Underreported story of the week: American-Mexican bilateral trade deal - Granite Grok

Underreported story of the week: American-Mexican bilateral trade deal

“…Both the U.S. and Mexico have removed trade barriers, eliminated tariffs and subsidies…”

My, my – it looks like the use of tariffs as an economic tool (when wielded correctly) is actually having a positive result.  As a Free Trader, if nationally based and anti-free trade tariffs and subsidies are eliminated, this can only be a good thing! Conservative Treehouse has a good synopsis of the intent and result of this decision announced earlier this week on the re-negotiation of the Mexican part of the NAFTA treaty – and note the note about Canada’s unwillingness (emphasis mine):

Under the original 1993 terms and Chapter 22 of the Implementation Act, Lighthizer notifies congress that trade parties have modified the terms; this is the Section 2202 notification of modification. Ninety days after the date of the notification the U.S. and Mexico can sign the new terms of agreement; congressional approval is not required. [Canada can still join the U.S-Mexico agreement but they need to act fast.]

If Canada refuses to join the agreement Lighthizer will follow-up the 2202 modification notification with a Section 2205 notice dissolving the U.S. from the 1993 agreement with Canada; the dissolution is official six months from the date of notification. During the 6 month period, before official dissolution, the U.S. and Canada can enter into new negotiations for a separate bilateral trade agreement.

If no agreement is made in the six months, prior to the dissolution date, then the terms within an older 1973 trade agreement between the U.S. and Canada take effect.  However, it is more likely a new U.S-Canada trade agreement will be made within the six month NAFTA dissolution period as Canada would not want to revert back to a trade agreement almost fifty years old.

President Trump has executed this plan brilliantly.  The U.S. and Mexico have formed a manufacturing alliance based on common sense principles that are mutually beneficial to both countries.  Incoming Mexican President Lopez-Obrador retains much of the current investment and gets a significant win for his labor policies (a promise kept).  President Trump gains increased U.S. investment and the NAFTA loophole is closed (a promise kept).

Both the U.S. and Mexico have removed trade barriers, eliminated tariffs and subsidies and established mutually beneficial terms of commerce.

And here’s the Canada part I mentioned – a move played well.  Canada needs us FAR more than we need them economically.  They also are used by other countries as a “loophole” in getting their goods in-country and bypass the tariffs that otherwise would have to be paid but the real deal is that Trump has just used Mexico as a bargaining chip (think doing a bank shot in pool). The ointment for Canada is their quasi-socialist Big Government structured business rules:

However, Canada cannot -and will not- remove protectionist trade barriers (telecommunications and banking); will not eliminate protectionist tariffs (dairy); will not remove subsidies on Lumber and Aeronautics; and will not accept rules of origin in manufacturing that would remove their ability to exploit cheap Asian and Chinese parts and assemble them in Canada.

In essence Canada does not want to open their government controlled markets to competition and pesky capitalism; and they also don’t want a restart of heavy industry.

So it is likely President Trump and Robert Lighthizer will attempt a separate bilateral deal; and if not possible, Trump will place a 25% tariff on all Canadian made automobiles thereby bringing the cross-border auto manufacturing industry back to the U.S.

So the problem with Canada is not one of just goods and services – it is what the Trump critics have accused him of: protectionism.  Trump has made it known that he wants ZERO tariffs and subsides but has no problem using them to achieve a “zero end”. I have no problem in using the size and strength of our economy in these negotiations.  If indeed what is being reported is true (and we’ll start finding out the important details later on as the Senate ratifications

Sidenote: Gosh, Trump is doing something that Obama would NEVER do – actually follow the right Constitutional process!

start up.  If the end result truly is no tariffs between US and our trading partners, that can only be goodness.