North America Brief
Issue 09 | June 7, 2023

The North America Brief is a compilation of stories and links on the United States and Mexico’s trade relationship with Canada’s Prairie provinces focusing on stories and topics not always “on the front page” of mainstream media.

In this issue: A historic yet Band-Aid Colorado River deal, a Canada-Mexico trade and energy update and much more. 

Historic Colorado River deal a Band-Aid solution 

Efforts to protect what is left of the drought-stricken Colorado River continue as California, Arizona and Nevada sign a historic deal to cut water consumption by 13 per cent (equivalent to a trillion gallons) over the next three years. Around $1.2 billion from the Inflation Reduction Act would fund roughly 75 per cent of conservation efforts, with the rest relying on voluntary commitments. 

Due to the river’s complex priority system, the largest beneficiary of the river’s water, California, will take half of the cuts but Arizona farmers are bracing for large losses too.  

Despite the fact that no deal of this nature has been made before, experts say it won’t be enough to remedy the damage already done. “This deal is clearly a Band-Aid solution for a short-term fix,” says water specialist Katharine Jacobs at the University of Arizona. Plus, Jennifer Gimbel, a water policy expert at Colorado State University, explains that achieving a long-term solution would involve complex government-backed incentives that promote water conservation across the entire river basin while addressing the diverse needs of multiple users. 

Hey Canadians! This is a big deal because the Colorado River feeds you.  

  • Arizona exports $1.3 billion in goods to Canada annually—20 per cent of that value coming from agriculture.  
  • Canada is California’s top agriculture and agri-food export market.  

Director of the Arrell Food Institute at the University of Guelph, Dr. Evan Fraser, told CBC and the Toronto star that Canada “depends on a very small geographic area for the parts of our diet that we’re supposed to eat more of,” adding that Canada needs to “take proactive measures to diversify where we get our salad from.” 

And it’s not just the Colorado River we should be worried about. At the end of January 2023, 33 per cent of land in Canada, 82 per cent of land in Mexico and 52 per cent of land in the United States was facing varying levels of drought.  

  • The Great Salt Lake in Utah, once the largest saltwater lake globally, has diminished to just one-third of its size since the late 1840s.  
  • New Mexico’s Elephant Butte Reservoir, the largest in the state, is now less than 4 per cent full. 
  • Approximately 65,000 dead salmon trapped in a dried-up creek connected to the Neekus River were discovered in British Columbia at the end of 2022.  

Agricultural protectionism  

Concerns about California’s Proposition 12 rule remain within the North American pork industry. Proposition 12 and the recently proposed revisions to Product of the U.S.A. labeling raise concerns about cross-border trade and disruptions to the heavily integrated North American market.  

Right now, the current labeling practice in the United States allows products from animals that are born, raised and slaughtered in another country but undergo any processing in the U.S., to be labeled as Product of U.S.A. But recently the U.S. Department of Agriculture introduced a proposed rule with the aim of refining this definition. The new rule states only animals that are born, raised and slaughtered within the U.S. would be eligible for the U.S. product label. 

In 2021 alone, Canada exported close to five million feeder pigs, over 1.5 million market hogs and more than 1.4 million tonnes of finished pork products to the United States. 

If the Canadian hog industry wants to continue supplying to the California market, farmers, processors and retailers must segregate products. If other states follow suit (which is likely), supply chains will face multiple divisions across North America, threatening market harmonization. The General Manager of Manitoba Pork is urging the federal government to intervene in the issue.

A Canada-Mexico trade and energy update  

Top North American official in Mexico’s Foreign Affairs Ministry, Roberto Velasco Alvarez, spoke with Business in Vancouver on trade and energy relations between Mexico and Canada. Some key takeaways from the conversation:  

  • In 2022, Canada became the second largest foreign investor in Mexico.  
  • Given the global uncertainty of today, “North America is not only back, but it is making more sense than ever.”  
  • There is an important space for Canadian companies in Mexico’s expanding energy sector—mainly when it comes to infrastructure for LNG projects.  

B.C. makes Mexico one of three priority countries in its new trade diversification strategy to support economic growth in the province. Mexico, along with Taiwan and Vietnam, was one of the three priority countries in the strategy. The B.C. government has, relative to other western provinces, long been absent in Mexico. The move to focus on the country comes at a time when the federal government and the rest of Canada are turning their attention to what the federal government has called a ‘generational’ shift to focus on the Indo-Pacific.  

Plus, Business in Vancouver did a deep dive into the North American components of the strategy. 

On the topic of Canada-Mexico energy following positive measures taken by Mexico to engage with Canadian energy firms (see in previous brief), Canadian International Trade and Export Minister Mary Ng has expressed that there is no immediate plan to intensify the ongoing trade disagreement surrounding Mexico’s energy policies.  

And a little corn update: Mexican Economy Minister Raquel Buenrostro plans to visit Canada next month to discuss the trade relationship. One topic on the agenda is the dispute on genetically modified agricultural imports.  

Canada LNG better watch out for Mexico  

Mexico is poised to outpace Canada in the race to become a significant LNG exporter, with the potential to become the world’s fourth-largest exporter if LNG projects in the region materialize. Analysts predict that the United States will lead as the primary LNG exporter in 2023, followed by either Australia or Qatar. Although Canada currently ranks as the sixth-largest natural gas producer worldwide, it does not possess any LNG export terminals at present. 

How is Mexico doing this with so little home-grown LNG? Infrastructure and short timelines. Unlike Canada, Mexico lacks LNG resources. Also unlike Canada, infrastructure to store and export LNG in Mexico is rapidly expanding. Right now most of Mexico’s LNG is imported from the U.S. for domestic use with surpluses processed for export. Short timelines for LNG project approvals have helped Mexico make strides in the sector. By the end of this summer, global energy infrastructure company New Fortress Energy Inc. intends to commence LNG export from the Altamira project to supply European markets.

Other News 

  • Last week, Arizona State University hosted a conference in Washington, D.C. to address North America’s position in the semiconductor industry. Industry and university representatives and cabinet members from all three countries gathered to discuss product quality, speed and cost-effectiveness within the industry. More on that here.  
  • Canada, the United States and Mexico have initiated the North American Ministerial Committee on Economic Competitiveness (NAMCEC). The committee’s objective is to strengthen regional competitiveness and productivity in key industries of the future, including semiconductors, clean energy, critical minerals, biomanufacturing and information and communications technology. Read more here.  
  • The Commerce Department’s International Trade Administration will organize a trade mission to multiple cities in Canada and Mexico in September 2023, along with a conference in Washington centered around “Business Opportunities in the Americas.” Read more here.  

— Taylor Blaisdell, policy analyst

The North America Brief is a compilation of stories and links related to the U.S. and Mexico’s relationship with Canada’s West. The opinions expressed in the links don’t necessarily reflect the views of the Canada West Foundation.

Photo: Unsplash