North American Brief
Issue 16 | March 2024

In this issue: Biden and Trump trade agendas released, U.S. and Mexicans in the U.S. election data, CUSMA expansion gets more real and the U.S. running out of power.

U.S. Trade signals from Biden2 and Trump2

There’s been a lot of necessary speculation on what a Trump2 administration would mean for Canada and global trade and also a lot of the same speculation for a Biden2 administration. Speculation was replaced by evidence in the first week of March. We offer a snapshot in this brief and also a longer analysis on our website.

For Biden, same old trade agenda in the U.S.? The U.S. Trade Representative (USTR) released its annual report for the previous year and agenda for the year ahead on March 1, and at over 350 pages, there’s a lot to review. The report is mostly a status update on existing U.S. trade agreements and trade actions including challenges for unfair trade practices and new negotiations. Our extended hot take is here. But, in short, the administration hasn’t given up on the IPEF, there is no doubt whatsoever that Canada is headed for dairy trouble, and the Latin America version of IPEF has legs.

For Trump? Not bad for Western Canada? The Heritage Foundation has released a 920-page compilation from several notable authors providing an in-depth, department by department agenda for remaking the U.S. government and policy under a second Trump administration. The trade chapters are written by former Trump director of trade policy Peter Navaro. Our “hot take” on the 53 pages of trade policy in the document are here.

Speaking of not bad for Western Canada, the Congressional Research Service released a briefing note for Congress on U.S.-Canada trade at the end of February. The good news here is that the brief spent a minimum amount of time on dairy, listing it as the fifth of six “selected trade issues for congress.” Ahead of dairy were Canada’s digital services tax, autos and critical minerals, the on-line news act and the on-line streaming act. Dairy was the fifth item and softwood lumber the sixth and last item. As opposed to the other five topics, the critical minerals brief was positive about relations with Canada. On a positive note – any Canada-U.S. relationship problems in the brief are not coming from Western Canada.

North American Trade News

NAFTA expansion gets yet another, more serious, boost – this time in the form of a joint House and Senate bill, dubbed the  “Americas Act,” (paywalled copy of the draft text of the 200-page bill on InsideTrade) which would use the Biden administration’s “Americas Partnership for Economic Prosperity” initiative (the Latin American version of its Indo Pacific initiative) as a path for countries to join the current North American trade agreement.

  • The bi-partisan Act has much of the same countering China focus seen in the Heritage Foundation’s trade chapter (reference above) including an even greater focus on re-shore production to the U.S. and also near-shore manufacturing to partner countries in our hemisphere.
  • The bill offers more access to the U.S. market in exchange for countries adopting a U.S. e-governance system, following U.S. policy on China which includes prohibiting certain types of investment and trade.
  • Most interestingly, a country can only join if “the government of the country has committed to beginning necessary negotiations and deliberations to accede to the USMCA as described in section 214 (sic. of the Act).” The draft bill says the president should, within 90 days of the bill’s signing, begin negotiations with Canada and Mexico “to establish procedures for an Americas Act partner country to accede to the USMCA.”
  • Before acceding to the current North America trade agreement, partner countries would first have access to the benefits under the Caribbean Basin Trade Preference Area as an interim stop before joining the North American agreement. This is a necessary inducement given the American’s recent history of yanking the rug out from under countries after they’ve made trade negotiation concessions. Of note for Canadian energy exporters, one of the benefits of the Caribbean agreement is duty-free access to the U.S. for hydrocarbons which sees tariffs on oil imports drop from 6.5 per cent tariff to zero.
  • The bill has strong bi-partisan support including Republicans Senator Bill Cassidy of Louisiana and House Foreign Affairs Western Hemisphere Subcommittee Chair María Elvira Salazar of Florida and Democrats Senate Finance member Michael Bennet of Colorado and representative Adriano Espaillat of New York. The sponsors have been advised by the White House on development of the legislation.

…and Canada gets yet another dairy warning shot, this time fired by the USTR’s Katherine Tai. At a Brookings Institution event in Washington D.C., Tai said that Canada and Mexico should not get too comfortable in preparing for the summer 2026 review. In fact, “The whole point is to maintain a certain level of discomfort, which may involve a certain level of uncertainty…” The key issue in the review will be how to deal with China. But for Canada, while Tai was optimistic about increased cooperation on autos, an extended quote on dairy illustrates why the review may go better for Western Canada than for the rest of the country. “When you get to the end of the system…the question is always going to be do you have enough – have you changed the leverage composition to get to the political solution that you need?” In a case involving Canada’s implementation of a dairy tariff-rate quota system, Tai said the answer to the question of a political solution was “no,” the system failed to deliver increased market access promised to U.S. dairy producers under the deal after a USMCA dispute settlement panel ruled against the U.S.

Why this is a problem. As we’ve said before, in the American’s view Canada pulled a fast one on dairy in the last round of trade negotiations. The Americans want to correct their mistake. If Canada’s potential response to U.S. concerns over dairy access is to prohibit any government from being able to negotiate any changes to dairy access, which Bill C-282, an Act to amend the Department of Foreign Affairs, Trade and Development Act (supply management) does, the response from a Biden or Trump administration will be severe. Further, this response will come in the context of the U.S. potentially having a bigger, better back up to the current North American trade agreement ready to go or in the shop being assembled. What started as a bad idea, Bill C-282, currently in second reading in the Senate, just keeps getting worse the more we hear from the Americans about the potential cost they will impose should the bill become law.

Energy News

Meanwhile, further south, according to stories in Reuters  Mexico’s president has handed an estimated US$6.4 billion to state-owned oil producer PEMEX through a new tax break. This is on top of an estimated US$106 billion that the Mexican government has put into PEMEX under the current AMLO administration. Despite these investments,  Bloomberg writes Moody’s recently downgraded the company’s stock to near junk status because of poor performance and a crushing debt load. All of this, of course, gets left on the desk of the next President of Mexico who will take office on October 1, inauguration day, a new federal holiday in Mexico.

Clean energy not done right…at least that’s the story coming from a deep dive by the Washington Post (paywall warning) on resistance by first nations in the U.S. who are facing massive renewable and clean energy related projects that will cross or touch on their lands. From reading the story, it seems the Americans have yet to figure out basic consultation. The U.S. Energy Dept. and embassy in Ottawa would probably have a different spin.

Yet, the U.S. is running out of energy, according to an in-depth analysis by the Washington Post (paywall). The article has some staggering figures for how much demand for electricity has, and will continue to, accelerate in the U.S. See, Amid explosive demand, America is running out of power.

Election Watches

And speaking of elections in Mexico, for a deep dive into how that race is proceeding, our friends at the Council of the Americas are hosting a Mexican election poll tracker with breakdowns by demographics, gender and other factors. No surprise that as the June 2 election approaches, former Mexico City Mayor Claudia Sheinbaum, successor to current President Andres Manuel Lopez Obrador (AMLO) and his Morena coalition which includes the Worker’s Party (PT) and Green Party (PVEM), is the frontrunner. While this sort of coalition sounds like a conservative nightmare to Canadian ears, the Mexican Green party is not a place where Elizabeth May would be caught dead. A great article a few years ago by Slate says it all “Green Like AstroTurf—or Dollars: For Mexico’s Green Party, the “green” is in the branding, not the policy.”

And speaking of Mexicans going to the polls, Pew Research notes that there are now 36.2 million identified Hispanics eligible to vote in this year’s U.S. elections, a four million person increase from the last election. Mexican descendants are, of course, the largest segment of the Hispanic vote. Pew Research is the place to go for more data and analysis of the U.S. Hispanic vote. The Americas Society also recently published insights. For those in Western Canada monitoring elections in states close to home, six of the top 10 U.S. states (not territories) for Hispanics or Latinos as a percentage of the state’s population are in the West. When planning a visit to lobby U.S. state officials, a stop by the Mexican consulate may be order in some cases.

Other News

  • Sweet news for Taber and it ain’t corn. The USDA just released projections that Mexican sugar production for the 2023-2024 fiscal year will fall more than 349,000 metric tonnes below the year before, a downward revision of 110,000 metric tonnes from January estimates. U.S. sugar beet production is also forecast to fall. Stock up now, it’s not water for which the Americans will be coming. For the Taber reference, see our friends at the Alberta Sugar Beet growers.
  • Somehow the U.S. Woman’s National Team lost to Mexico in the women’s CONCACAF gold cup – we must have missed the flock of pigs heading south for the winter this year. The U.S. then went on to best Canada 3-1 in their March 6 match, which may mean that the U.S. ambassador to Canada got some payback on Canada’s ambassador to Washington D.C. for his last Canada-U.S. soccer bet.
  • An interesting, enraging story on an own goal by Canada in the war on fentanyl. This ties to a larger story covered extensively in our last ChinaBrief. A B.C. court was forced to order the release of a Canadian fentanyl distributor wanted in connection with two deaths in the U.S. because the International Assistance branch of Justice Canada gave the wrong submission deadline for extradition paperwork due to U.S. authorities. As the fentanyl crisis worsens in both countries and U.S. media like the Washington Post call Canada a threat in the U.S. opioid epidemic, mistakes like this will not help build trust in Canada as a reliable, competent partner in fentanyl fight.
  • ¿dónde está the beef? In a different take on country of origin labelling for beef, stories online and in some Canadian consumer news shows are running on the appearance of beef from Mexico in Canadian supermarkets. The issue is that the beef is labelled as “ungraded beef from Mexico” leading to questions about what “ungraded” means and why beef from Mexico is in Canada. The answer to the latter question is the high price of Canadian beef has led to the import of cheaper Mexican beef for budget conscious consumers. And while the beef could not be sold in Canada if it was unsafe, the “ungraded” term on the label has raised concerns and questions. Really? Unless the 4 million Canadians who visit Mexico each year are packing a week’s worth of groceries, they are eating Mexican food. As for quality of the beef? Well, the higher the rating the more Canadian consumers pay. The same “common sense” yardstick works for most products including beef from other countries. The confusion and concern illustrate why Canadian beef exporters are concerned by U.S. attempts to mandate country of origin labelling and this episode explains why we spend so much time following country of origin labelling in the U.S.
  • BNSF railway going off the rails…The Transportation and Trades department of the national trade union centre AFL-CIO issued a letter to the U.S. Federal Railroad Administrator at the end of February demanding that U.S. authorities “immediately conduct unannounced focused inspections of all BNSF owned and leased locomotives and rail cars located at, or in transit, to all BNSF Locomotive Maintenance Inspection Terminals (LMITs), and further issue non-compliance orders requiring BNSF to repair any defects before being permitted to utilize their locomotives and rail cars.” The letter notes that BNSF “has slashed Mechanical Department employees by over 41% since 2015” to the extent that mechanical department employees “cannot adequately perform federally mandated safety inspections, as verified by their (sic. BNSF’s) most recent waiver petition.” Given the presence of BNSF-operated trains and yards in Canada, it will be interesting to see what action, if any, Canadian authorities take. (The AFL-CIO letter doesn’t appear to be online. We got a copy from our friends at Politico’s Weekly Trade. Sign up!)

Carlo Dade, Director of 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.