North American Brief
Issue 14 | December 20, 2023

In this issue: APEC in San Francisco, PEMEX’s failure to pay suppliers and NAFTA review danger

Asia comes to North America: APEC Leaders meet in San Francisco and dairy drama starring Canada as Snidley Whiplash

In a fortuitous conflux of events, at least for the writer of CWF’s China/Indo-Pacific and North America briefs, this year’s annual Asian Pacific Economic Leaders’ Summit was held in North America. Unfortunately not in Canada, which hasn’t hosted since 1997. The U.S. has hosted twice since Canada last hosted and Mexico hosted in 2002. Arguably by the metric of hosting APEC meetings Canada is clearly the laggard in North America.

The big news out of the Summit for Canada was what didn’t happen – an invitation to join the U.S. economic engagement initiative for Asia, the Indo-Pacific Economic Framework (IPEF). Janyce McGregor of CBC has a good backgrounder. The IPEF is the U.S. attempt to replace the TTP trade agreement, from which Trump withdrew and Biden has been unable to rejoin, with something close to a trade agreement but not so close as to elicit the domestic political backlash that killed the TPP. To draw on the title of a 2009 hit movie – it’s complicated.

Going deeper. We have an analysis in the Hill Times of the lessons from Canada’s exclusion from the IPEF. Bottom line, it’s not a big deal because Canada already has a real trade agreement with the Indo-Pacific through the the CPTPP. The IPEF is not a real trade agreement. Rather, it is a loose framework of often non-binding agreements to cooperate on joint initiatives. This is a far cry from hard tariff cuts tied to rules of origin and dispute settlement that Canada has in the CPTPP. Second, out of over a dozen agreements that were being negotiated under the IPEF umbrella, the Americans only managed to get one signed in San Francisco. And finally, with Democrats in the house and Senate opposing the “not-even-a-real-trade-agreement” IPEF, it’s hard to see the Americans making further progress before election season gets in full swing. And of course, on the Republican side, Trump has already promised to rescind anything the Biden administration signs. Since these agreements do not go to congress, that will be one of the simpler things to do should he get a second first day in office. So, nothing to see here.

But the main point of our analysis in the Hill Times is that if, as Axios notes, a Democratic administration has this much trouble getting a trade agreement without tariff cuts or other traditional measures through its own party what happens when it, or a Trump2 administration, has to face a review and potential renegotiation of a real trade agreement like the current North American trade agreement, in the summer of 2026 at the height of campaigning for fall mid-term U.S. congressional elections?

From IPEF to NAFTA review

Bill C-82 and supply management also play into this. News headlines in Canada have government claiming victory over the Americans on an American complaint about Canadian supply management for dairy. This will only make the upcoming NAFTA review more difficult in an environment of already elevated distrust in the U.S. on trade agreements. If this dispute is not resolved in America’s favour, it’s sure to become a hammer to be used by angry Democrat and Republican candidates in upcoming elections. According to the Deputy U.S. Trade Representative in charge of the file, Canada “shifted the pieces around but didn’t really provide meaningful access for our farmers” and ominously, “Canada certainly hasn’t heard the last from us on dairy market access.” Six members of the U.S. Congress are already on record saying “These bad faith attempts to distort trade by the United States’ closest allies should not be tolerated.” And that’s only Wisconsin.

And this is the “friendly” Biden administration. Should Trump return to office during the NAFTA review, Canada will face the “Art of the Deal” president who allowed Canada to pull a fast one on dairy in trade negotiations that he led. It’s worth quoting Trump here on his NAFTA renegotiation success:

This new deal is an especially great victory for our farmers…They’ve been taken advantage of by everybody…But this is a very, very big deal for our farmers…The agreement will give our farmers and ranchers far greater access to sell American-grown produce in Mexico and in Canada…The deal includes a substantial increase in our farmers’ opportunities to export American wheat, poultry, eggs, and dairy — including milk, butter, cheese, yogurt, and ice cream, to name a few.  I want to be very specific.  (Applause.)  I want to be very specific, right.  Right? And many other products — but those products were not really being treated fairly, as far as those that work so hard to produce them.  And now they’re going to be treated fairly.”

Even worse, fuel will be added to a Blame Canada bonfire (borrowing from SouthPark) if the Canadian Senate approves the pending measure (Bill C-282) to ban supply management from being included in future trade talks. The U.S. perception of Canadian duplicity will be reinforced if supply management is taken off the trade negotiation table before the U.S. has a chance to correct a bad deal. Bill C-282 essentially puts a stovepipe hat, black cape and handlebar moustache on Canada, and in American eyes Canada turns from Dudley Do-Right into Snidley Whiplash* (pictured right for readers under 40) at the NAFTA review table. More than dairy will face America’s wrath; all Canadian sectors, including already vulnerable industries like beef, will be in the line of fire. Even if Canada is in the right on the dairy issue, as the NAFTA tribunal ruling indicates, it will still be in the Trump doghouse at the review table and Bill C-282 only makes it much worse. Even if the bill fails in the Senate, the damage may have already been done as the Americans will be well aware that we tried to pull yet another fast one. Cue the Snidely Whiplash evil cackle.

Other News

PEMEX’s failure to pay suppliers is, according to Reuters, a threat not only to oil production in the country but a threat to the survival of suppliers, according to a letter sent to Energy Minister Miguel Angel Maciel and Finance Minister Rogelio Ramirez de la O, by the Asociación Mexicana de Empresas de Hidrocarburos (Amexhi). As of September 2023, PEMEX reported total financial debt of US$105 billion with debt to local and foreign companies of about US$17.22 billion.

U.S. farm state reps showing China some love. A super interesting piece in Politico is also a warning for Canadian farmers to pay more attention to the realities versus rhetoric of their U.S. competitors’ policy toward China. A direct quote from Politico sums the warning:

“Congress’ China hawks are meeting rare pushback in their campaign to crack down on Beijing — farm district Republicans and agriculture lobbies increasingly alarmed that Congress might just blow up American farmers’ largest export market. Lawmakers and influential agriculture lobby groups led a campaign to soften the language in a high-profile new report this week from the House Select Committee on the Chinese Communist Party, prompting the panel’s leaders to pull back from an explicit call to revoke normal trade status for China — a move that would likely mean significantly higher tariffs on a wide swath of Chinese products.”

And for our friends in the auto biz, a story also worth watching out west: The Financial Times of London reports that U.S. government officials are worried about an impending raft of Chinese investment to build EV plants in Mexico. The article notes that Mexico is seeking to balance its domestic need for economic growth and job creation against risk of upsetting the U.S. How Mexico navigates this tension is worth watching.

Bringing home the bacon. An interesting analysis in Quartz dives into the diving U.S. demand for pork (fun fact, 20 per cent of Americans say they’d eat bacon every day if they could). But higher prices, tied partially to rising exports, are hurting U.S. demand. According to the article, U.S. producers are shuttering operations including 26 plants in Utah employing over 200. The U.S. has seen rising demand in Chile and Guatemala, but these are small markets. U.S. industry instead has its sights set on Korea – and Canada – to make up for falling U.S. demand.

Mexico, China, fentanyl and more. The Mexican and Chinese presidents met in the margins of the APEC summit to discuss further deepening cooperation to combat fentanyl production and trafficking. In addition, Presidents Xi and Lopez Obrador also discussed cooperation in finance, electric vehicles and infrastructure.

U.S. as well, but not Canada. The U.S. has a similar agreement with China announced in the margins of the APEC meeting. But, according to our friends at InsideTrade, the U.S. deal came at the cost of removing a Chinese science institute from the U.S. Commerce Department’s Bureau of Industry and Security’s Entity List. Several U.S. GOP senators are decrying the quid pro quo. Canadian Prime Minister Trudeau did not meet with Chinese president Xi in San Francisco, so no announcement of an agreement for Canada.

United States poised to extract more oil and gas than ever before in 2023, was a lead in many news sources including the Guardian, which notesRecords will also be broken this year for gas production, with a glut of new export terminals on the Gulf of Mexico coast facilitating a boom that will see US exports of liquified natural gas (or LNG) double in the next four years.”

Of interest to those who visit Canadian national parks, HuffPost has a story about an initiative by the U.S. National Park Service, which is under the charge of Interior Secretary Deb Halland, the first indigenous cabinet member to add more and deeper telling of tribal stories – the good and bad – at U.S. National Parks and Monuments.

And for those shipping to or from Europe, a story that stretches the definition of North America a bit, the drought in Panama that is backing up traffic through the canal. This is a story we have been following since last summer and has just made Canadian papers. Key point here is that Panama is just coming off its rainy season and the lake that feeds the canal locks is still too low for optimal functioning. Ships must be lighter, i.e., smaller loads, and passage takes longer. For the next few months, grain shipments from the U.S. Gulf to Asia have been halted according to Progressive Farmer. This will harm grain shipments from the U.S. Gulf (shipments that travel from the U.S. heartland via the Mississippi River) to markets across the Pacific. This may create opportunities for western Canadian grain. On the other hand, shipments of forest products to Europe from B.C. and Alberta may take a hit. Does this make a business case for the Churchill Port? Interesting question.

Not feeling the love According to ESPN, the NFL has announced that Brazil, not Canada, will host a regular season NFL game next season. The league will have eight matches played abroad the year after (seven in addition to the permanent game in London…England) so there’s hope for Canada. Interesting is the list of foreign markets assigned to each team. Canada has the Vikings and Seahawks, so prairies and the west coast. China has the Los Angeles Rams, while the Rams and Philadelphia Eagles share New Zealand and Australia. The other countries with assigned teams are Austria, France, Germany, Ghana (which also got the Eagles), Mexico, Ireland, Spain, Switzerland and of course the UK.

If the CFL were to do this, which teams should get which countries? Let us know.

*Source: J.J. at the English-language Wikipedia, CC BY-SA 3.0, via Wikimedia Commons

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 are those of the articles’ authors and don’t necessarily reflect the views of the Canada West Foundation and our affiliates.