American media, especially business media, does a terrible job of covering trade issues. During the extensive negotiations, very little was written or said about issues such as tariffs, softwood lumber, patents on drugs, sunset clause, trade dispute resolution, de minimis levels, supply management, and culture protections.
Listening, reading, and watching Canadian media gives an insight into the issues and concerns that Canada and the United States had in renegotiating NAFTA.
The American media reaction was very pro-Trump without a consideration for how the deal was put together or the consequences of aggravating the U.S. largest trading partner.
The name itself is meant to be part of the aggravation. The beauty of the NAFTA name was the unification of the 3 countries under the North America banner. USMCA separates out the countries and is supposed to be a reminder that Canada was the last country to enter the agreement. The initials come too close to USMC, which is known in the United States for the United States Marine Corps.
In the spirit of fair play, we offer up a few advantages to the new deal. This won’t take long.
The obvious advantage is the elevation of Mexican wages for auto production. The Canadian auto industry is excited about this resolution. What isn’t clear is whether this will reduce the number of auto jobs leaving Canada for Mexico or that some jobs might leave Mexico for Canada.
The de minimis limit aka duty-free shopping was going to go up regardless of how the negotiations went. Canada has kept this at an artificially low figure of $20. The de minimis amount will now be at $150. Mexico raised its de minimis limit from $50 to $100.
The sales tax threshold will go up from $20 to $40. The sales tax would easily be higher than the duties, depending on the product. The goal for a low de minimis amount was protecting Canadian retailers from the lower prices from the United States.
Canada's existing cultural exemption is preserved under the new deal. This is in place to protect Canada’s cultural institutions from being bought out by U.S. business interests. Though as we’ve seen, U.S.-based hedge funds dominate control over Postmedia, the largest private newspaper company in Canada, with a reported 98% ownership level by U.S.-based hedge funds.
Donald Trump does not understand that the American economy benefits from Canadians shopping in the U.S.
Canadian dairy was going to be upset regardless of how the negotiations went. The supply management system provides a rather good safety net. If the U.S. had stayed in the Trans-Pacific Partnership (TPP), the U.S. would be in on market access to 3.25%. The new deal puts the U.S. access at 3.6%-3.9%. While that increase is not significant, Canada could have justify holding at 3.25%.
The U.S. also significantly subsidizes dairy production. The U.S. outcry about Canadian dairy access is more about the U.S. system encourages overproduction of milk. Yet Canada didn’t get any new access to the U.S. market.
One key stumbling block with American milk in the Canadian market is that Canada does not allow the artificial growth hormone Recombinant bovine somatotropin (rBST) to be used on cows. The Monsanto co-developed growth hormone is allowed in American milk.
Country of origin labeling has been a tricky subject between the NAFTA countries, so Canadian consumers will have to be extra careful in reading labels. The cost differential may outweigh the fear of the artificial hormone as Americans will be allowed to dump their subsidized milk in Canada.
The new deal also eliminates Class 7 that reduced the price on Canadian-produced milk ingredients. That deal also significantly kicks up access to Canada’s egg, chicken, and turkey markets, again not in exchange for anything.
Canada wanted to modernize the list of professions for temporary work visas known as TN (Trade National) visas so more Canadians could work in the United States. Some professions such as nurse practitioners didn’t exist in the early 1990s. The U.S. said no.
Canada wanted to compete on behalf of so Canadian businesses for U.S. government contracts under Buy America. The U.S. said no.
We can’t ignore 2 of what is probably multiple examples of pettiness and being mean-spirited against Canada.
This most brilliant Neil Macdonald column explores Clause 32, which deals with any attempt by Canada to negotiate with a “non-market country” (i.e., China) and how Canada would have to keep the United States up to date in obnoxious detail.
"Canada shall rescind Broadcasting Regulatory Policy CRTC 2016-334 and Broadcasting Order CRTC 2016-335."
Canada may be doing this but only as a result of extortion. This refers to the CRTC decision to allow the U.S. outlet for the Super Bowl to air American ads on cable and satellite. Trump took the NFL’s side along with Bell Media to keep the simsub for the Super Bowl. Bell Media has lost money on the decision, which the company could have moved to collect from the NFL.
You may disagree with the CRTC decision and still be upset at the loss of sovereignty.
The good news is that the USMCA only becomes law if that legislation is passed by the 3 countries. Mexico has the most to lose but regardless of whether the current or new government reviews the legislation, there may not be another option. If Liberals in Canada were allowed to vote their conscience, the new trade deal wouldn’t pass unless every Conservative passed it along with a few Liberals.
There isn’t a likelihood that the Dems in the U.S. will take over the House or the Senate. A change in either chamber would make a difference. If both chambers stay GOP-dominated, the relationships the Trudeau Government have worked hard on establishing might help, but a GOP-dominated Congress would need to know why to vote against the trade deal in the context of how the trade deal would negatively affect Americans.
Chrystia Freeland and Justin Trudeau did as good a job as they could do under a really horrible situation. But they did have momentum: The U.S. wanted a deal before the more liberal new government in Mexico started December 1 and before the U.S. midterms. Congress was not going to approve a bilateral deal with the U.S. and Mexico. Ultimately, Canada couldn’t bear the weight of auto production tariffs on top of steel, aluminum, airplane, and softwood lumber tariffs. The terms extortion and “gun to your head” are not exaggerations.
Canada fought hard not to have a sunset clause. This new deal is so bad that a sunset clause would be a welcome invitation. The fear was that if NAFTA went away, the U.S.-Canada Free Trade Agreement of 1989 would still be in effect. NAFTA was very imperfect, but the USMCA is a disaster. If this new trade deal is approved, Canada won’t have the power to renegotiate.
photos credit: Twitter @realdonaldtrump; act.leadnow.ca