Ottawa out-Trumps Trump on Nafta and trade.
Throughout his presidential campaign, Donald Trump liked to bang on about how Mexicans are stealing American jobs, and he called the North American Free Trade Agreement “maybe the worst trade deal ever signed anywhere but certainly ever signed in this country.” Now someone on the other side of the U.S. border is finally agreeing with him.
But it isn’t Mexico. It’s Canada. And this is probably not what Mr. Trump expected when he forced Nafta’s trading partners back to the negotiating table. As part of this renegotiation, the Canadians are now complaining that U.S. labor laws are unfair to Canada. Specifically, the Globe and Mail reports that Canadian negotiators spent Sunday’s talks in Mexico City trying to persuade their U.S. counterparts to pass a federal law negating the right-to-work laws that now prevail in 28 U.S. states.
Mexico Plays the ‘China Card’
The possibility President Trump will pull out of NAFTA has prompted his Mexican counterpart to court China.
.. This week, while his country is renegotiating the North American Free Trade Agreement, Mexican President Enrique Peña Nieto was in China to pursue his country’s Plan B. Rumblings of a free-trade deal between the two nations have grown since President Trump took office this year, but they’ve mostly been seen as political posturing. But with Trump threatening regularly to dump the deal—even taking time last Sunday, during Hurricane Harvey, to say he “may have to terminate” NAFTA—the possibility of Mexico opening up to China seems ever more real.
.. Peña Nieto’s will participate in the BRICS summit in China, named for its participants, Brazil, Russia, India, China, and South Africa. And he also met with Chinese President Xi Jinping, a sign the two countries are seeking a closer trading relationship.
.. NAFTA changed the waythe U.S. eats, and without NAFTA, consumers stand to lose their perennially fresh and cheap vegetables. But the sector that stand to lose the most is auto manufacturing, because U.S. companies have invested heavily on being able to send car parts to Mexico, assemble them there, then bring them to the U.S. to be sold.
..The WTO tariffs for the auto sector are much higher than for most other industries, so not only would consumers have to pay more for cars, but it would likely disrupt the current chain of manufacturing.
.. if NAFTA did end, it’s trade would likely continue at WTO tariff rates, making many products from Mexico more expensive, but leaving intact the flow of trade.
..Mexico sends about 75 percent of its exports to the U.S., which comes to about $290 billion. By way of comparison, Canada is its second-largest export market at $23 billion, and China its third at $7 billion...And as recently as June, China’s ambassador to Mexico, Qiu Xiaoqi, said his country was open to a free-trade agreement. But while a deal like that could benefit China (and scare the U.S.), it probably wouldn’t benefit Mexico that much. Dussel told me Mexico imports about 14 Chinese products for every one product it exports... “The thing you want to think about is what is Mexico’s competitive advantage,” Adam Collins, a Latin America economist with Capital Economics, a London-based research and consultancy group, told me. “In both cases it’s low wages. So really the place Mexico should look to are other developed countries, like in Europe, and richer East Asian countries. But even that is an uphill battle because of geography, by which I mean Mexico’s other competitive advantage is its location next to America.”
How China Aims to Limit the West’s Global Influence
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In January, at the World Economic Forum in Davos, Switzerland, President Xi Jinping of China called his country a champion of free trade and globalization. And at an international conference in Beijing in May, he laid out China’s grand vision of promoting global integration by linking Asia, Europe and beyond through a new network of roads, railways and sea routes.
.. China is fashioning a new form of multilateralism
.. This strategy will advance its economic and political influence in a far more effective manner than a unilateral approach built on brute economic force, a tactic that has produced mixed results for China so far.
.. With the United States apparently pulling back from multilateralism
.. This form of multilateralism is built on transactional principles very different from the type of global order the United States and other Western economies have championed, one built on trust and mutual cooperation. It will eschew values like democracy, human rights and freedom of expression, which the United States has long sought to promote around the world.
.. Beijing’s strategy has two main prongs. The first is to change the rules of the game from within, by expanding Chinese influence in existing international institutions.
.. But the other side of the bargain — China’s opening — was not fulfilled. Foreign exporters and investors still face many barriers in China.
.. Foreign businesses undertaking production in China also have to partner with local companies, requiring transfers of technological expertise and intellectual property. Foreign investment is still restricted in certain sectors, including financial services like insurance.
.. The country is now one of the prime users of the W.T.O. dispute-settlement process to protect its own interests and to aggressively counter trade actions brought against it by other countries.
.. At these organizations, the United States and other advanced Western economies together still have the dominant voting power. So, China has been subtle in its approach, creating alliances with other emerging-market countries like India and Russia to advance its priorities.
.. The second prong of China’s strategy is to set up its own international institutions.
.. Initiatives like One Belt, One Road — the plan to invest $1 trillion or more in transcontinental infrastructure — and the Asian Infrastructure Investment Bank, which started operation last year, allow Beijing to cloak its influence behind the facade of a large group of countries
.. The professed multilateral nature of its initiatives allows Beijing to pull other countries more tightly into its fold. It becomes harder for countries that do not share China’s values to stay on the sidelines. Many countries joining with China say they must do so to influence these new institutions from the inside rather than just complain about them from the outside. This was the justification when Britain, Germany and France signed up to become founding members of the Asian infrastructure bank, leaving the United States fuming.
Canada Makes a Mockery of a Trade Deal
The Liberals want to expand Nafta to cover ‘gender rights’ and ‘indigenous rights.’
But Foreign Affairs Minister Chrystia Freeland wants to make Nafta “progressive.” So Canada’s Liberal government proposes including new chapters related to “gender rights” and “indigenous rights.” Seriously. Ms. Freeland wants Nafta to reflect the government’s “commitment to gender equality” and “our commitment to improving our relationship with Indigenous peoples.”
..This is another frustrating example of Canada’s political culture. The Liberals are perennial fence-sitters, content to shift with the prevailing political winds. The current government is one of the most left-leaning in years.. The Liberals also seem intent on blurring the lines between political and economic reality and becoming a political and economic alternative to the U.S. Prime Minister Justin Trudeau’s recent profile in Rolling Stone—cover line: “Why Can’t He Be Our President?”—is part of a long-term marketing strategy to make the young, hip, photogenic leader a progressive hero in the face of Donald Trump’s America... only 43% of Canadians hold a favorable view of the U.S. That’s down from 65% during President Obama’s last year in office.. Canada’s political culture approves of preposterous proposals like gender and indigenous rights in Nafta. It’s the type of modern progressive agenda many Canadians want... If Canada and the U.S. can’t find common ground on Nafta, Mexico may end up becoming North America’s voice of economic sanity.