Takeaway from Trudeau's trip to Washington and Mexico City: NAFTA talks still driven by U.S. demands
Canada pushing partners for progressive labour and social policies
The campaign to save NAFTA is far from over and may yet prove to have been a losing struggle, but Prime Minister Justin Trudeau's blitz of the capitals of Canada's two NAFTA partners planted seeds that may bear fruit down the road.
The three main targets of the trip were Trump personally, the U.S. Congress, and the government of Mexican President Enrique Pena Nieto, all of whom will play a role in whatever happens next, whether NAFTA is successfully renegotiated, or if it crashes and burns and needs to be replaced with something else.
The most important of those factors is also the most unpredictable: Donald Trump himself.
Trump once again spoke in welcoming tones about Trudeau, "a man who's become a friend," but he offered no assurances on NAFTA.
Trudeau sat quietly in the Oval Office for a few minutes while Trump denounced the fake news media and talked about his desire to get America's nuclear arsenal "in tip-top shape."
For the Trudeau government, the meeting at least maintained the friendly personal relationship between the two men, a factor that appears to carry considerable weight with Trump.
But on the same day the two met, round four of the NAFTA talks began across the Potomac in Arlington, Va., and the U.S. side began to present some of its most indigestible proposals for changes to the treaty (labelled "poison pill proposals" by the president of the U.S. Chamber of Commerce).
By the time round four ends on Tuesday, Canada's negotiators will likely have seen three demands that will be extremely difficult to accept: a five-year sunset clause on any new NAFTA treaty, an increase in the minimum amount of U.S. parts required for a car to avoid tariffs, and an end to Canada's supply management system for dairy.
The ways and the means
The White House, of course, is not the only pole of power in Washington. There is also Congress.
The House Ways and Means Committee puts its imprimatur on almost every piece of legislation having to do with money, whether taxes or tariffs. Its role would likely include abrogating the laws that enacted NAFTA in the first place if it is scrapped, and also ratifying any new deal that emerges to replace it.
The Canadian delegation, which included Trudeau, Foreign Minister Chrystia Freeland, her parliamentary secretary Andrew Leslie, and Ambassador David MacNaughton, was pleased that 36 out of 40 committee members showed up to hear their pitch.
They may also have been heartened to hear the committee's Republican chair, Rep. Kevin Brady, say he wanted a NAFTA that gave predictability to investors.
That remark appeared to be a rejection of the idea of a sunset clause, which Canada and Mexico fear would make investors unwilling to risk their money when the rules of the game could change a few years down the road.
Outside the meeting, though, there was a reminder that not all threats to NAFTA come from the populist right embodied by Trump. A couple of the Democratic members of the committee chose to mingle with anti-NAFTA protesters.
Those members would never make common cause with Donald Trump, but their shared protectionist instincts could turn them into what Lenin called "objective allies" — people who hate each other but join forces to oppose something they both hate together.
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Canada is pushing socially progressive reforms to NAFTA that would add clauses on climate and environment, and women's and Indigenous rights. That agenda is driven partly by principle (after all, Canada recently negotiated similar clauses to update its free trade deal with Chile), but it has the added benefit of blunting opposition to NAFTA in the U.S. from the left.
A scenario that Canada wants to avoid is one where Trump rescinds NAFTA and then negotiates a hard-nosed, old-school trade deal without any of the socially progressive clauses, only to see it blocked by Democratic legislators newly invigorated after next year's U.S. midterms.
Chilly relations with Mexico
Under Donald Trump's presidency, relations between the U.S. and Mexico have deteriorated to a point not seen in decades.
Even if the government of Enrique Pena Nieto were inclined to make major concessions — and all indications are that it increasingly is not — its hands are tied by the anger and injured pride of the Mexican people.
Simply put, it is difficult for a human being to be less popular than Donald Trump is in Mexico.
The Mexicans feel particularly hard done by because the country was already enacting painful reforms that will ultimately address some of the criticisms from its NAFTA neighbours, including a major labour reform and the opening of its energy sector, long dominated by the giant state-owned oil company Pemex.
Justin Trudeau, on the other hand, is popular in Mexico, and Mexicans increasingly see Canada as the "good" version of the country just to the north.
The pomp and ceremony with which Justin Trudeau was received in Mexico (he could not go anywhere without trumpets sounding O Canada and red carpets rolling out) seemed, at times, a fairly transparent attempt to flatter an ally that Mexico believes can help to shield it from Trump's hostile protectionist instincts.
In return, Mexico received strong rhetorical support from Justin Trudeau, who brought a message that Canada's friendship with Mexico will survive anything that could happen to NAFTA. It remains to be seen whether that will translate into real support at the negotiating table, particularly in areas where Canada's interests and those of Mexico diverge.
Canada's own Mexican deficit
A curiosity of the current trade situation is that although many Americans are angry at the U.S. trade deficit with Mexico, Canada's balance of trade with Mexico is really not a political issue at all. And yet Canada's deficit with Mexico is almost half as big as the American one, in an economy only one-tenth the size.
In other words, on a per capita basis, Canada's trade deficit with Mexico is a few times bigger than the U.S.A.'s.
Some of that is a result of climate. Canada imports many agricultural products from Mexico, and you can't grow avocados in P.E.I.
Some of the deficit is simply Canadian consumers allowing Mexican workers to do jobs they don't want to, and reaping a reward in the form of cheaper consumer products (few Canadians want to work in a sweatshop making jeans).
But some of it, of course, is simply the result of companies taking advantage of Mexico's lower wages.
It didn't help that General Motors was threatening to move production of the Chevrolet Equinox from Ingersoll, Ont., to Mexico just as Trudeau landed in the country.
In his speech to the Mexican Senate, Justin Trudeau gently pressured Mexico to move ahead faster with its labour reforms and to raise salaries, which average around $4 to $5.50 an hour for a Mexican auto worker.
"We know that the Mexican middle class is growing. In order to maintain that growth and offer families the support they need to prosper, workers — here, in Canada, and around the world — need to feel confident and secure in their jobs.
"We must ensure that workers are protected by progressive labour standards. They need to know that their governments, and their employers, have their backs. Progressive labour standards are how we ensure that a modernized NAFTA will not only bolster free and fair trade, but will also enjoy lasting popular support."
Trump still holds the big stick
Of course, Canada's commerce with Mexico will always be small compared with its enormous trade with the U.S. (today it's a mere 2 per cent by volume). Canadian trade is equally insignificant for Mexico, when compared to the amount it buys and sells in the U.S. So the notion that Canada and Mexico can somehow work around Donald Trump is a forlorn dream.
As long as Donald Trump remains ensconced in the White House, NAFTA talks will be driven by American demands, with Mexico and Canada scrambling to respond and control the damage.
As NAFTA talks heat up and head for the final stretch, there may well be more shuttle diplomacy ahead.
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