In the face of America’s trade rancour, Canada and Mexico look to China
"This uncertainty is a significant issue for both Canada and for Mexico," said Bank of Canada governor Stephen Poloz as Canadian and Mexican trade officials met to compare notes
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OTTAWA—The uncertainty caused by the Trump administration means Mexico and Canada need to look towards new non-American markets, including China, to grow their economies, says a visiting Mexican cabinet minister.
Enrique de la Madrid Cordero, Mexico’s minister of tourism, echoed the view of Canada’s central bank governor Stephen Poloz, which he delivered in a speech in Mexico City.
De la Madrid Cordero was in Ottawa for meetings with the federal Liberals this past week as the countries continue to grapple with the possibility of reopening the North American Free Trade Agreement later this year with U.S. protectionists who have lashed out publicly at both continental partners.
Canada and Mexico are dealing with a rash of unknowns around the eventual U.S. negotiating position on NAFTA, something that won’t be known for months, as well as Donald Trump’s frequent outbursts disparaging the 23-year-old trilateral trade agreement.
“We’re all learning from this experience. On one hand, we should try to have the best relationship between the U.S., Mexico and Canada,” de la Madrid Cordero told The Canadian Press in an interview.
“At the same time, we should make our best efforts to diversify even more. It is not very safe to have such a strong dependency on an economy.”
In his speech Thursday in Mexico City, Poloz noted that the vast majority of Canadian and Mexican imports last year went to the U.S.—Canada shipped 75 per cent south, while Mexico sent 81 per cent north.
“Clearly, this uncertainty is a significant issue for both Canada and for Mexico. Both of our countries’ trade is dominated by the United States,” Poloz said.
De la Madrid Cordero said Mexico is trying to diversify by looking to Canada, Latin America, Europe and China.
The Trudeau government has loudly proclaimed its trade ambitions with China, especially after Trump recently hit Canadian softwood lumber with retroactive duties of about 20 per cent.
International Trade Minister Francois-Philippe Champagne, one of the ministers de la Madrid Cordero met with in Ottawa, led a delegation of Canadian softwood lumber representatives to China in a very public attempt to find new markets for Canadian timber.
“Our trade with China is impressive, and we do not have a free trade agreement,” de la Madrid Cordero said, noting the $60 billion in two-way trade between the two countries.
De la Madrid Cordero also suggested the clock is working against the likelihood of a sweeping overhaul of NAFTA. But he said: “There are areas of opportunity for modernizing this trade agreement.”
He cited upgrading the pre-Internet pact to reflect the realities of e-commerce, while strengthening rules of origin requirements.
Once the Trump administration gives its official notice to Congress, it triggers 90 days of consultation with industry and lawmakers before it can officially start trade talks.
The timing of Mexico’s July 2018 presidential election, combined with the mandatory consultation period in the U.S. means there’s short window, essentially three months at the end of this year, to make changes to NAFTA.
In the new year, Mexico’s current government enters what is widely viewed as a lame-duck phase. Meanwhile, the front-runner in the election is the left-wing firebrand populist Andres Manuel Lopez Obrador.
Laura Macdonald, a Canada-Mexico expert at Carleton University, said a Lopez Obrador presidency that pushes for the rights of workers might be the best thing to bring the most needed change to NAFTA: improving wages and working conditions in Mexico.
That would ultimately reduce the flow of migrants out of Mexico and deliver what NAFTA was supposed to give it—economic prosperity, she said.
“The real problem of NAFTA has been all along is that it did not lead to an increase in wages and working conditions in Mexico. That’s behind many of the forces that have led to a Trump presidency.”