsidy “problem” is left to another day, likely another government. Your beef industry is much closer to a free market system and so the government control and subsidy for dairymen is a bit foreign to cattlemen. But I ran across an opinion piece from a Canadian before the final agreement that some livestock folks may think still applies.

Colin Robertson, vice-president of the Canadian Global Affairs Institute, noted Trudeau’s political problem in executing a dairy deal right before a Quebec election October 1. (Of course, other issues had already determined that election outcome, it’s just no one knew that for sure before October 1.) Robertson told Politico that there were some cracks in the Quebec supply management defense. Some favour the end of supply management and he concurs with the opinion that “Canadian cheese can be world busters” and Canadian dairymen can be competitive with the Aussies and Kiwis. He thinks the adjustment assistance necessary during a transition is “affordable” and that dairy can be just as successful as Canadian “beef, pork, grains and lentils.”

“Mr. Trump may force us to do what we should do,” Robertson concluded.

Now, Canadians will have to decide what, if anything, they want to do and find a new bad guy to force it.

I think your Minister Freeland did a very good job, holding her dispute resolution position, beating back the sunset clause with a pretty clever device and protecting Canada from a 25 per cent auto tariff. Given her toughness and the backing she has apparently gotten from Trudeau, I would guess she will get a good deal on the steel and aluminum tariffs very soon, probably a quota with some headroom.

After all, it is not easy negotiating with the trading partner you sell 75 per cent of your exports to. Especially when that partner realizes its advantage, pushes it and has a booming economy and substantial hubris behind its approach.

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One thing I have learned from my conversations with Canadian friends and trips to your meetings: the fundamental attitude is totally different in an exporting nation versus one dominated by its domestic market. It has been your advantage to have producers who instinctively cut right to the customer’s thinking when structuring their whole industry, versus the American cattlemen’s attitude for many past years that we’ll produce what we want to produce and the domestic market will always be there.

It has also been pointed out that the strengthening of the auto manufacturing model, to require 75 per cent of the content to be made in North America to be duty free and that 40 per cent of it be made by workers making at least $16/hour, helps Canada as well, as some of its auto and parts manufacturing has been lost to Mexico over the years.

Canadians feel President Trump has been too hard on Canada during these negotiations and I can’t blame them. But, when you are trying to tackle the brute running back (China), some other guys are going to get bumped along the way. But deep down, businessmen in both countries are aware of how integrated our businesses and economies are. That kind of pressure undoubtedly played a part in getting this thing done, especially with our mid-term elections so soon.

Oh, I see Canada has been busy with the process of ratifying the TPP agreement— you know, the one without the U.S. in it. Go figure.

Oh, Canada!

USMCA and Congress

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The Canadian Global Affairs Institute suggests the United States remains the biggest unknown as Canada, the US and Mexico move toward ratification and implementation of the United States-Mexico-Canada Agreement

The United States-Mexico-Canada Agreement (USMCA), the modernised version of NAFTA, is expected to be signed 30 November, at which point the deal will still require passage of legislation in all three countries for its ratification.

Colin Robertson, Vice President and a fellow of the Canadian Global Affairs Institute, says the agreement won’t be a done deal until it gets through the US Congress.

Mr Robertson says, “My sense is that the earliest the Americans will be in a position to bring forward their legislation will be probably February, March or April and we’ll be dealing with a different Congress.

“There are mid-term elections set for 6 November and that’s for all 435 seats in the House of Representatives and for one third of the 100 member Senate.”

Mr Robertson says that this could result in a different configuration within both the House of Representatives and in the Senate.

He says that the Republicans currently have a majority in the House of Representatives and very slim majority in the Senate and it’s an open question as to what will be the results of the election.

He says, “The pundits currently seem to think the Democrats have a fair chance of taking the majority in the House of Representatives but the Senate is still, as they would say in basketball, jump ball so we’re not sure what will happen there.

“That will have implications for the ultimate passage of legislation in the US Congress because, for the new US-Mexico-Canada Agreement to take effect, legislation would have to be passed in the three parliaments.”

Mr Robertson notes, in the case of Canada and Mexico, both leaders have majorities so he doesn’t anticipate any problems with passage of the legislation to ratify the agreement in Canada or Mexico.

 

As reported by Bruce Cochrane, Farmscape.Ca

China Card

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On China trade, Canada should tread carefully

COLIN ROBERTSON THE GLOBE AND MAIL

So now, in the wake of the USMCA, China wants a trade deal with Canada. Prime Minister Justin Trudeau says our country is ready. Improving trade ties with China would go a long way to trade diversification but Canadians should tread carefully.

More engagement with the world’s second biggest economy that is growing at twice the rate of our U.S. and EU partners makes a lot of sense. Economics aside, we have expanding people-to-people ties: the Chinese are our largest group of foreign students; Chinese tourism is up by double digits; and 10 per cent of recent immigrants came from China.

So the question is not about whether to engage, but how best to engage.

Negotiating a full free-trade agreement, says the Public Policy Forum’s useful report, Diversification not Dependence, could take a decade. Last December, Chinese Premier Li Keqiang rejected Prime Minister Trudeau’s overture on a closer economic partnership, dismissing out of hand the gender and aboriginal rights integral to Mr. Trudeau’s progressive trade agenda. The Chinese aren’t open to change, so have we decided to drop the progressive agenda?

The PPF says sectoral agreements are the way to go, starting with agri-food and natural resources, eldercare and pensions coupled with co-operative arrangements on things such as climate. These will build confidence and create momentum for more progress.

This could work although, like the rest of Asia, the Chinese are increasingly skeptical about Canada’s ability to get its goods to market. One new LNG pipeline is not enough.

The Chinese will demand preferred investment access for their state-owned enterprises (SOEs). They feel that the current regime, imposed by the Harper government in 2012, is unfair. Are we prepared to relax our rules?

There is a third option – encourage China to join the Comprehensive and Progressive Trans Pacific Partnership (CPTPP). It already covers things such as SOEs, labour and environmental standards, intellectual property rights, and includes enforceable dispute settlement. The CPTPP should become the benchmark pact for the Indo-Pacific. China’s own model – the Regional Comprehensive Economic Partnership (RCEP) – does not meet the CPTPP standard.

But all of this may come to naught. Like it or not, Canada is now caught in the Sino-U.S. confrontation, of which the USMCA “China clause” is the latest manifestation. While we are nowhere near negotiations with China, consulting with our principal trade partners would seem sensible.

The sense that Chinese behaviour is predatory and posing significant threats to the U.S. that need to be countered is driving current U.S. policy. The Donald Trump approach – threats, bombast and tariffs – is antagonizing China and prompting retaliation. We will need to be careful that we don’t become collateral damage.

China’s leadership wants to reform global governance to reflect China’s superpower stature. But China only pays lip service to the rules-based international order. Its mercantilist behaviour, ranging from subsidized to forced technology transfers, has contributed mightily to the looming Sino-U.S. trade war. Its cyberintrusions – for espionage and commercial gain – are detailed in our intelligence agencies’ annual reporting. While the Trump administration’s method is obnoxious, the EU, Japan and North America need to defend our rules-based system.

China has not developed politically, economically or diplomatically in ways that the West had thought it might. But projecting hopes and wishful thinking on China goes further back than this current moment. In his latest book, Daniel Kurtz-Phelan describes U.S. General George Marshall’s unsuccessful efforts to steer China toward liberal democracy in the aftermath of the Second World War. The China Mission is a must-read for foreign-policy makers practising diplomacy in Asia.

The Prime Minister meets the premiers this fall to talk trade diversification. Thrashing through a China strategy is essential. What is it we really want? What are we prepared to give up?

We need to engage in continued relationship building through ministerial visits and through the kind of Track Two discussions organized by the University of Alberta’s China Institute.

It would help if the federal Conservatives are part of the consensus. No one expects lock-step agreement, but a general alignment on our objectives – as we witnessed during the USMCA negotiations – serves the national interest. It also ensures continuity when governments change.

Beyond the obvious trade benefits, better relations with China make sense for Canada. But decisions on China should only be made after we have done our homework and with our eyes wide open.

Norms break down

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Trump: Saudi king ‘firmly denies’ any role in Khashoggi mystery; Pompeo en route

Turkish police officers gather as they prepare to enter the Saudi Arabia’s Consulate in Istanbul, Monday, Oct. 15, 2018. (AP Photo/Petros Giannakouris

James McCarten, The Canadian Press
Published Monday, October 15, 2018 6:20PM EDT 

WASHINGTON – Donald Trump appeared to be taking Saudi Arabia at its word Monday as he described how King Salman “firmly” and “strongly” issued a “flat denial” that he or his crown prince had any knowledge of or role in the disappearance of Jamal Khashoggi.

In describing his morning phone conversation with the king, the U.S. president repeatedly emphasized the strenuous nature of the ruler’s denials – even as he confirmed that Secretary of State Mike Pompeo was travelling to the Middle East to learn more about the fate of the Saudi national and Washington Post columnist, who vanished inside the Saudi consulate in Istanbul.

Khashoggi – a “Saudi Arabian citizen,” Trump noted, although he lived in the U.S. – was last seen entering the consulate two weeks ago. Turkish officials have said they have audio recordings that prove the journalist, a known critic of the Saudi regime, was killed inside, his body dismembered for easy disposal.

“The king firmly denied any knowledge of it,” Trump said. “He didn’t really know – maybe, I don’t really want to get into his mind, but it sounded to me like maybe these could have been rogue killers, who knows. We’re going to try getting to the bottom of it very soon. But his was a flat denial.”

Turkish and Saudi investigators began Monday what Turkish officials call a joint “inspection” of the consulate – but not before a cleaning crew walked in armed with mops, trash bags and cartons of milk, said to be good for removing bloodstains.

American lawmakers have threatened tough punitive action against the Saudis, and Germany, France and Britain have jointly called for a “credible investigation” into Khashoggi’s disappearance. Foreign Affairs Minister Chrystia Freeland tweeted a link to that statement Sunday, adding, “Canada strongly supports our allies on this important issue.”

Freeland said she spoke Monday with Saudi foreign minister Adel al-Jubeir, and remains in close contact with her U.S., German and British counterparts as the global community awaits more answers.

“Canada and our government has a strong record of standing up for human rights around the world, very much including in Saudi Arabia, and we’re going to continue to do that,” she said outside the House of Commons.

“It’s important to establish clear facts about what has happened, and it’s important for the international community to be clear that those facts need to be established in a clear and transparent manner.”

Turkish officials allege a Saudi hit team that flew into and out of Turkey on Oct. 2 killed and dismembered Khashoggi, who had written Washington Post columns that were critical of Saudi Crown Prince Mohammed bin Salman, also known as MBS. The kingdom has called such allegations “baseless” but has not offered any evidence Khashoggi ever left the consulate.

If the allegations prove true, experts fear it would be just one more example of autocratic rulers feeling emboldened by the slow disintegration of the international world order, thanks in large part to a White House that’s willing to look the other way.

“I do think the norms have eroded and the guardrails (have) come down under Donald Trump,” said Colin Robertson, a former Canadian diplomat and foreign policy expert who serves as vice-president and fellow at the Calgary-based Canadian Global Affairs Institute.

Robertson cited the brazen poisoning in March of Russian spy Sergei Skripal and his daughter Julia, an attack attributed to but denied by the Russian government, as just one instance of international malfeasance that seems to be filling the breach left by a lack of strong U.S. foreign policy.

“Autocrats are taking liberties – Skripal, drug hit squads, poison gas, trolls and bots and fake news, prison without trial. They believe they can get away with it because for the new sheriff it’s ‘America First,’ full stop.”

Prime Minister Justin Trudeau suggested Monday that Canada won’t shy away from taking up the cause.

“Canada will always be very firm … about standing up for human rights all around the world because Canadians expect it of our government,” Trudeau said in an interview as part of the Fortune Global Forum in Toronto.

“But the world also expects it of Canada – to be the clear voice saying, ‘You know what, this is right,’ or ‘This is wrong and you need to do better.’ And we don’t take kindly … to having people try (to) punish us for believing what we say.”

That appeared to be a direct reference to Saudi Arabia, which lashed out at Canada – recalling its ambassador, freezing trade, pulling students out of Canadian schools and even cancelling flights to Toronto – after a tweet from Freeland calling for the immediate release of detained activists, including Samar Badawi, a champion of women’s rights and the sister of detained blogger Raif Badawi.

The kingdom flexed its rhetorical muscles Sunday, saying that if it “receives any action, it will respond with greater action, and that the kingdom’s economy has an influential and vital role in the global economy.”

In the U.S., the Post has been publishing full-page ads in its front section in an effort to keep the pressure up.

“On Tuesday, Oct. 2 at 1:14 p.m. Washington Post columnist Jamal Khashoggi entered the Consulate of Saudi Arabia in Istanbul,” reads the ad, which features an ominous-looking depiction of the consulate’s imposing double doors, adorned with the twin swords of the kingdom’s emblem.

“He has not been seen since. Demand answers.”

International business leaders have also been bailing en masse out of the kingdom’s glittering big-ticket investment forum, the Future Investment Initiative, including the CEO of Uber, billionaire Richard Branson, JPMorgan Chase & Co. CEO Jamie Dimon and Ford executive chairman Bill Ford.

Working the USA under Trump

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A German breakdance troupe, the Flying Bach, recently performed in front of the Lincoln Memorial. (Embassy of the Federal Republic of Germany)
By Carol Morello

October 7 at 10:00 AM

President Trump and German Chancellor Angela Merkel don’t seem to like each other much, as he has disparaged her policies and leadership.But German breakdancers on the steps of the Lincoln Memorial may have reminded Americans that their countries are “Wunderbar Together,” the theme of a year’s worth of events.

Last year, Trump abruptly hung up on Australian Prime Minister Malcolm Turnbull after an immigration dispute. But the Australian Embassy shrugs it off as just a blip as it celebrates “100 years of Mateship” this year, harking back to World War I battlefields where troops from the two nations fought and died beside one another.

And never mind the insults Trump has lobbed at Canadian Prime Minister Justin Trudeau. Canada has dispatched members of Parliament and the cabinet on hundreds of trips south to find common cause with U.S. governors, state legislators and mayors on issues such as trade and climate change.

Long-standing allies whose leaders have had sometimes testy relations with Trump are increasingly keeping U.S. ties alive in ways that bypass the White House.

Faced with Trump’s volatility, a foreign policy that is constantly changing, and many vacancies in the State Department and other traditional venues for communication, some governments are employing what diplomats call the “doughnut strategy.”

“What many, many foreign governments are doing is trying to find ways to get around the problem,” said Nancy McEldowney, a former director of the Foreign Service Institute, which trains U.S. diplomats, and now a professor at Georgetown University. “When you have a problem in the middle, you work around it by building out a network that encircles the problem.”

The efforts to contact local and state governments, business leaders and civil society reflect the conviction that the United States is still an influential player in the world. So even countries that hoped to lie low until a new administration is in place have concluded that they can’t afford to do that. Some are already gaming scenarios for how to deal with a second Trump term.

In the meantime, some countries are making creative connections with Americans, far from the traditional halls of power in Washington. Germany is focusing on culture and heritage in its Wunderbar Together campaign, with a database for an estimated 50 million Americans who can trace their lineage to Germany. It is holding 1,000 events in every region of the United States in the next year, commemorating the 30th anniversary of German reunification. Last week, a German breakdance troupe, the Flying Bach, performed in front of the Lincoln Memorial.

German officials swatted aside questions about whether it has anything to do with the Trump administration, saying it is just the latest in a string of countries where they have held Wunderbar Together celebrations. But before he left Bonn for Washington last week, German Foreign Minister Heiko Maas acknowledged the differences between the two governments’ views on the Iran nuclear deal, climate change, trade and NATO military spending.

“Things that used to be taken for granted are no longer that way; they must be worked on,” he said.

Canada is taking a less public approach, enlisting cabinet members and business executives to make official visits to the United States.

“There’s no question we are upping our game since things became uncertain in our priority areas, like trade relations,” a Canadian official said of the uptick in official visits. “They are capable of engaging with the administration and Congress on our behalf.”

Early in the Trudeau-Trump relationship, Canada had tried a charm offensive stressing the importance of the connection, said Laura Dawson, director of the Canada Institute at the Wilson Center. But that proved insufficient during NAFTA negotiations and, ultimately, tariffs that Trump imposed in the name of national security.

Invoking national security deeply offended many people in a country that helped U.S. diplomats escape from Iran in 1979, welcomed passengers grounded in Newfoundland after the 2001 terrorist attacks and sent troops to Afghanistan.

Colin Robertson, a former Canadian diplomat posted in Washington, said Canada has come to realize that it is not enough to train diplomacy only on the White House and Congress.

“The Trump administration is changing the game,” said Robertson, who now studies U.S.-Canadian relations at the Canadian Global Affairs Institute. “There’s a growing recognition we have to play the American system the way it was designed, with checks and balances, a separation of powers. Not just at the congressional level, but the role governors and state legislators play.”

Some countries are bringing forth a heavy dose of nostalgia.

Australia has largely escaped Trump’s ire since his hang-up call with Turnbull.

“Perhaps most crucially, the government has gone into overdrive trying to educate Trump on the history of shared military sacrifice over the last 100 years,” said James Curran, who teaches history and foreign policy at the University of Sydney.

Australia’s “100 Years of Mateship” is rooted in the centennial of the Battle of Hamel, a French town where U.S. and Australian soldiers fought along the Western Front. The idea of the Australian ambassador in Washington, the campaign came with a TV documentary, badges, stickers, posters and even a “mate ale” brewed in Texas.

“It is as if the government here thinks that the more it reminds the U.S. of how much we’ve been there for them on the battlefield, then they will surely come to help us in the event of a future military crisis,” Curran said. “But I wonder: Is anybody there in the White House or State Department really listening to these Australian clarion calls about ‘mateship’? After all, there is the old saying that ‘when you are living and working in Washington, you need to have very good peripheral vision to see Australia.’ That surely is intensified in Trump’s Washington.”

As foreign governments seek to get Americans to reflect on decades of friendship and mutual values, the historical reminiscences and cultural events represent a role reversal. A decade ago, U.S. diplomats worried that a new generation of Europeans did not appreciate how the United States had come to the continent’s aid during World War II and the Cold War.

“Now the tables are turned,” McEldowney said. “We have the Europeans concerned not only that the American public does not value them, but even the American president does not value them. No matter how awful it is, we still need each other and we need to recognize that.”

USMCA Improvements

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USMCA expected to improve investor confidence in Canada

  • Corwyn Friesen, mySteinbach
  • Posted on 10/05/2018 at 9:05 am

The Vice-President of the Canadian Global Affairs Institute is confident a new trilateral North American trade agreement will help bolster investor confidence in Canada.

Canada, the United States and Mexico have successfully concluded negotiations aimed at creating a United States-Mexico-Canada Agreement on trade.

Colin Robertson, the Vice-President and a fellow of the Canadian Global Affairs Institute, says from Canada and Mexico’s perspective it ensures preferred access to the largest market in the world and, for the United States, it illustrates to the world that, even with Donald Trump as President, they actually can do trade deals.

From a Canadian and Mexican perspective, it lifts the uncertainty about investment in Canada both by Canadians and by foreigners who look at Canada as an attractive destination. We’ve got a highly educated work force, we have energy, we’ve got capacity but if we don’t have access to the biggest market in the world they begin to think, why do we not we situate in the United States instead of in Canada.

But I think now that Canada has maintained and preserved its access to the United States as well as now having better access to the Pacific because of our membership in the Comprehensive and Progressive Trans-Pacific Partnership and to Europe through the Comprehensive Economic Trade Agreement that puts Canada in, I think, a quite enviable position.

Importantly for North America it once again means that North America can operate as a kind of platform, particularly in manufacturing. And we’ve made improvements. There are chapters now on the environment and labour and that introduces a kind of progressive element. And we’ve added a chapter on digital commerce, something that was in both the European and the Pacific agreements but was missing from the former NAFTA.

~ Colin Robertson, Canadian Global Affairs Institute

Robertson notes the USMCA will run for a minimum of six years and it can be renewed twice so it can go to 18 years with revisions as we go along which provides and added measure of stability.

USMCA not done yet

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Don’t celebrate just yet. USMCA is far from being a done deal

COLIN ROBERTSON
THE GLOBE AND MAIL

A proposed deal – not NAFTA 2.0 but, in deference to U.S. President Donald Trump who initiated this 13-month odyssey, the United States-Mexico-Canada Agreement.

Judging by the market reaction, the USMCA should be good enough to thaw the chill shared by investors, both Canadian and foreign, since the negotiations began. We are not out of the woods – congressional approval of the necessary implementation legislation is no slam dunk and there is still the threat of further Trumpian protectionism, whether direct or through collateral damage.

The dairy lobby is aggrieved but they dodged a bullet. Supply management, a protectionist system badly in need of reform, is preserved. We gave the Americans about half-a-percentage more of the market than they would have received had Mr. Trump not pulled out of the Obama-initiated Trans-Pacific Partnership.

Even with the additional quota negotiated for the EU in the Canada-EU trade pact (CETA), more than 90 per cent of our dairy market is still protected for Canadian producers. It is also a sure bet that the federal and provincial governments will open their wallets to provide adjustment assistance to the afflicted, although for taxpayers’ sake there must be demonstrable proof of injury. There is no reason why our dairy farmers cannot become as successful internationally as our beef and pork, grains and pulse producers, especially given the growing appetite for protein in the Indo-Pacific.

The dairy lobby’s cry of pain is reminiscent of that heard from vintners after the Canada-U.S. free-trade agreement (FTA) of 1988 opened up their market. Today their products are both very drinkable and sell more than ever before. The tentative new agreement means that U.S. wines will now share shelf space on British Columbians’ shelves with B.C. wines, but B.C. protectionism is the kind of non-tariff barrier that we rail against in other markets. Redress was overdue and it reminds us that, when it comes to protectionism, no nation has clean hands.

Canadian auto manufacturers have cause for celebration. It appears we have evaded Mr. Trump’s threatened 25-per-cent tariff and, even if trade is slightly more managed, the new rules of origin and the wage component could well create more opportunities, especially for Canada’s highly competitive parts manufacturers – our real niche in the global auto trade.

There is the potential for slight cost increases in pharmaceuticals with the extension of patent protection but provincial administrators are now very skilled at using their cartel power to get the best price from drug manufacturers. E-commerce shoppers can celebrate because purchases under $150 will now pass much more freely and our customs inspectors can focus on bigger game, including keeping counterfeits out of North America.

Our negotiators deserve a glass of sparkling wine (Canadian) but the USMCA is far from being a done deal. While majority governments in Canada and Mexico will be able to secure legislative implementation, passage in the next U.S. Congress is no sure thing.

We need to continue the advocacy campaign into the regions and within the Washington beltway. Most Americans still have no idea that their main export market is Canada and that jobs and prosperity depend on mutually beneficial trade and commerce. More than 300 Team Canada outreach missions made contact with more than 300 members of Congress, 60 governors or lieutenants-governor and most of the Trump cabinet. To protect Canadian interests this must become a permanent campaign.

 The premiers and provincial legislators must continue to play a critical role in reaching out to their counterparts and this should be a main discussion topic at the upcoming first-ministers meeting on trade. We need to increase our presence in the U.S. – a representative in every state should be our goal. Here again, the premiers can help through establishing offices in the states that matter most to them. Ontario is the province most dependent on the U.S. market. Instead of seeking federal handouts, Premier Doug Ford could learn from Quebec. La belle province has long had representatives in U.S. states. These representatives complement the work of our consulates.

Our dependence on the U.S. market – 75 per cent of our trade goes south – was used as leverage by Mr. Trump since only 18 per cent of U.S. exports head north. It is another reminder that we really do need to invest in trade diversification. We have deals with the European Union and with key Pacific partners, most notably Japan. How to realize opportunities opened by these agreements must be another discussion at the first-ministers conference. As with our permanent U.S. campaign, trade diversification must be a Team Canada effort.

Winners and Losers US MCA

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Who are the real winners and losers in the USMCA deal?

Canadian consumer will have more choice, says one researcher

CBC Radio ·

From left to right, U.S. President Donald Trump, Mexican President Enrique Pena Nieto and Canadian Prime Minister Justin Trudeau. The three countries have reached a new trade deal to be called the the U.S.-Mexico-Canada Agreement, or USMCA for short. (Kevin Lamarque, Daniel Becerril, Chris Wattie/Reuters)

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Canadian consumers are among the biggest winners in the new USMCA deal, according to a researcher who focuses on international trade.

“In terms of dairy, wine, the de minimis threshold — I mean, it was all in the right direction in terms of easier access to goods and services abroad, lower prices and greater variety for the Canadian consumer,” said Christine McDaniel, a senior research fellow at George Mason University.

The de minimis threshold for duty-free shopping — the amount that Canadians can buy in the U.S. and bring back across the border without having to pay a duty — increased from $20 to $150.

The new deal — set to replace NAFTA — has been criticized by the steel and aluminum sectors for not removing U.S. tariffs, but praised by the auto industry for stopping those same tariffs affecting them. The dairy sector is disappointed over concessions made to push the deal through, while the government has been praised for preserving the independent dispute resolution mechanism.

The Current’s Anna Maria Tremonti was joined by trade experts from all three countries to help tally up the wins and losses of the USMCA:

  • Colin Robertson, a former Canadian diplomat who helped negotiate the Canada-U.S. Free Trade Agreement, and later NAFTA. He is now vice-president and fellow at the Canadian Global Affairs Institute.
  • Antonio Ortiz-Mena, an economist who was part of Mexico’s negotiating team when NAFTA was first drafted. He’s now senior vice president at Albright Stonebridge Group, which provides strategic trade advice.
  • Christine McDaniel, senior research fellow at the Mercatus Center at George Mason University. Her research focuses on international trade and economics

    VOICE: I’m looking forward to signing this agreement with Presidents Trump and Pena Nieto. And I really would like to stress this will be good for workers in all three of our countries.

    AMT: There are wins and losses in the new US-Mexico-Canada agreement. Whose wins and whose losses? We’re asking. I’m Anna Maria Tremonti. This is The Current.

    Who are the real winners and losers in the USMCA deal?

    Guests: Christine McDaniel, Colin Roberston, Antonio Ortiz-Mena

    SOUNDCLIP

    VOICE 1: When the Prime Minister offered to renegotiate NAFTA, there were no sunset clauses, steel tariffs or auto quotas. And we already had a dispute resolution mechanism. So these are not new gains in this deal. So we had hoped that the government might negotiate gains for Canada, like an end to the buy America policy that cost billions of dollars and thousands of jobs.

    VOICE 2: Canadians are pleased today that we are moving forward on a historic record that stabilizes, secures and offers certainty to investors to Canadian businesses, but mostly to workers and folks in the middle class.

    AMT: So was it a win for Canada or not so much? You heard Conservative leader Andrew Scheer and Prime Minister Justin Trudeau going back and forth there yesterday in the House of Commons over USMCA, the United States Mexico Canada agreement, is set to replace NAFTA. I’m joined by trade experts from all three countries to help tally up the wins and losses for all involved. Colin Robertson is a former Canadian diplomat who helped negotiate the Canada US Free Trade Agreement and later NAFTA. He is now vice president and fellow at the Canadian Global Affairs Institute. He is in Mexico City. Antonio Ortiz-Mena is an economist who was part of Mexico’s negotiating team when NAFTA was first drafted. He’s been head of economic affairs at the Mexican embassy in the U.S. He’s now senior VP at the Albright Stonebridge Group, which provides strategic trade advice. He’s in Washington, D.C. And for the U.S. Christine McDaniel is a senior research fellow at the Mercatus Center at George Mason University. Her research focuses on international trade and economics. She is also in Washington. Hi everyone.

    CHRISTINE MCDANIEL: Good Morning.

    ANTONIO ORTIZ-MENA: Hello.

    AMT: First of all, USMCA, is anybody calling you US-M-CA or anything like that? Like what are we calling it?

    CM: We’re calling it USMC.

    AMT: For now.

    CM: We’re trying to out how to say it really quickly.

    AMT: OK. I’m going to go around the table quickly and just get a sense of what you see as the most important gain for each country. Antonio Ortiz-Mena, let’s start. Most important gain for Mexico, quickly.

    AOM: Quickly, the fact that there is a new agreement as opposed to just endless uncertainty, in general. Specifically I’m quite obsessed about dispute settlement mechanism. So I’m glad to see that there is a strong dispute settlement mechanism. I think apart from that everything is less important.

    AMT: Colin Robertson. Hello, Colin. Colin Robertson did we lose you? OK while we try to find him, Christine McDaniel very quickly, what do you see as the most important gain for the United States?

    CM: Well I think the biggest gain right now is just the sense of relief you know that we averted disaster. And you know investor confidence hopefully will be built back up you know to the extent it was sort of on the brink there.

    AMT: OK. Colin Robertson what do you see as the biggest win for Canada?

    CR: Well I think I agree with Antonio that dispute settlement mechanism, but importantly the market certainty. You saw the market track yesterday that we now have a deal in the kind of zombie NAFTA zone. That wasn’t good for Canada or Mexico. That having access now once again to the biggest market in the world is important for Canada.

    AMT: Colin Robertson, I want to ask you I’m looking at the CBC opinion page today. Neil Macdonald has a piece where he says that under this deal, if Canada wants a trade deal with China, it must signal its intent ahead of time to the United States. It must submit the text of any deal to the United States and then accept Washington’s verdict on that.

    CR: Well I think what it says is, if Canada has an agreement with a non-market economy and I think you’re going to get some dispute as to because China is a member of the World Trade Organization, but is it a non-market economy. But it’s not a clause I’ve seen before, others have commented on it, Peter Clark as well. We’ll see how what it means in application.

    AMT: And doe that worry you? Given that Canada the real push that came out yesterday from various sectors in Canada was to say Canada needs to diversify so it doesn’t end up on a precipice again.

    CR: No because I think what that there is pressure on China, Canada is part of that steel reduction and things to bring China more fully into how we trade amongst nations and I think the more likely you would see efforts to bring China into what we now call the comprehensive from progressive Trans-Pacific Partnership, which I think is going to become the benchmark for trade agreements in the Pacific. And Canada and Mexico are both members of that and I see that as more likely to be the new benchmark and the encouragement to bring China into that and China will have to take on certain obligations.

    AMT: Let’s talk about some of the losses. Colin Robertson, we heard some negative reaction from dairy farmers on concessions regarding U.S. access to the Canadian dairy market. Canada has says it will compensate dairy farmers. What are we looking at there?

    CR: Well if the United States had joined the Trans-Pacific partnership, we would have given the United States an additional three and a half percent 3.25 percent quota. Instead we’re now giving them I think something like 3.75 percent quota. We’ve given the Europeans about 3 percent quota. So 90 percent of the market is still very much in Canadian hands, so it’s a very small increase. And as you pointed out, the governments, provincial and federal, have offered compensation. We did something similar with the wine industry after the negotiations of the Canada-US free trade agreement and you know it really did turn around our wine industry. Now we sell Canadian wines all over the world. So I think rather than looking at it defensively, we should be looking at it the same way our beef and pork, our grains and our pulse, we we are world gangbusters. I don’t see any reason why our dairy producers and you think of the superb cheeses we produce, strictly out of Quebec, why we can’t turn that around and become real international competition as we are in other parts of the agriculture sector.

    AMT: Christine McDaniel, if Canada is going to compensate the provinces and the federal government, dairy farmers for any losses. Is that how does the United States see that, does that go against free trade?

    CM: Well that’s their prerogative to do. You’ll recall that the United States is doing something similar or are considering doing something similar on agriculture in terms of the effects on US farmers from retaliation from China and others. So you know as long as it’s within the WTO rules and you stay within those parameters then it’s the country’s prerogative to do that.

    AMT: And so what’s the reaction in the United States that this deal has given more access to the Canadian dairy market?

    CM: Well I think it’s positive. It’s definitely in the right direction. I think you know one of the bigger winners here are the Canadian consumers. You know in terms of dairy, wine, the de minimus threshold. I mean it was all in the right direction, you know in terms of you know easier access to goods and services abroad, lower prices and greater variety for the Canadian consumer.

    AMT: Let’s talk about wine for a minute. In BC, the wine industry is going to have changes because the winds have traditionally had exclusivity in grocery stores in the province. Listen to Karen Graham, a wine industry consultant.

    SOUNDCLIP

    VOICE: For the BC wine industry it means a few different things. Some of them certainly today or by November 1, 2019 to be feeling the pinch a little bit in terms of increased competition on BC wine and grocery store shelves.

    AMT: Colin Robertson, there’s unhappiness on that front. What do you think?

    CR: Well this is an example of a kind of what we call non-tariff barriers. No nation is immune from protectionism and essentially what was being practiced in British Columbia was protectionism on behalf of the local vintners. Now again, I say BC makes a very good product. The BC wines are going to have to share shelf space with wines from the US and others. Something we really should have been doing under our NAFTA obligations. And this was sort of rectified in this agreement. I don’t see a problem because I think if you like BC wines, you’re still going to be seeing BC wines, but when you go in and you look at their shelf, you’re now going to have more choice. Yes, some of it is coming from the States, but you’re still going to have the BC wines there. It is up to the consumer to choose, which one he wants to get. And the fact we’re now in accordance with obligations we really undertook under the original North American Free Trade Agreement.

    AMT: I want to ask about the auto industry. Antonio Ortiz-Mena, how will changes in that sector impact Mexico?

    AOM: Well I think that the auto agreements are both a win and a loss for Mexico. I think they’re a loss because Mexico would have preferred to keep the original regional content rule of 62.5 percent regional value added. The fact that it went higher and that it has some wage related requirements means that the rules are pretty complex, they’re cumbersome and some companies might opt to trade under WTO rules, which only provide 42.5 percent tariff. And there’s also a side agreement whereby both Mexico and Canada have a guaranteed quota of 2.6 million autos to be exported from Canada or Mexico to the US, should the US impose new tariffs on autos, under national security laws. So I think that the rules again are very high. They could be cumbersome to implement and we’re looking at a world where this is some sort of an insurance policy. Why do we talk about quotas when we didn’t have quotas 25 years ago? The only way to understand that is we’re entering a new more protectionist world. So this sort of a sthe new agreements insurance policy provision. That’s the way I see it.

    AMT: Christine McDaniel, you’ve said you’ve had mixed feelings on this. How so?

    CM: Well I think you know the North American auto industry has been a relatively competitive on a global scale, but US, Mexico, Canada, automakers in the region, they need access to globally competitive priced inputs. You know I mean if was profit maximizing for them to have you know done some of these things in the past, then they would have been doing that. So you know this is you know putting a restriction on how much you know particular firms in a particular sector must pay their workers, restrictions on where they can get their inputs, at what price and how much. You know these are things that will restrict automakers in the region. You know in a time where you know the real growth is in Asia, so we want a strong competitive globally competitive automotive sector. And these restrictions do not necessarily align with that you know investor confidence.

    AMT: Colin Roberston, I’ll just get you to be brief on the impact for Canada because I want to go to one more topic too.

    CR: No, we’ve moved to similar to what we have in lumber, we’ve moved to manage trade in autos. Keep in mind this is something Donald Trump was insistent on and I make the bigger point is that these negotiations were not initiated by Canada or Mexico. This was very much initiated by the United States. I think the fundamental reason is that Canada and Mexico, 75 percent of our trade is with the United States. Only 18 percent or 17 percent of US trade is with Canada or Mexico. So the US exercised, under Donald Trump, exercised that leverage. I think we’ve come out of this OK. Is it perfect? No, but I think we’re in any trade agreement you take wins and losses and I think overall this is good. And you saw the market reaction, the fact we still have continued access to the biggest market in the world, that’s important for Canada Mexico.

    AMT: Colin Roberston, what about patent protection on certain drug classes being extended another two years. There are concerns that that could really affect provincial pharmacare plans and Canadians buying drugs.

    CR: I think that’s correct, although the cost of that through and the fact that we act as a bit of a cartel when we buy the drug. So yes there’s an additional two years protection for a particular stream of drugs called biologics. But you’re correct, Anna Maria, is the potential for slightly higher costs over a period of time is there, but mitigated in part by the fact that Canadian provinces who are the sort of administer the health care, do act as a cartel to try and get best prices from those they’re buying from.

    AMT: Christine McDaniel, we know the pharma lobby in the United States is one of the biggest lobby is that they had to get this deal. What was going on there?

    CR: Well remember back in our TPP days, they were lobbying very hard for 12 years on data exclusivity protection for biologics. And you know the end of the day, Australia, Canada, Chile, New Zealand, many others, banded together and really blocked that effort by the United States to do that. So the US was not able, it did not look like it was going to be able to do that in TPP. The fact that you know it appears to have sort of twisted Mexico’s arm and then for Canada join in they had it you know reluctantly agree to something that they apparently didn’t want to do earlier. You know that’s I think that’s interesting. Although they didn’t get, US didn’t get the full 12 years, they got 10 years.

    AMT: I’ve got music coming up. Means we’re running out of time. Thank you all of you for weighing in on some of these issues today.

    CM: You bet. Thank you.

    AMT: That’s Colin Robertson, vice president and fellow at Canadian Global Affairs Institute. Antonio Ortiz-Mena, senior vice president of the Albright Stonebridge Group and Christine McDaniel at the Mercatus Center at George Mason University. Stay with us. This is The Current.

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How Trump’s Freeland broadside factored into getting a trade deal done

The Canadian Press

WASHINGTON — From deep within the pantheon of diplomacy that is the United Nations came hardly a warning shot or a red flag — it was a rocket-propelled rhetorical grenade aimed directly at Canada, with a concussive blast that reverberated all the way to the Prime Minister’s Office.

And it just might have been the catalyst for the new U.S.-Mexico-Canada Agreement.

“We’re thinking about just taxing cars coming in from Canada. That’s the motherlode, that’s the big one,”  U.S. President Donald Trump said last week during his explosive news conference on the margins of the UN General Assembly in New York.

“We’re very unhappy with the negotiations and the negotiating style of Canada. We don’t like their representative very much.”

That “representative” was Foreign Affairs Minister Chrystia Freeland — the senior cabinet minister leading Canada’s trade delegation to rescue NAFTA from a president who won the White House in part by denouncing the agreement as one of the worst deals ever made.

It wasn’t Freeland’s hard-driving negotiating style that was under Trump’s skin. It was her appearance on a panel in Toronto two weeks earlier dubbed “Taking on the Tyrant” that featured a video montage with Trump alongside autocrats like Syria’s Bashar al-Assad and Chinese President Xi Jinping.

Trump learned of it only the day before, said a source close to the talks who was briefed by insiders on both sides of the Canada-U.S. border.

“Somehow it got back to the president,” said the source, who spoke on condition of anonymity in order to speak freely about the details. “At that point, we saw everything that happened on Wednesday.”

That morning, before Trump’s news conference, U.S. Ambassador David MacNaughton spoke at an event in Toronto with U.S.-based website Politico, where on a scale of one to 10, he put the chances of the two sides being able to reach a deal at “five.”

After Trump’s news conference, “the only difference was that instead of seeing the glass half-full, I was seeing it half-empty,” MacNaughton chuckled in an interview.

He soon found himself in Ottawa, a critical part of a full-court press to get an agreement done before the Sunday midnight deadline imposed by the U.S. Congress to get the deal fast-tracked and voted on by Dec. 1, ahead of a new incoming Mexican government.

Canadian sources close to the talks say MacNaughton’s easygoing style and political acumen — honed as co-chair of multiple provincial and federal Liberal election campaigns, and former Ontario premier Dalton McGuinty’s principal secretary — proved invaluable.

It’s MacNaughton who ensures federal cabinet ministers are ushered onto Capitol Hill during Washington visits to forge one-on-one relationships with American lawmakers — relationships that bore fruit during the latest round of talks, said Colin Robertson, a former diplomat and U.S. consul general who was part of the team that negotiated the original Canada-U.S. free trade deal and later NAFTA itself.

“This new focus on Capitol Hill — when legislators come down, they go to Capitol Hill in recognition that Congress really, truly counts, and the cabinet ministers, who are also legislators, have got to recognize that they can use those peer-to-peer relationships.”

Indeed, Canadian influence in Congress may have helped discourage U.S. Trade Representative Robert Lighthizer from trying to push senators into approving the bilateral deal he forged with Mexico, said Dan Uczjo, an international trade lawyer in Ohio with the U.S. firm Dickinson Wright.

As talks came down to the wire, Lighthizer encountered resistance on Capitol Hill to approving a deal that didn’t include Canada.

“You saw three things come together,” Uczjo said.

“The general course of the deal started to be more positive, the USTR became concerned there may be some procedural challenges to his deal with Mexico from the Hill, and I think the White House wanted to ramp up the pressure and started repeating its threats about auto tariffs.”

The president became aware of Freeland’s attendance at the “Tyrant” event as a plot to prevent Trump from meeting the prime minister at the UN and agreeing prematurely to a deal, a source said.

Forces within the USTR office — including Lighthizer himself — were determined to wear Canada down on the issue of the dispute resolution mechanisms embedded in the old NAFTA.

“The president’s issue is dairy … and those discussions were actually going fairly well over the last couple of weeks,” said the source, prompting fears the “dealmaker in chief” would agree to a deal in principle with Canada if he met Prime Minister Justin Trudeau at the UN.

“On Tuesday, all the rumblings were that Trump and Trudeau were going to meet at the General Assembly — in fact, senior-level U.S. officials were telling stakeholders that at private dinners, luncheons, receptions in Canada and the U.S.,” the source said.

A deal seemed imminent, worrying those within the USTR who were convinced they weren’t yet done, said the source. So the nuclear option was deployed: telling the president about Freeland and reminding him about the summer G7 meetings in Quebec, where Trudeau’s closing news conference so agitated Trump that he used his Twitter feed to attack the prime minister from the confines of an airborne Air Force One.

“All of that was done less about blowing up the NAFTA deal, but to stop Trump from making a quick deal.”

In the end, the dispute-resolution mechanisms from NAFTA remain largely intact in the new deal, that Trump christened the USMCA.

His victory-lap news conference Monday also drove home the point to all concerned that unpredictability remains the watchword in Canada-U.S. relations. As Robertson said MacNaughton told him last week, “Whether we get a deal or not, the campaign continues — it’s a permanent campaign.”

James McCarten, The Canadian Press