Five things to consider before writing off NAFTA


OTTAWA — President Donald Trump said Monday the U.S. and Mexico had reached a bilateral trade “understanding” that could lead to an overhaul — or maybe the demise — of the three-country North American Free Trade Agreement.

Trump lauded the new deal as landmark in U.S. co-operation with Mexico, and he made it clear the two countries will proceed with their pact, with or without Canada. At one point, Trump mused that simply imposing punishing tariffs on Canadian cars would be easier.

Monday’s drama forced Canada’s Foreign Affairs Minister Chrystia Freeland to abandon her plans for a three-country European mission, and fly to Washington.

Will she be presiding over the death of the 24-year-old continental trade pact? Or is all of this simply more of Trump’s tough negotiating tactics aimed at wringing concessions from Canada?

The latter is more likely. NAFTA may not survive under the same name, but here are five things to consider before three-country trade in North America is declared dead.

1. There’s room to give Trump a win on dairy.

Trump once again criticized Canada’s supply managed dairy industry on Monday. He said: “You know, they have tariffs of almost 300 per cent on some of our dairy products, so we can’t have that. We’re not going to stand for that.” He mentioned this in the same breath as dangling the possibility of auto tariffs to punish Canada. What he didn’t say is he wants an end to Canada’s supply management system. American negotiators know what Canada has already done on dairy in past trade deals: it gave the European countries greater access to the protected market in the Canada-EU trade deal, and it was willing to the do the same in the Trans-Pacific Partnership. Now, the Americans want a similar overture from Canada.

2. U.S. Congress needs to be persuaded.

Several trade analysts points out that under the current U.S. Trade Promotion Authority provisions, Trump hasn’t been given the authority to negotiate a two-way deal with Mexico that excludes Canada. Eric Miller of the Washington-based Potomac Institute says many U.S. border states who have grown dependent on trade the regular trade flows over the 49th parallel simply won’t go for it. An aide to former Conservative trade minister Ed Fast argued that the only way Congress might approve such a deal is if Canada walked away from the negotiations, which the Trudeau government has consistently ruled out. “The appearance of Canada as an irrelevant after-thought in NAFTA is a U.S. frame designed solely to wrestle concessions from the Canadian side,” says Adam Taylor.

3. Cars will keep it together.

The Canadian Automobile Dealers Association called the U.S.-Mexico deal a “major breakthrough” and that Canada would inevitably join NAFTA. It essentially branded the continent’s auto sector too big to fail, saying “it is time to close the book on the modernization of NAFTA, and to implement an agreement that continues to provide billions of dollars in benefits to all three member states.” Conservative foreign affairs critic Erin O’Toole says it was a “colossal failure” that Canada stayed away from the bargaining table for the last few weeks and allowed the U.S. and Mexico to carry on in its absence. He says NAFTA can still be saved — no thanks, in his view, to the Trudeau government — because “the long-term integration of our economies will make that happen, led by the auto industry.”

4. Mexico’s president insists he isn’t throwing Canada under the bus.

As Trump blithely repeated his threat to dump Canada, Mexican President Enrique Pena Nieto repeatedly stressed — four times his disembodied voice permeated the Oval Office via speaker phone — that bringing Canada into the deal was the next move. “I like to call this deal the United States-Mexico Trade Agreement. I think it’s an elegant name,” Trump said at one point, and said the U.S. may, “just do a separate deal with Canada, if they want to make the deal.” Pena Nieto — when he was able to squeeze in a reply — showed Canada some love: “I really hope — and I desire, I wish — that the part with Canada will be materializing in a very concrete fashion, and we can have an agreement the way we proposed it from the initiation of this renegotiating process, a tripartite.”

5. U.S. officials actually said they want a three-way deal.

When the reality show spectacle of Trump’s Oval Office phone call with Pena Nieto had subsided, senior U.S. officials briefed journalists on a conference call. As usual, they agreed to speak on condition they not be named. While nothing can be taken for granted with Trump, they provided some insight into U.S. administration’s thinking moving forward. One official said that dealing with one country at a time was perfectly reasonable. “This is not part of the negotiating strategy or anything,” the official said. “And now we’re bringing the other party in … So it isn’t like Canada’s coming in at the last minute.” The official said this was all “a normal, orderly way to arrive at an agreement with three people.”

Mike Blanchfield, The Canadian Press