Canada Takes Mexico’s Place as Main Target of US Attacks during NAFTA Renegotiation

The Trump administration’s latest rebukes to its southern neighbor focus on the construction of the wall that should separate both countries.

The guest of honor is now in the eye of the storm: Canada has taken Mexico’s place in Trump’s bull’s-eye during the NAFTA renegotiations. Unlike the first talks, during which the Latin American country was the target of all of the Republican tycoon’s rebukes − disloyal competition stemming from salaries that were too low, Trump said − today, it’s the government ruled by Justin Trudeau that is the administration’s main target. In the middle of the crossfire, the seventh round of talks between the three countries to renegotiate the biggest free trade agreement on the planet will take place this Sunday.

The first – and tensest – clash occurred at the end of the sixth round of negotiations, just a month ago in Montreal, Canada. Some time after Ottawa brought its neighbor before the World Trade Organization alleging improper imposition of anti-subsidy and anti-dumping duties, the U.S. Commerce Department was forced to eliminate a special levy on the import of C Series planes made by the Canadian manufacturer, Bombardier. U.S. Trade Representative Robert Lighthizer, the main political representative at the negotiations, used a press conference that should have put an end to a week of conversations between the three teams, to criticize the WTO and raise one of Trump’s biggest concerns: the U.S. trade deficit with its northern neighbor. Canadian Foreign Affairs Minister Chrystia Freeland, who was standing by his side, was incredulous.

The second public clash occurred last Tuesday, when the chief of the Canadian delegation, Steve Verheul, accused the American government of preferring to weaken its two commercial partners rather than seek a way that the three North American countries could benefit from the negotiations. “We have achieved what I would characterize as quite limited progress in general terms,” Verheul said. “The main problem is that we have seen limited flexibility by the United States, even in fairly simple matters,” he added during a press conference that took place in the Canadian capital. Lighthizer responded that the talks with Mexico on the NAFTA renegotiations were going well and ignored Canada altogether.

“Tension is due, for the most part, to the U.S. not accepting Canada’s conditions regarding the new rules of origin methodology [in the automobile sector] and the new mechanisms to deal with controversy,” said Ignacio Martínez of the National Autonomous University of Mexico, one of the academics closely following the trilateral negotiations. When Trump opened the way to renegotiate two bilateral treaties instead of updating NAFTA, many analysts considered that, this way, Washington and Ottawa would team up, leaving Mexico aside. Today, this is just a dead letter. NAFTA will be trilateral or it won’t be at all, they repeat each and every day at the Mexican and Canadian ministries. In the highly unlikely case that the renegotiations prove infeasible, they opted for exploring a bilateral path forward – something that is more typical of how it was done in the ‘80s. The chance that diplomatic tension between U.S. and Canada will have a good ending is doubtful.

On the other hand, Mexico is relatively comfortable in its new position. It’s gone from being blamed each and every week by the White House for a drop in manufacturing jobs in the U.S. – something that’s actually due to the labor cost gap on both sides of the Rio Grande – to being the target of attacks that don’t concern trade at all. The president has, instead, insisted on building a border wall during conversations with his Mexican counterpart this week. However, the other side of the coin is that there is increasing tension between Trump and Trudeau that’s undermining and slowing down the already complex negotiations. This is bad news for Enrique Peña Nieto’s cabinet, since the president of Mexico intends to conclude the agreement before the July elections in Mexico in order to play the “white smoke” card for his candidacy, and thus make an announcement that he can use to win votes.*

“[Trudeau] feels a bit pressured since the [U.S.] accused Canada of being the one that doesn’t want to go forward, and now he wants to put the blame on Mexico again,” said Moisés Kalach, a leader of Mexican businessmen in the negotiations, at a meeting with international correspondents. That’s why, he added, the Canadian government has changed its tone during recent weeks when talking about a tricky aspect of the negotiation: the salary gap between Mexico, the U.S. and Canada. According to calculations by the research department of BBVA Bancomer, the main bank in Mexico, an employee working in manufacturing in Mexico may earn up to six times less than in the U.S., a gap that NAFTA has not been able to close in any way. Setting aside regional rivalries, the relationship between Canada and the U.S. is one of the closest relationships in the world. In addition to sharing the longest border on the planet, they are both members of NATO and the Group of Seven major industrial nations. Each day, according to data from the U.S. State Department, 400,000 people, as well as products valued at $1.7 billion, cross the border in both directions. At an economic level, both neighbors have been trading freely without duties since 1988, when they signed the first bilateral agreement, which would be replaced by NAFTA six years later.

However, the way Trump and Trudeau see the world couldn’t be more antagonistic, and not only on trade. While Trump has opted for protectionism, Trudeau defends free trade tooth and nail, and they also hold antagonistic views on immigration, international cooperation and human rights. Trump, the most belligerent occupant that the White House has ever had, has to deal with one of the most progressive prime ministers Canada has ever had. Tension is guaranteed.

*Editor’s note: “White smoke” is a reference to the signal that is issued by the Vatican when a decision has been reached and a new pope is elected.