The Honourable Joe Volpe, Publisher
TORONTO - Everyone is all aflutter because President Trump has vowed to demolish everything that stands in the way of making America Great[Again]. Soft targets like the Trans Pacific Partnership (TPP) are already history – victims of Executive Orders – because they were merely in the negotiation stage.
But, because Trump sees “bogeymen” everywhere, he has mused about the North America Free Trade Agreement (NAFTA). It should be a much tougher nut to crack. It has been there since 1994, weather the test of reciprocal profitability, court challenges and chicanery by businesses and pliable politicians.
Canada and Mexico must be on the alert and wary. But, they are not the real target. Nor are they without “partners” in the dance for market access.
President Trump has summoned the President of Mexico and the Prime Minister of Canada to talk about “improving the NAFTA”, otherwise. Presumably he could sign Executive Orders to begin the process of withdrawal. It is not a quick and dirty process.
He might even bully some of the Industrial sectors covered by the NAFTA with either the threat of tariffs (probably illegal and unenforceable under the rules today) or increased taxes on American companies that defy his “invest in America, or else” policy.
It is unlikely, as long as the USA stays in the World Trade Organization (WTO), the arbitrating component adjudicating on the General[ly negotiated] Agreement on Trade and Tariffs.
The USA and other leading Industrial Powers have worked hard to “discipline the marketplace” – and continue to do so – in order to level the playing field. And to provide companies with protection against bully tactics by governments like that which Trump muses about leading, or against special treatment for competitor companies.
Canada has been there before. In fact, the WTO has a special case study on Canada, NAFTA and the Auto Sector. It is a well researched (though sometimes technical) piece revealing the sly, behind-the-scenes manipulation of rules, the “caving in” to domestic political pressures, the use of “alternative facts” followed by [humiliating] political damage for the government of the day.
The study is replete with ironies. The bullies of the day were the [Detroit] Big Three Automakers. They did not like the market strategies of European and Japanese counterparts who located in Ontario to take advantage of the NAFTA provisions – negotiated by the USA with Mexico and the government of Brian Mulroney, later ratified by Canada’s Jean Chretien in 1994.
Canada was in clear violation of the NAFTA, because it did not treat the Japanese and European as North American companies, even though they complied with all the measures and proved a veritable boon to the Manufacturing sector (Auto) in Ontario.
The Big Three, and their Union allies, they prevailed on a Cabinet pre-occupied with the pressures emanating from Quebec, pre-and post-Referendum, to defend their interests at the WTO. After a negative decision, they further convinced the government to appeal. Canada lost.
General Motors, which had been “promising” to keep a plant in St Therese, Quebec, open, in return for government action at the WTO, vacated the province. They must have been operating in a milieu where “alternative facts” are the norm.
The point is that, while both Canada and Mexico are saddled with weaknesses, their position in NAFTA is now stronger for the expiry of the TPP. At least as far as the Auto sector is concerned.
If Trump’s USA is truly concerned about the growing Auto sector in China, it should be encouraged to improve the local content provisions under NAFTA as a start.
Of course the negotiations and National positions are more complex but there has to be a beginning. If Trump needs some sort of “face-saving win”, Canadian negotiators might look to the TPP as a “bullet they dodged” when they ceded negotiating authorities to their American counterparts and insist on strengthening their relative positions in the NAFTA.