As Trudeau meets Trump, will Canada abandon Mexico?

by Erica Alini (feat. Sarah Goldfeder)

Global News
February 13, 2017

As Prime Minister Justin Trudeau navigates his first meeting with U.S. President Donald Trump, a third nation is watching with fingers crossed: Mexico.

The country, which has relentlessly found itself in the cross hairs of the Trump administration, has been looking eagerly to Canada for support, especially on NAFTA.

But messages coming out of Ottawa haven’t always been reassuring.

Just days after the U.S. president’s inauguration on Jan. 20, a Reuters article quoted two anonymous government sources suggesting that Canada may not be able to help Mexico if Washington decides to deploy new protectionist measures against it.

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

“Our negotiating positions are totally different. Mexico is being hung out of a skyscraper window by its feet,” a second government source reportedly said.

Former Canadian ambassador to the U.S. Derek Burney had similar advice. “Regarding the North American free-trade agreement, keep in mind that Canada has rarely been the target of Mr. Trump’s complaints, ” he noted in a November op-ed in the Globe and Mail.

Burney, who helped negotiate the bilateral Canada-U.S. Free Trade Agreement under former Prime Minister Brian Mulroney, suggested “Canada should be on high alert, manoeuvring carefully and marshalling support quietly in Congress and with firms that benefit from the deal.”

Such talk has rattled officials in Mexico City, despite reassurances from Foreign Minister Chrystia Freeland and Canada’s ambassador to Mexico that Canada remains committed to NAFTA as a trilateral agreement.

Mexico’s government will now be watching the Trudeau-Trump meeting closely for signs of whether Ottawa really means it.

Meanwhile, other former government officials warn that abandoning Mexico would be the wrong strategy and ultimately harm Canada, too.

“Mexico may be the low-hanging fruit for the Trump administration, but that doesn’t mean that Canada doesn’t have a whole list of issues that the Trump administration would be interested in taking on like gangbusters,” warned Sarah Goldfeder, a fellow at the Canadian Global Affairs Institute who served under two U.S. ambassadors to Canada from 2012 to 2015.

Instead of going it alone, Trudeau should act as a “buffer” between Trump and Mexican President Enrique Pena Nieto, said Goldfeder, who also served in Mexico as a U.S. foreign service officer.

Pena Nieto cancelled a scheduled visit to the White House on Jan. 26 after the U.S. president suggested in a series of tweets that Mexico pay for his long-promised wall along the U.S. border. The day before, Trump had signed an executive order greenlighting construction of the wall. Since then, the White House has threatened to impose a 20 per cent tax on Mexican imports to pay for it and moved to step up removals of undocumented migrants, which is expected to send a wave of deportees to Mexico.

Trudeau would be in a good position to help restore the U.S.-Mexico relationship because his government has already started patching up its own rapport with the Pena Nieto administration, noted Goldfeder. In December of last year, for example, Ottawa ended a Harper-era visa requirement for Mexican visitors to Canada.

But what would Canada get out of stepping between Mexico and Trump?

After all, while the U.S. is the destination of 75 per cent of Canadian exports, bilateral trade with Mexico is hardly critical. Canada exported $392 billion worth of goods to the U.S. in 2016. The number for Mexico, by contrast, was less than $9 billion, according to data from Statistics Canada.

Still, if Mexico was singled out for protectionism, Canadian consumers would hurt, said Goldfeder.

Supply chains across North America are so tightly integrated that any attempt to disentangle them would drive up prices for Canadian shoppers, too, she added. That’s because Canada imports so much from the U.S., and so much of those imported consumer products have some made-in-Mexico component.

And it wouldn’t be just cars. The agri-food, cosmetic and chemical industries also have “unexpected skin in the game,” said Goldfeder, noting that U.S. companies in those sectors have come to rely deeply on Mexico’s supply chains.

Mexico, for example, is the primary source of tomato imports to the U.S. and accounts for over 70 per cent of greenhouse tomatoes, according to the U.S. Department of Agriculture.

It’s in the interest of Canadians that the Trudeau administration work with Mexico on preserving NAFTA, said Goldfeder.

A good first step would be for Ottawa and Mexico City to crunch the numbers quantifying the impact that an unraveling of NAFTA would have both on jobs and consumer prices in all three countries.

“Some of those numbers are already out there, but there’s more,” said Goldfeder.

That is roughly the approach that Best Buy took when the U.S. Congress threatened to introduce its own version of a 20 per cent tax on imports. The U.S.’s largest consumer electronics retailer handed U.S. lawmakers an analysis forecasting that its projected annual net income of U.S. $1-billion ($1.3 billion) would turn into a loss of $2 billion ($2.6 billion) as a result of the tariff, Reuters reported.

Similarly, Japanese automaker Toyota has rallied hundreds of its dealers in the U.S. to remind lawmakers of how a border tax would kill U.S. jobs and raise the cost of vehicles by thousands of dollars.

Reportedly, the moves have already given pause to some Republican lawmakers, especially those in states where firms targeted by the tariff are large employers.

A number-crunching exercise on NAFTA by Canada and Mexico might have the same impact on the White House.