What prizes lie behind the NAFTA door?

by Colin Robertson

The Globe and Mail
April 9, 2018

Donald Trump has decided it’s “Let’s Make a Deal” time for NAFTA. Like in the long-running game show co-created and hosted by the late Canadian Monty Hall, there are three doors with different prizes: the big, the modest and the booby.

After deliberations last week in Washington by the key ministers − Chrystia Freeland, Ildefonso Guajardo and Robert Lighthizer − three doors lie before their leaders:

  • Pursuing a big deal with negotiations suspended until next year, after the Mexican inauguration and new U.S. Congress convenes.
  • Agreement now on a modest deal, such as the recent remake of the Korea-U.S. FTA.
  • The booby prize — Mr. Trump rescinds the NAFTA.

Calling NAFTA “the worst trade deal ever,” Mr. Trump has come close to scrapping it on several occasions. Farmers, auto workers and business, key components in the Trump base, now say “do no harm“ to NAFTA.

Congress is responding to their pressure by telling the U.S. President to reform NAFTA. After enduring 23 years as one of the scapegoats for job loss and illegal migrants, its threatened demise has rehabilitated NAFTA with half of Americans saying they want to keep it.

As Sino-American trade tensions continue to escalate, China requires sustained attention from the Trump administration.

If Mr. Trump wants to build international support to persuade China to curb its overcapacity in steel production and to follow international norms on intellectual property, then repairing neighbourhood relations makes good geopolitical sense. With the midterms approaching, it is also good politics.

So what would a revised NAFTA, even in a modest deal, look like?

Dispute settlement is the red line for Canada and Mexico. The Trump administration is applying trade retaliation as never before. Canada has felt the U.S. sting on softwood lumber, Bombardier jets and newsprint. We also face tariffs on steel and aluminium – exemption depends on the NAFTA talks. Canada and Mexico must have redress, beyond the U.S. court system, from unilateral U.S. trade actions.

A new content formula for North American autos appears within grasp, although Mexico will need to bend on the minimum-wage component.

Access to government procurement could be resolved by letting governors and premiers figure this out through regional reciprocity agreements. We did this in 2010. States and provinces handle most spending on infrastructure. Having a variety of vendors ensures better value and checks local gouging.

The Mexican idea of having a thorough review of the agreement after five years should satisfy the U.S. demand for a sunset clause.

If these pieces fall into place, resolution of other items should follow.

Canada would keep supply management of its dairy and poultry industry. In return, the United States will get increased quota access — what they would have got if they had stayed in the Trans-Pacific Partnership. The threshold after which duties apply on cross-border imports would be revised upwards from Canada’s $20 rate to that approaching the Mexican rate - $50 - but nowhere near the $800 U.S. rate.

The negotiators and ministers have gone as far as they can go. If Mr. Trump is set on a “quick“ deal, then the three leaders must weigh in.

With new auto-content rules and slight improvements on agricultural access, President Trump would claim victory for auto workers and farmers. Canada and Mexico would retain dispute settlement. There would be provisions on energy as well as environment, labour and gender - reflecting elements of the Trudeau progressive trade agenda.

For Mexico, the stakes are high. How will a deal affect campaigning for its July 1 presidential and congressional elections? President Enrique Pena Nieto’s chosen successor, Jose Antonio Meade, is currently running well behind the leftist former mayor of Mexico City, Andres Manuel Lopez Obrador.

And what about Congress? A modest deal won’t meet every local interest.

With effort, an agreement could be voted on during the lame-duck session after the Nov. 6 mid-term elections, but it would be tough. Mr. Trump may well decide to double down by introducing the new NAFTA and rescinding the current version, telling Congress to take it or leave it.

A modest NAFTA agreement would still be a win-win-win. North America would retain its top spot as a competitive trading platform. In time, there will be more improvements, whether through future NAFTA updates or when a future U.S. administration joins the Trans-Pacific partnership.

Monty Hall said that there were “some strange moments” on Let’s Make a Deal, like the time that there was an elephant behind one of the doors. Living in Trump times, we understand what he meant.

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


Be the first to comment

Please check your e-mail for a link to activate your account.
SUBSCRIBE TO OUR NEWSLETTERS
 
SEARCH
PODCAST

Positioning Canada in a Shifting International Order: Canada's Energy Future

July 16, 2018

On today's Global Exchange Podcast, we continue our series on positioning Canada in a shifting international order. Today's episode, recorded during our May 8th foreign policy conference in Ottawa, has Monica Gattinger, Michael Cleland, and Ian Brodie in conversation with CGAI President Kelly Ogle on the future of Canada as a major energy producer and exporter.



IN THE MEDIA

Oilsands output forecast pinched by pipeline uncertainty

by Kevin Orland (feat. Kevin Birn), Calgary Herald, July 18, 2018

Will Trans Mountain lead to better oil prices? Analysts remain skeptical

by Kevin Orland & Natalie Obiko Pearson (feat. Kevin Birn), BNN Bloomberg, July 18, 2018

Nelson Mandela aurait eu 100 ans aujourd’hui

by Philippe Marcoux (feat. Ferry de Kerckhove), Les matins d’ici, July 18, 2018

Canada’s Trudeau reshuffles cabinet over trade concerns

by Paul Vieira (feat. Eric Miller), Wall Street Journal, July 18, 2018

Trump-Putin Summit

by Molly Thomas (feat. Ferry de Kerckhove), CTV News Channel, July 18, 2018

Trudeau blasts Putin, Russia following Finland summit but stays mum on Trump

by Canadian Press (feat. Ferry de Kerckhove), iPolitics, July 17, 2018


LATEST TWEETS

HEAD OFFICE
Canadian Global Affairs Institute
Suite 1800, 421-7th Avenue SW
Calgary, Alberta, Canada T2P 4K9

 

OTTAWA OFFICE
Canadian Global Affairs Institute
8 York Street, 2nd Floor
Ottawa, Ontario, Canada K1N 5S6

 

Phone: (613) 288-2529
Email: contact@cgai.ca
Web: cgai.ca

 

Making sense of our complex world.
Déchiffrer la complexité de notre monde.

 

© 2002-2018 Canadian Global Affairs Institute
Charitable Registration No. 87982 7913 RR0001

 


Sign in with Facebook | Sign in with Twitter | Sign in with Email