Around The World in 100 Words - November 2017, Week 47

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This week's Around The World (ATW) revisits the economic pot-on-the-back-burner, namely the re-negotiation of NAFTA. As summarized in today's Globe & Mail article, there has been zero progress on that front. This is the first step to the unravelling of the 30 year old trade deal that governs the trillions of dollars exchanged between the 3 Amigos (Canada, US and Mexico).

 

My suspicion has always been that the Trump administration has Mexico in its cross-hairs. So the end of the deal would almost certainly mean a new bi-lateral agreement between Canada and the US that would be fundamentally similar to the rules in place today. Both our countries are First World, wages are comparable and there is trade parity between us. Mexico is a different matter, and legitimate concerns exist between trading relations with the US. Notwithstanding the hollowing out of manufacturing due to mechanization, the wage and environmental differences with Mexico has meant their factories have cratered Rust Belt cities (that voted for Trump) and the Mexicans run a perennial deficit of $80 billion year after year.

Free and fair trade agreements would over time produce comparable levels of economic exchange between countries -exactly the opposite of what is happening here. But Mexico is not alone here. Germany and China both have asymmetrical trading relationships with the US and account, together with Mexico for two-thirds of the $800 billion trade deficit the US runs with the world. This needs to change and Fairness needs to be integral to any Free Trade agreement. Especially for workers.

 

The bottom line? Canada will still be in pretty good shape whatever the outcome of the talks are. The lifeboat that the Globe article suggests is needed applies more to the country south of the United States then the one north of it. Who knows, maybe Trump is bluffing and the real objective is to take Mexico to the brink and then offer to keep things status quo in exchange for a border wall -as long as the Mexicans pay for it. No way that's costing $80 billion. Every year. 

Martin Weiler 

519-546-5088 

 

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