The US administration plans to table the deal in Congress this Friday. With the mid-terms approaching, there is no prospect that the deal will actually get passed by the House and the Senate until next year. Rather, the short deadline is for Mexican political purposes, allowing incumbent President Pena Nieto to sign off before his sexenio ends in December and his successor takes over. So by Friday Canada can either sign on to the deal, or reject it and take its chances on negotiating its own bilateral arrangement with the US -- which, lest we forget, accounts for over 70 percent of Canada's exports.
Full details of the accord are not yet available, but there's enough information to suggest that there may be quite a lot in it for Canada. This article lists five key elements of the agreement; we can just consider two items that have loomed large in the negotiations from the outset, but now appear to have been agreed:
- On autos and auto parts, the US and Mexico have agreed to boost the percentage of the value of a vehicle that has to be locally made in order to qualify for tariff-free treatment. In addition there is a new and separate percentage of the value of the vehicle that has to be manufactured in plants where workers are paid more than US$ 16/hour. It may seem surprising that Mexico has agreed to this, but early analyses suggest that very few vehicles now made in Mexico would fall foul of the new rules. Since auto wages in Canada are in line with US levels, there seems to be little reason for Canada to balk at this part of the deal.
- The US originally wanted any NAFTA replacement to have a five-year term, after which any of the parties could walk from the deal. What has now been agreed is a sixteen-year initial term, with a review after six years leading to a potential extension back to a sixteen-year life. This appears to represent a major concession by the United States, and should allay Canada's concerns that a short fixed term would make investment decisions impossible.
Canadian negotiators are now back at work and Foreign Affairs Minister Chrystia Freeland has cut short a trip to Europe in order to join the talks in Washington. Assuming Canada can live with the deal that has been made on autos and the sunset clause, there are two major issues that could stymie attempts to join the deal: dispute resolution and agricultural supply management.
- As regards dispute resolution, the US has always been unhappy about any arrangement that offers recourse to a decision-maker outside the US judicial system, whereas Canada (and Mexico) have preferred not to have to take their chances with US courts. It is not yet clear how the US-Mexico agreement handles this.
- Supply management may prove the most vexed issue of all. Trump has regularly railed at Canada's tariffs of "300 percent" on dairy products, and he's only exaggerating slightly -- the highest tariff, on butter, is actually 298 percent. The strongest support for supply management comes from the farming lobby in Quebec; awkwardly enough, there is a provincial election coming there in October. Still, Canada made some concessions on supply management in order to secure the Trans Pacific Partnership (TPP) deal -- which, of course, Trump walked away from. This suggests it may be possible to offer some changes that will satisfy the Americans, and as a side benefit provide relief to Canadians stuck paying exorbitant prices for milk, eggs and cheese.
Mexico seems to want a trilateral deal, and despite Trump's tough talk and threats, it seems most of his team wants that too. Whether it can all be squared away by Friday remains to be seen. And whether Canada joins the deal or not, the domestic political ramifications stand to be severe, because the unctuous Trudeau and the abrasive Freeland have comprehensively botched this file from day one.
No comments:
Post a Comment