Donald Trump has given Canada an ultimatum: Sign the new trade deal by Friday, or you're out in the cold. Tom Walkom writes:
Canada has been had. The Mexicans and Americans have agreed behind Canada’s back to cut a bilateral deal that would replace the North American Free Trade Agreement.
Justin Trudeau’s Liberal government has been told it can join in, but only if it capitulates to all of Donald Trump’s demands.
Some of what's in the new deal is good for Canada:
Not everything in the Mexico-U.S. deal would be bad for Canada. Indeed, some parts would be positive.
The original NAFTA allowed companies, particularly big auto manufacturers, to relocate their operations from Canada and the U.S. to low-wage Mexico.
To his credit, Trump recognized that this was a job killer for his country. The new Mexico-U.S. deal specifies that at least 40 to 45 per cent of automotive content must come from factories where workers make at least $16 (U.S.) per hour.
The new pact would also tighten so-called rules of origin to ensure that at least 75 per cent of the content in autos sold duty-free under the deal comes from a country that is signatory to the agreement.
That too would benefit Canadian auto workers if Ottawa signed on.
As well, Mexico agreed to another useful Trump demand — the weakening of a NAFTA provision allowing foreign investors to overturn government laws and regulations that interfere with their profitability.
This so-called Chapter 11 provision has been used mainly against Canada. Yet for reasons that it has never fully explained, Ottawa resisted Trump’s efforts to eliminate it.
The Mexico-U.S. deal doesn’t get rid of Chapter 11. But it would limit its scope to firms operating in specific areas such as energy.
But there are some big poison pills:
In particular, the agreement reached by the Mexicans and Americans appears not to include an independent dispute-resolution system for sorting out trade conflicts among the signatories.
Canada has long insisted that this is a must. NAFTA’s precursor, the original 1989 Canada-U.S. Free Trade Agreement, was almost scuppered by Ottawa over U.S. resistance to this demand.
The Mexico-U.S. deal also includes a so-called sunset clause, a date by which the agreement, unless specifically extended, will automatically expire. According to Trudeau, that too is an absolute no-no for Canada.
True, the time frame has been extended from the original American proposal of five years to 16. But the essential problem with the sunset clause — that placing an arbitrary deadline on a trade deal leads to investment uncertainty — remains.
So it's crunch time. Five of Trump's associates have either pled guilty or been found guilty of crimes. There will be more convictions. It's clear that doing business with Trump is bad business.
Justin has proclaimed that Canada will not be pushed around. Will his actions match his rhetoric?
Image: The Cut