Question

• How would the US relationship with Mexico and Canada be affected if NAFTA is revised to USMCA?
• Would manufacturing jobs return if this were to happen ?

Answer 1

Canadians may not realize this just yet, but they got totally hosed, eh.

First and foremost, the United States now essentially has veto power over any future trade agreements Canada may wish to engage in. This is a major win the the American negotiating team, since it effectively limits the ability of any future Canadian government to engage in trade deals, unless those deals align with American interests. Stop and think about that for a second. Canadians might want to enter a trade deal with (say) the Republic of Togo, but subject to scrutiny by the United States, in the event this is an underhanded ploy by the Togolanders to slip goods tariff free into the US market.

This actually puts existing trade deals in jeopardy as well, since the US can object to various trade deals as “back doors” into the US market. Since the Liberal government has essentially sat on their hands WRT the TPP and CETA, there isn’t even strong precedent to fall back on, and since the Liberals were essentially “kicked to the curb” when Prime Minister Trudeau went to China and India (weirdly impressive, simultaneously alienating two regional rivals at the same time) seeking new trade deals, we literally have no fallback positions.

The other danger is the issue of “side letters”. There is little public information available about what issues may be dealt with by “side letters” the the main USMCA, but it is a virtual certainty that Chapter 19 and the Dairy Marketing Boards (and the concept of “supply management” in general) will be targets for US negotiators. Canada went into the NAFTA renegotiations unprepared and with a weak hand, and our position is even worse today than it was at the opening. Every other possible back door for Chinese entry into the US market is also going to fall under the microscope, Canadian negotiators may end up feeling like they have been singled out for “enhanced screening” at border security when American negotiators come with a portfolio stuffed full of “side letters”.

The worst part is this was so unnecessary. The general outline of the Trump Administration’s trade policy was visible during the election, and Canadian negotiators should have been well aware of US issues and concerns, and prepared counterarguments and had tradeoffs to offer. Instead, the Liberals arrogantly went in believing they had the ability to dictate issues like employment standards, gender and diversity issues to the Americans and Mexicans, without having to offer anything in return. I doubt even the Republic of Togo would have been pleased to be presented these negotiating points, much less Mexico and the United States.