Canada should decouple itself from Mexico in NAFTA talks and pursue improvements to its bilateral relationship with the United States for two reasons. The Canadian and Mexican agendas are often at odds and Canada should use its considerable political capital in Washington to work for Canadian interests exclusively. And President Donald Trump is going to tack to the left on behalf of workers now that tax cuts are accomplished.
Unfortunately, President Donald Trump tweeted that Canada and Mexico were “being very difficult” and “NAFTA was the worst deal in history.”
Frankly, Trump is right about the deal. And the Canadian-Mexican alliance is wrong-headed because Canada has benefited the least from the trilateral arrangement and Mexico the most. The facts are that Canadian job losses and trade deficits have been disproportionately worse than America’s since the 1994 deal took effect.
In the past 24 years, U.S. exports to Mexico have quadrupled from a very small base, but imports from Mexico have jumped fivefold. The result is that by 2016, America’s trade deficit with Mexico was US$55.6 billion, just behind Japan and Germany’s and showing no sign of ebbing.
The Canada-Mexico trade relationship is even more one-sided. Trade is minuscule, but even so, in 2016 the Canadian trade deficit with Mexico was a soaring US$8 billion. That’s a combined total of US$65.6 billion in deficits for the United States and Canada versus Mexico.
From a Canadian viewpoint, NAFTA has been a problem from the start. After launching the Canada-U.S. Free Trade Agreement in 1989, Mexico asked Washington in 1990 for a similar deal. The Americans were convinced that NAFTA could bootstrap the unstable Mexico, and stop soaring migration problems. Canada jumped into talks and probably should not have.
Ever since, Mexico has deteriorated. Wages have dropped, along with living standards. Institutions remain weak and corrupt. The country has been enmeshed in a full-fledged war with drug cartels that, in 11 years, has cost 200,000 lives and resulted in 30,000 missing persons.
The only win-win has been the U.S.-Canada relationship. Trade has roughly tripled between the two since 1989 and in 2016, the U.S. enjoyed a surplus with Canada of US$12.5 billion – the only major trading partnership where this has occurred.
Another reason Canada’s negotiating strategy should shift is based on politics. President Trump’s tax cuts victory means that he will tack to the left in the mid-terms in order to help workers and repatriate jobs to the U.S., contrary to Big Corporate agendas.
This fall, there are 10 Democratic Senate seats up for re-election in states the President won in 2016 because he bashed NAFTA. He may not convert all those seats to Republicans even if he is tough with Mexico, but he won’t win a single seat if he isn’t. This aligns him with protectionist Bernie Sanders.
“The renegotiation of NAFTA must stop providing incentives for corporations to outsource American jobs to Mexico,” Sanders said recently in several of those states.
Ottawa must heed Sander’s message, too. Canada should agree with proposed U.S. rules of origin increases to bring back jobs, but carve out a guaranteed percentage of jobs for Canada. Ottawa should also push for an asymmetrical NAFTA — the U.S. and Canada would continue to integrate economically and create a perimeter.
The irony is that the Canadian-Mexican alliance does not align with the interests of Canadian workers, the economy or Canadian values and is exactly what the corporate lobbyists want. At the same time, Trump, with his rules of origin and labor standards initiatives, is on the side of American workers, unions, Bernie Sanders, and the Democrats.
First published National Post