One interesting side effect of the tsunami of North American Free Trade Agreement (NAFTA) negotiation coverage for the “trade commentariati” is that it’s been better than LinkedIn for catching up with old colleagues, figuring out who has changed jobs, retired or come out of retirement to start commenting.
Yes, there is that much coverage, which is kind of amazing for Canada given that we do not have a research centre or think tank (i.e., non-academic centres) with full-time staff dedicated to long-term, practical work on North America.
So much for North America being a priority for Canada.
But, that lack of think tank capacity also means that even with all the chatter, there have been some holes in the analysis and media coverage of the NAFTA talks. This is even more glaring in the case of the third partner of NAFTA, Mexico.
With that in mind, here are 5 things that media coverage in Canada has been missing.
1) Article One, Section Eight
…of the U.S. Constitution, which unequivocally states that Congress shall have the power “To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.” That is Congress, not the administration and not the president.
Yet, media coverage in Canada, and to some degree the states, has made it seem that the negotiations revolve almost solipsistically around President Donald Trump’s every tweet. But it is not just the media that have overlooked Congress’ power and supremacy on trade. U.S. Commerce Secretary Wilbur Ross and Trump also appear to have entered office unaware of how things work. Ross was essentially reprimanded by the Senate Finance committee when it appeared the Secretary wanted to launch NAFTA talks without following the rules that Congress laid out in the Trade Promotion and Priorities Act.
Trump has also been given a pass by the media on his threat to “end NAFTA.” Sure, the president can withdraw but what does that mean if Congress declines to rescind or amend laws that it put into place to enable NAFTA? That’s an open question. But in the short term, it probably plays against the president. Think about it this way: does a U.S. customs officer consult the legal manual in front of her to do her job, or check her Twitter feed to see what the president has just put out? Congress has been steadily taking back its constitutionally mandated powers to set the rules and priorities for trade negotiation. This occurred under the Obama administration but has gathered speed, and urgency, under Trump. While members of Congress might not have liked President Barack Obama, at least they could still trust him to negotiate competently and within the rules. This clearly not the case with Trump. Dislike of personality has been replaced by distrust of competence.
2) Everyplace but D.C. matters
…Canada arguably has the best outside-the-beltway ground game of any foreign country. It also has the only outside-the-beltway ground game.
Mexico has three to four times as many consulates as does Canada and more diplomatic presence in the U.S., but the vast majority are focused solely on consular issues. For Canada, it’s all about lobbying and business. As we explained above, Congress will be the most important voice in the U.S. on NAFTA. So, it follows that getting to Congress is most important. The best way to get to Congress is not to queue up in reception with the other 177 embassies; it’s to go out in the congressional districts and get to the mayors, chambers of commerce, businesses and others who can get the congressperson to pick up the phone on the first ring. Earlier this year, the clerk of the Privy Council – aka Canada’s top bureaucrat – told the premiers that it’s all hands-on deck and that the federal government needs the provinces to step up engagement with their U.S. counterparts. But the feds didn’t offer any money to help the provinces do this at a time when the provinces are implementing austerity measures at home. There has also been, as far as I can tell, no money to help trade associations reach out to their U.S. counterparts.
So, we have federal officials leading conversations that would be more effective and impactful if non-federal actors were involved. Part of the fault is lack of federal money and part a lack of realization of the importance of this outreach by provincial leaders. Saskatchewan Premier Brad Wall was the only western premier to attend this year’s Western Governors’ Association meeting, despite the fact that this year’s host Montana Governor Steve Bullock issued a special invitation and put Canada-U.S. relations on the agenda for an hour and a half discussion. At the National Governors’ Association in Rhode Island, it was Ontario Premier Kathleen Wynn holding down the fort for her no-show provincial counterparts. In both meetings, federal officials, Ambassador David MacNaughton in Montana and Premier Justin Trudeau in Rhode Island, played a larger role than one would expect in a sub-national venue. So, yes Canada is active and successful on the sub-national, outside-the-beltway front, but it falls far short of what it could and needs to do.
3) But local matters more
…as someone who grew up in Philly, the fact that Canada is the largest foreign trading partner of Pennsylvania is meaningless to me. That Pittsburg or, worse some farmer with a weed between his teeth over in Lancaster County, is or is not making money shipping produce to Canada is not only irrelevant on a personal level, it’s potentially counterproductive if any Philadelphian is informed of this in a way that indicates they’re supposed to care. And the love between Philadelphia and the rest of the state is reciprocal.
Like politics, all trade is local. Speeches by Canadian diplomats, government officials and fellow trade analysts often tout how many U.S. states count Canada as their largest trading partner as a talking point to convince U.S. citizens about the importance of the agreement. But what matters more to most people than the health of their state is their community and their job. The impacts of trade that matter most are local, and when you start naming companies that people know because they are in their community, it matters more because you’re talking about places where an aunt or brother-in-law or the one neighbor you like works. Or the plant or the business that the local congressperson visited during her last campaign. That’s what captures attention, not what’s taking place on the other side of the state or in rural counties if you live in a city and vice versa. As seen in the attached chart from our North American Infrastructure Bank paper, we have this info. We have to start using it, or using it more.
4) Who yells loudest, rust belt or farm belt
….may have a bigger impact on the outcome of negotiations than people realise. A lot of the anger over NAFTA is from the rust belt. The agreement has become the symbol for practically everything that is wrong with the world from job loss to the common cold (that’s only a slight stretch but you get the drift).
Other actors that have benefited more from NAFTA have not been as vocal and certainly were nowhere to be found during the recent election. Yet, a lot is at stake with agriculture. Canada and Mexico are crucial markets, in many cases the most important markets for U.S. agriculture. Take dairy. The first concern in the NAFTA talks for the U.S. dairy industry is not about opening the Canadian market; it’s about keeping market share in Mexico. Mexico is aware of the cards it holds in agriculture and has not been shy about upping the ante. The Mexican senate passed a resolution instructing the government to facilitate the shift in corn imports from the U.S. to Brazil, Argentina and Canada. Mexico, which used to be the largest importer of U.S. corn has fallen behind Japan to second place (yes, for a host of reasons, but in the current context the message is still there).
Now imagine if the Mexican government invites the New Zealand trade and agriculture minister over for talks on increasing dairy (milk protein) imports from New Zealand. New Zealand, Mexico and Canada are also all part of the Trans-Pacific Partnership (TPP) deal, which has been signed but not ratified, and as we argue in our recent paper, is far from dead even without the U.S.
Each country plus the other TPP members all stand to take market share from U.S. agriculture if – or more likely when – the TPP comes into effect. U.S. agriculture exporters are going to face a host of tariffs and other measures that their competitors will not. Canada and Mexico have the TPP, the U.S. has no active trade negotiations under way (describing Transatlantic Trade and Investment Partnership [TTIP] as active is correct in theory but not reality). So, for U.S. agricultural interests, NAFTA is the only game in town. Yes, overall Canada and Mexico need access to the U.S. market more than the other way around, but the disparity in need is not as great as it once was and in agriculture at least, leverage or a counter to the anti-NAFTA sentiment in the rust belt, may be on Canada and Mexico’s side.
5) TPP or not TPP, that’s the difference
…(with apologies to the Bard) as mentioned above, the U.S. faces potentially large losses for certain sectors if or when the TPP comes into effect. This impact goes beyond agriculture and commodities. The TPP contains pretty much everything on the U.S. business community’s wish list for a modern trade agreement. The irony of President Trump’s withdrawal from the agreement is that he’s taken away from U.S. industry everything they wanted and given it exclusively to Canadian, Mexican and other TPP country firms.
Canada and Mexico enter NAFTA negotiations with their companies potentially having a huge advantage over their American competitors. U.S. firms with branches in Canada and Mexico also have a strong incentive to look at moving production from the U.S. to Canada, Mexico to take advantage of TPP provisions. In other words: leverage.
If the Americans want TPP provisions in NAFTA, then they have to make Canada and Mexico an offer. While Canadian and Mexican firms would probably like to see some TPP provisions included in an updated NAFTA, they do not have the urgency that American firms have as Canadian and Mexican firms, which at least have these advantages in the TPP. The Americans have nothing. And they have no near-term prospect for gaining these advantages elsewhere as they have nothing being negotiated around the globe. And face it, which country wants to negotiate with the Trump administration. Better to wait for the next administration, which increases the incentive for American companies to move production from the U.S. to a TPP signatory and also to urge U.S. negotiators to make concessions to get TPP provisions into NAFTA. This is a pressure that Canadian and Mexican negotiators will not face. Again, that golden term of trade talks: leverage.
– Carlo Dade is the director of the Trade & Investment Centre at the Canada West Foundation