The Three Amigos Ride Again

edelbuey@gmail.com, lajornadamaya.mx

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Canadian Prime Minister Justin Trudeau’s visits last week to Washington and Mexico City were aimed at trying to keep ongoing NAFTA negotiations on an even keel. As with most deals he has not negotiated, President Trump has described NAFTA as the worst trade deal ever, and told the media during Mr. Trudeau’s visit that NAFTA might not survive current talks. Sustaining the momentum and achieving a positive conclusion is indeed an uphill battle.

Mr. Trudeau has a mercurial interlocutor in Washington. President Trump seems intent on keeping Canadian and Mexican NAFTA negotiators off balance. This is a good negotiating strategy aimed at forcing the best deal for the United States. Buy it creates an aura of uncertainty that has many people concerned.

Indeed, President Trump will continue to be aggressive until negotiations end and a conclusion is reached. When that will be and what the conclusion will be are both complete unknowns, and we can expect strong turbulence en route.

Mr. Trudeau’s visit to Washington underscored the excellent relations between both countries, and demonstrated the strong support Canada enjoys in certain quarters of the U.S. political and business communities. This is a consequence of Canada’s cultural proximity and its highly effective public diplomacy campaign across the United States in recent months.

In Mexico, Mr. Trudeau also has a strong ally. His visit on October 12th underscored the strong relationship he has forged with President Enrique Peña Nieto, and has aroused positive sentiments from Mexicans from all walks of life. Many Mexicans appreciate Canada as a solid partner, although some may be forgiven if they fret at times about occasional reports from some quarters that Canada may, at some point, decide to negotiate a bilateral deal with the U.S. if national interests so dictate.

However, Mexicans must understand that Mr. Trudeau’s overarching responsibility is to achieve the best possible deal for Canada and Canadians, and that this may well mean seeking a bilateral alternative should the current NAFTA talks fail to produce a new agreement.

Both Canada and Mexico are strongly against the U.S. calling for NAFTA to be renegotiated every five years. This is anathema for the business sector, who much prefer the security of a long-term trade agreement to ensure private sector investments. Both countries are also against removing the dispute settlement mechanism that allows all three countries to appeal to a neutral tribunal that helps level the playing field between them. The Trump administration sees it as an encroachment on U.S. sovereignty, and has made its removal a top priority. However, it goes against Canadian and Mexican interests, since both countries are fighting for a rules-based trading system with a far more powerful partner.

Mr. Trump is playing his divide and conquer approach to negotiations strongly. He hints that perhaps he might prefer a strong bilateral trade agreement with Canada, and perhaps a separate one with Mexico. This will appeal to those in Canada who have no confidence in a good faith approach to negotiations by the Trump team for a trilateral deal, and would allow Canada to salvage what it can of the 1988 bilateral Free Trade Agreement with the United States.

It could also appeal to Canadian workers who have lost their jobs to NAFTA or who stand to lose them if major industries like automobile manufacturers continue to shift production to Mexico. There are hundreds of thousands of Canadians whose jobs depend directly or indirectly on automobile manufacturing, and these people represent hundreds of thousands of votes in the province of Ontario.

Mr. Trudeau is very aware of the role that U.S. rust belt voters played in Mr. Trump’s Electoral College Victory that brought him to power in 2016. I am sure that Mr. Trudeau will be looking carefully at the impact low Mexican wages can have on Canadian manufacturing – hence Canada’s play for a binding commitment to higher wages in Mexico by the Peña Nieto government.

So, what are the prospects resulting from Mr. Trudeau’s visit to Mexico City and Washington last week?

Firstly, Canada has managed to create a powerful pro-Canada lobby in Congress and among key decision makers in the United States. The U.S. Chamber of Commerce is four square in support of NAFTA, and can be expected to bring pressure to bear in Congress as well as throughout the United States. So, a strong foundation has been laid for enhanced Canada-U.S. relations regardless of the White House.

Canada’s public diplomacy in Washington and around the country has successfully created multifaceted allies at all levels of U.S. society, and they are fully informed about the importance of Canada for sustaining millions of jobs across the United States. Canada continues to work assiduously to court the U.S. Congress, and create within that body an ally to counter the aggressive U.S. Administration.

This can be translated not only into support for a renewed and enhanced NAFTA but, absent a tri-lateral agreement, for a renewed and enhanced Canada-U.S. Free Trade Agreement.

Mexico has a network of fifty Consulates in the United States, and some 11 million Mexican immigrants and some 22.5 million Mexican-Americans. These could also provide a solid platform for effective lobbying both at the national and the local levels should NAFTA fail and Mexico seek a bilateral agreement with the United States.

Secondly, the warm relationship between Canada and Mexico will allow both countries to work together for common goals to a certain extent.

The fact that Mexico and Canada enjoy a deep and warm relationship would undoubtedly contribute to their ability to negotiate a bilateral deal absent NAFTA. While the Canada-Mexico relationship is strong, Mr. Trudeau would face pressure at home to include strong human rights, indigenous rights, gender equality, and wage increases into any bilateral agreement. These are sensitive areas for any Mexican government as they would be for any government, although these proposals could well prove popular to Mexicans in general. As Mexico goes into a presidential election year in which a populist left wing candidate is currently leading at the polls, an agreement that binds Mexico to a greater degree of social justice could prove popular for more mainstream candidates.

Indeed, Economy Secretary Idelfonso Guajardo and Foreign Secretary Luis Videgaray have both said on occasion that Mexico is fully prepared to go it alone rather than sign a bad tri-lateral deal.

I suspect Mexico would also want to strike a bilateral trade deal with Canada should the NAFTA negotiations fail. Both economies are very intertwined, and a bilateral Canada-Mexico trade deal could well continue to benefit both countries. As well, a resuscitated Trans Pacific Partnership without the United States could well provide a safe haven for both countries in a broader context should trade relations with their neighbor flounder.

In this era of global flux, nothing is certain.

What is certain is that the trilateral relationship will be recast over the next few months, and no one knows what the results will be.

But one hopes that all three governments are ready for the worst-case scenario, however you may choose to define it.