Trump looks to make U.S. the hub in trade wheel
President wants Canada, Mexico to become mere spokes, writes Earl Fry.
Two years ago, Donald Trump was excoriating U.S. trade accords but few expected him to win the 2016 presidential election. Prime Minister Justin Trudeau enjoyed good relations with Barack Obama and Mexican President Enrique Pena Nieto. NAFTA was on firm footing and all three nations were moving to modernize it through the Trans-Pacific Partnership (TPP).
Today, the legacy of the original TPP, Shamrock Summit and Three Amigos is dead.
When negotiations for the Canada-U.S. Free Trade Agreement broke down in October 1987, then-prime minister Brian Mulroney used his personal “Shamrock” friendship with president Ronald Reagan to end the impasse, paving the way for the world’s largest bilateral free-trade accord.
In order to protect Canada’s economic interests, Mulroney suggested to George H.W. Bush and Carlos Salinas in 1991 that trilateral free trade would be preferable to a new Mexico-U.S. bilateral agreement. Mulroney feared that separate Canada-U.S. and Mexico-U.S. bilateral accords might disadvantage Canada and allow the U.S. to become the dominant “hub” while its North American partners became “spokes.”
Trump wants to dismantle NAFTA and create the hub and spoke by seeking two bilateral pacts. Based on Trump’s “art-of-the-deal” reasoning, the U.S. would dominate the negotiations because it is so powerful, and Canada and Mexico are vulnerable because they dispatch 80 per cent of their exported goods to the U.S.
Mexico has apparently opened the door for a bilateral accord with the United States, tarnishing any Three Amigo camaraderie. In his tweets of Sept. 1, Trump upped the ante on Canada. His first tweet stated: “There is no political necessity to keep Canada in the new NAFTA deal. If we don’t make a fair deal for the U.S. after decades of abuse, Canada will be out.”
Nine minutes later, a second tweet exclaimed: “Remember, NAFTA was one of the WORST Trade Deals ever made. The U.S. lost thousands of businesses and millions of jobs. We were far better off before NAFTA — should never have been signed.”
These tweets were incendiary, along with his off-therecord remarks to Bloomberg reporters that the U.S. would refuse to make any future concessions to Canada.
Trump has forwarded the required 90-day notification to Congress stating that he will complete a free-trade arrangement with Mexico, and Canada might join. However, the text of the agreement does not have to be submitted to Capitol Hill for 30 days, giving the Canadian team a month to transform a Mexico-U.S. bilateral accord into a trilateral arrangement.
In public, Trump continues to be combative and selfassured, but his presidency faces potential pitfalls greater than any since Richard Nixon’s: the Manafort conviction, the Cohen guilty plea, the forthcoming Bob Woodward book entitled Fear, and the ongoing Mueller investigation. Democrats may prevail in at least the House of Representatives in the November mid-term elections.
If this happens, the Trump legislative agenda would be dead in the water beginning in 2019, and the House would launch a plethora of investigations and public hearings aimed at Trump. A new Washington Post/ABC News survey also shows a record 60-per-cent disapproval of Trump’s job performance.
Trump believes that the Mexican accord on the auto sector could garner greater voter support among autoworkers in Michigan and Ohio. Significant concessions by Canada in the dairy sector would also boost his standing among farmers in Wisconsin and other border states. In many respects, Trump needs some form of agreement with Mexico and Canada to bolster his own party’s prospects in November.
However, will a besieged Trump hold out for the huband-spoke arrangement? Will our federal government swallow hard and make concessions on supply management or dispute settlement in order to preserve NAFTA and perhaps avoid a crippling tariff on motor vehicles and parts?
Two years have dramatically changed the North American landscape.