Canada has reassured Mexico that updating the North American Free Trade Agreement will be a three-way conversation involving all three member countries.
Foreign Minister Chrystia Freeland’s remarks Tuesday appear to clarify speculation that Canada will abandon Mexico and pursue bilateral talks with U.S. President Donald Trump, who wants to renegotiate the 23-year-old trade deal.
“We recognize that NAFTA is a three-country agreement and we need a three-country negotiation,” Freeland told a Toronto conference on North America’s future convened by the Canadian Council for the Americas.
“We have had no specific NAFTA conversation with the U.S. There is no negotiating process in place yet. The U.S. has no team in place.”
Freeland said her conversations with U.S. counterparts have so far focused on the value of Canadian trade with the U.S., she added, noting that Canada is the top export market for 35 U.S. states.
She noted that Canada also enjoys close trade, investment and tourism ties with Mexico, links that were further strengthened by Prime Minister Justin Trudeau’s recent decision to remove the visa requirement for Mexican visitors to Canada.
“I see real opportunities for us to have stronger, closer collaboration between the three North American partners and seize on opportunities to achieve objectives of more jobs and growth. That is the core thing that brings us all together,” she said.
Luis Videgaray, Mexico’s Foreign Minister, echoed this point of view, telling the forum that “when it comes to trade ties, this is a three partners conversation.”
He also praised Mexico’s relationship with Canada saying “it would be a significant mistake to characterize it as something other than simply great.”
Trump campaigned for president on a pledge to overturn NAFTA, which he has blamed for a decline in the U.S.’s manufacturing sector and called “one of the worst deals ever.” After meeting with Trudeau last week in Washington, Trump suggested that he planned only “tweaks” for Canada’s terms under the NAFTA, saying he would focus instead on the “unfair” U.S. commercial relationship with Mexico (the U.S. has a trade deficit with the Mexico).
Trump has also pledged to crack down on illegal immigrants from Mexico and to erect a barrier along the entire U.S.-Mexico border, and force Mexico to pay for the wall. The heated rhetoric prompted President Enrique Pena Nieto to cancel his visit to Washington last month.
Videgaray called Trump’s remarks “damaging, offensive and insulting”.
“Mexico and the U.S. have had very public and open differences,” he said. “But what people don’t know is how strong the countries are and the complex and deep relationship. For many, many reasons, the U.S.-Mexico relationship will be sorted out.”
Videgaray has been to Washington twice already to meet with U.S. counterparts and this week U.S. Secretary of State Rex Tillerson and U.S. Homeland Security Secretary John Kelly will travel to Mexico City in an effort to “help promote respectful and close relations” between the two neighbouring countries.
NAFTA is not the “villain of the story,” said Ildefonso Guajardo, Mexico’s economy minister, who spoke at an earlier panel Tuesday.
Introducing tariffs — as Trump has suggested — would be a disaster and would affect regional competitiveness, said Guajardo, due to integrated supply chains in many sectors.
“You need domestic policies to retrain people and to help them transition. The solution isn’t a less open economy,” he said.
A Scotiabank study, released Feb. 17, concluded that NAFTA has not led to a decline in U.S. manufacturing jobs, or a hollowing out of labour, environmental or intellectual property standards. “Technology, not trade, has cut manufacturing jobs. Manufacturing’s share of U.S. GDP (gross domestic product) has been stable for decades,” the study found.
Experts say that a trade deficit or surplus is not a good indicator of a trade deal’s effectiveness; trade volume is key and so is regional competitiveness.
North American trade has more than tripled under the NAFTA, which comprises 470 million people and a $25 trillion regional market. An estimated 2.8 million U.S. jobs are directly supported by exports to Canada and Mexico. The agreement was the first trade deal between two developed countries, and a developing economy.
Guajardo said all three members need to acknowledge that the trade deal has been a “win-win-win.” “We must change NAFTA to reflect our new challenges. For example, 23 years ago there was no e-commerce,” he said. “But nothing new in NAFTA should be a step backwards. It won’t include trade quotas or tariffs. There are many other instruments we can use. We must show the world we are committed to free trade and open policies.”
Changes to certain parts of the deal, such as rules of origin that say how to determine where a product is made, must be trilateral so there are common rules and certainty for investors. Currently, NAFTA requires that all products have 62.5 per cent NAFTA content to avoid duties.
John Weekes, Canada’s chief negotiator for NAFTA in 1994, said Canada should definitely be in the room for any discussions between Mexico and the U.S.
“We should be at the table,” said Weekes. “Canada needs to know what is going on to ensure that the resulting text doesn’t emerge in a way that causes problems for Canada later.”
The White House must deliver 90 days’ notice to Congress to begin any NAFTA renegotiations. The U.S.’s trade deal with Peru took five years to negotiate, while the agreement with Panama took seven years.
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