North American Brief
Issue 17 | April 2024

In this issue: Voluntary labelling not a big deal; drought, megadrought and aridification; North American trade agreement review issues; and good haircuts make good leaders.

COOL nothing to get hot about

COOL spring: In February, the NA Brief did a deep dive into the new proposed U.S. regulation for Voluntary Country of Origin Labelling (VCOOL). And sure enough, in March the Americans formally announced the rule and the story hit the media news cycle. (See, CTV and Calgary Herald and CBC). We’ve checked with colleagues on the trade front, including those at CATO and the Council on Foreign Relations who published deep analysis on COOL, and our original analysis stands:

  • There is no WTO or NAFTA challenge to be had on this issue. Since the rule is voluntary there is no government enforced discrimination and hence no case to be had.
  • Damage will be minimal if at all. There is no evidence that Made in U.S.A. beef can be cheaper than made in North America beef and even less evidence that U.S. consumers would pay more for Made in U.S.A. beef, especially with persistent worries about higher food prices.
  • Made in U.S.A. will affect purchases by the U.S. government for schools, prisons, the military, etc. But as best we can figure, this is only about 10 per cent of U.S. food sales. That’s likely not enough market share to force massive changes to processing. Bearing in mind the second point above, this means U.S. government expenditures, and taxes, will have to rise.

It’s the cost stupid, not the trade rules (to paraphrase the Bill Clinton campaign.) And this is the crux of the matter and how to kill COOL. The necessary immediate response to the U.S. announcement should have been to fill the airwaves with how much more this measure would cost the average American, both at the supermarket check-out line and in their tax bill. The U.S. Department of Agriculture had to publish a cost-benefit estimate for the implementation and impact of the new Country of Origin Labelling. Their methodology is questionable and the figures they cite almost certainly underestimate the cost. A (our) cynical view is that the USDA selected a number that prevented cost from becoming an issue via the media megaphone. So it’s a mystery why the Canadian livestock industry did not have its own cost estimate ready to blast out to the media as soon the U.S. Ag Secretary announced the proposed rule. It was also a huge, missed opportunity: e.g., “COOL will raise your grocery bill by $XXX a year and raise your taxes by $XX.” The American public, not a ruling in “trade court,” is the only way to permanently kill COOL. A push for a “Made in North America” label, as discussed in our February Brief, is another option to undermine COOL.

Water on the brain

Mexico first: As summer approaches Western Canada, and Alberta in particular, prepares for another summer of drought. (Note for foreign readers: preparations for a crisis are already underway. See this CBC piece on the crisis and this CTV piece Why this recent snowfall won’t fix southern Alberta drought conditions.)

It makes one wonder how worse off the rest of the continent is. Mexico City with a population over 20 million, about five times the population of Alberta, is, according several major media outlets including CNN, about to run out of water. There’s quite a bit of nuance to the big headline. Our friends at the Latin American Advisor have a range of expert opinions on this. Despite the crises, parts of Alberta will be fine as will parts of Mexico City. The issues are really larger system shocks.

As more attention turns to drought in North America (or, depending on the region, megadrought or aridification) a good bookmark to add to your browser is the North American Drought Monitor, a tri-country initiative that grew from the U.S. drought monitor established about 15 years ago.

For Alberta, the worry over water is not really “new.” We found at least one article going back to 2006 warning of impending, long-term water crisis in the province. Looking farther back, Captain John Palliser identified much of the land in southwestern Alberta and southeastern Saskatchewan (the Palliser Triangle) as unsuitable for farming because of dry conditions. Nevertheless, “not new” does not mean “not urgent.”

NA trade agreement: What to watch

Resuscitating the RCC? Last month Canadian Treasury Board President Anita Anand announced on Twitter (maybe to get Trump’s attention?) a Canadian government effort to revive the dormant U.S.-Canada regulatory cooperation council (RCC) with meetings with business leaders across Canada. The U.S. publication InsideTrade (paywall) reported that OMB did not respond to a request for comment about the Canadian initiative. But the rest of the InsideTrade analysis is super interesting and insightful. Canada tried to have the RCC expanded to include Mexico and then added to the new North American trade agreement only to be shot down by the Americans.

This is, again, the crux of the problem. The Americans do not want permanent, independent, on-going institutions or arrangements here in North America, which is what most other trade blocks have. Americans view these as potential infringements on U.S. sovereignty. This imposes a collective cost of uncertainty and of having to rebuild, revive, recreate and rediscover mechanisms to manage trade. A problem or trade irritant has to get big enough or bad enough to generate the attention and will to fix it. Even simple measures like the annual meeting of the heads of state, the Three Amigos summit, have become increasingly difficult.

What to do about this? Be ready. If the Americans will only pay attention and act when crisis strikes, then that becomes our strategy to get greater institutionalization. As the Nobel-prize winning economist Milton Friedman put it “Only a crisis – actual or perceived – produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes the politically inevitable.”

The problem though is that Canada doesn’t do “lying around.” Instead, our response to crisis is defensive reaction with a mad scramble to assemble resources to put together a policy response. We at the N.A. Brief have been trying to keep the idea of a North American Infrastructure Institution alive. But a focus on North America is part-time work for CWF and, it appears, for Canada. We do not, as far as we know, have a full-range public policy think tank in Canada focused on the U.S. let alone on North America. The one Canada-U.S. think tank is an American organization funded by the U.S. government and located in Washington, D.C. The Canada Institute at the Woodrow Wilson Institute is a light in the darkness and a godsend. As good as the Canada Institute is, and it is good, is one institution enough for a market that takes over three-quarters of our exports and that holds so much of our fate in its hands?

Will upcoming U.S. elections and review of the North American trade agreement change this? No.

And speaking of the upcoming North American trade agreement review, one issue rising on the horizon that may be more difficult for Canada than dairy is China. Specifically, Canada’s poor performance in cracking down on goods suspected of being produced with forced labour in Xinjiang, the Uygur Autonomous Region in China. We held a webinar on the issue a year ago. There were a series of stories about this last year, see for example the Toronto Star which noted that after all three North American countries announced bans on goods made with forced labour from China, only the U.S. reported significant interdictions. Last year, the Americans seized over US$1 billion in goods under their Uyghur Forced Labor Protection Act. According to the American on-line scoreboard, in the 21 months since the U.S. began enforcement of its act, U.S. Customs has stopped 7,566 shipments and of these denied 3,096 valued at US$2.78 billion.

And Canada? The government agreed to bar imports of goods made with forced labour as part of the new North American trade agreement and has recently passed a forced labour and supply chain act. But actual interdictions? Four years after the commitment made to renegotiate NAFTA, that number stands at zero minus one. (Anecdotally, Canada is rumored to have accidentally interdicted a shipment from China that it later released.) As noted by the Globe and Mail’s Chase and Fife, U.S. Undersecretary of State for civilian security, democracy and human rights visited Ottawa and raised this discrepancy.

The drumbeat will only get louder. As much trouble as Canada may face with the U.S. on dairy access, lack of enforcement, or even the appearance of not taking seriously the U.S. obsession with countering China, will be a worse problem if interdiction numbers do not rise significantly. On the other hand, sloppiness and inevitable mistakes in a mad rush to raise numbers would cause other serious problems. This is an issue to keep a close eye on. It’s also one where coordinated work by public policy institutions is desperately needed.

Other News

A small story that is a big story is also an antidote to the doom scroll that is now news from the U.S. – conversation between Governors Spencer Cox (R-Utah) and Wes Moore (D-Maryland) on disagreeing better. The news cycle would have us think that we’ve lost the pragmatic, practical and just plain decent U.S. But the conversation between Cox and Moore is a reminder that it still exists – and the place to find it is at the sub-national level. You may not agree with every policy or public pronouncement of the two governors, but you cannot miss the seriousness and thoughtfulness of what they say across the literal and figurative aisle. Maybe more important in the current context is how they say it. And to be transparent as to our personal biases beyond pragmatism and reasoned, evidence-based public policy, the video is also an example of two elected officials who, as opposed to other politicians, sport impeccable hair styles a la the Honourable Premier of the Yukon and President of Pacific Canada (PacifiCan).

The Honorable Wes Moore, Governor of Maryland and the Honorable Spencer J. Cox, Governor of Utah interviewed by Judy Woodruff, Senior Correspondent of PBS NewsHour on Wednesday, February 21, 2024

Carlo Dade, Director, Trade and Trade Infrastructure

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.