Supplementary Report: Foreign Affairs Committee Visit to Mexico City and Washington

FAAE- NAFTA

TABLE OF CONTENTS

LIST OF CONSERVATIVE PARTY OF CANADA RECOMMENDATIONS............................................................................................................................................................................ 2

MOVING THE RELATIONSHIP FORWARD: NAFTA MODERNIZATION AND NORTH AMERICAN TRILATERAL COOPERATION................................................................................. 3

INTRODUCTION................................................................................................................................................................................................................................................................... 3

CURRENT DYNAMICS AND CHALLENGES FOR NAFTA MODERNIZATION.................................................................................................................................................................... 4

1. Building Consensus for a Stronger NAFTA ............................................................................................................................................................................................................ 4
2. Differences in Trilateral Views................................................................................................................................................................................................................................. 4
3. Canada and the United States.................................................................................................................................................................................................................................. 5
4. Industry must engage in the NAFTA debate............................................................................................................................................................................................................ 5-6

CONCLUSION......................................................................................................................................................................................................................................................................... 6

LIST OF RECOMMENDATIONS

As a result of their deliberations committees may make recommendations which they include in their reports for the consideration of the House of Commons or the Government. The Conservative Party of Canada’s Recommendations related to this study are below.

RECOMMENDATION 1

It is clear that Members of the House of Representatives and Senate are well disposed to Canada, but that North American Free Trade Agreement negotiations (NAFTA) are not yet viewed as a priority in the United States.  Tax Reform, North Korea and Iran appear to dominate discussion in Congress at the moment, so more work is needed to ensure that Canadian interests are advanced.  A longer term, bipartisan approach to Canada-U.S. engagement will be important and the German example was highlighted as one to emulate.

RECOMMENDATION 2

The expectation that completing NAFTA negotiations ahead of the Mexican Presidential election was crucial does not appear to be the case.  Elected officials in Mexico advised the committee that domestic issues like crime and corruption will again dominate the election in Mexico more than NAFTA and U.S. relations. 

RECOMMENDATION 3

Labour Unions in Mexico and the United States are not as engaged in NAFTA negotiations as they are in Canada.  Labour union reform in Mexico will also be important to ensure that benefits from trade will be shared across the economy.

RECOMMENDATION 4

Agricultural and migrant workers will be an area of unique interest in NAFTA modernization.  Mexico and Canada share a unique view to the benefits of seasonal agricultural workers, whereas the United States views the issue far differently.

RECOMMENDATION 5

The automobile assembly and parts industries in North America are facing dire risks if the unreasonable U.S. positions continue to be advanced in NAFTA negotiations.  The integration of the industry and the overall low tariff rate in the U.S. could lead to investment moving overseas if content rules are changed

RECOMMENDATION 6

Canada should embrace and grow our consular network and parliamentary outreach in the coming years. We must foster a deeper level of understanding of Canada and areas of mutual interest. Canada should consider expanding consular services and ensure that people to people ties are expanded. Education and civic engagement should be expanded by all parliamentarians should expand engagement beyond Washington and New York.

RECOMMENDATION 7

The Canadian “progressive agenda” for trade is having a neutral impact on NAFTA negotiations.  Officials in Mexico and the United States are supportive of the elements advanced in this agenda, but do not view them as critical to modernization.  Labour standards might be the one agenda item that is viewed as more important as the others and this related mainly to wage rates in Mexico.  Industry stakeholders in the U.S. suggested that Canada is advancing this “progressive agenda” as a series of non-binding, aspirational measures.

MOVING THE RELATIONSHIP FORWARD: NAFTA MODERNIZATION AND NORTH AMERICAN TRILATERAL COOPERATION

INTRODUCTION

1.      The Conservative opposition members of the Standing Committee on Foreign Affairs and International Development Committee (the “Committee”) were not prepared to participate in the interim majority report on NAFTA.  This reluctance is due to both political and practical reasons.  First, the Committee study on relations with the United States and Mexico is not complete and there is no compelling reason to issue an interim report on this study other than for the political value for the government members to craft a narrative that is, in our view not fully supported from the meetings and outreach conducted on our recent trip to Mexico and the United States.

 It is also not practical for the Conservative members to complete an interim report because the Committee membership has changed substantially in the last six months.  All of the Conservative members are new to the committee and did not participate in some of the early witness testimony on this study.  Half of the Liberal membership also changed in the last six months, so an interim report is not really appropriate given the fact that the majority of committee members only participated in the visit portion of the study and did not hear any witness testimony on the study.

CURRENT DYNAMICS AND CHALLENGES FOR NAFTA MODERNIZATION

1. Building Consensus for a Stronger NAFTA

The visit by the Committee to Mexico City and Washington, D.C. was a very worthwhile and important exercise.  The ability for MPs to discuss NAFTA and bilateral relations on an elected official to elected official basis was very important to discern the opportunities and challenges facing all three countries in the context of modernizing or renegotiating NAFTA.  It is clear that Mexico and Canada are in these negotiations solely due to the unilateral decision by President Trump to demand re-negotiations.  While both Canada and Mexico are attempting to find a rationale for a “modernization” exercise, it is clear that both countries would be very happy to emerge with the status quo at the conclusion of negotiations.

2. Differences in Trilateral Views

It was also clearly illustrated to Conservative members of the Committee that the bilateral relationship between Mexico and the United States is very different from that between the U.S. and Canada.  In Canada, agricultural issues and migration issues generally are viewed positively, whereas migrant workers and illegal immigration are touchstone issues in the U.S. and are a particular focus for the US President.  It is also clear that relations between Mexico and President Trump are very strained and viewed as a departure from normal Mexico – U.S. relations.  Agricultural labour and produce trade will be uniquely challenging issues for Mexico and the United States and do not receive a lot of attention in Canada.

While Union representatives are part of the Trudeau government consultation group and are front and centre in Canadian discussions about trade, the same is cannot be said about labour groups in the United States of Mexico.  In the United States, we were informed that the Union of Auto Workers (UAW) is not as vocal or active as their UNIFOR counterpart in Canada.  In Mexico, we were advised that there is a need for labour movement reform, as it is viewed as a “political tool” and not a true voice for workers.  It was also interesting to hear that most Mexican officials we met were more than willing to see the President push for a higher minimum wage in Mexico.  It appears that all political parties would like to see more movement on that issue and that there was disappointment in the approach from their government to date on NAFTA and relations with President Trump specifically.

Migration issues will continue to dominate the bilateral relationship between Mexico and the U.S.  The southern border of Mexico is the frontier between central and southern America and North America.  Currently, the two countries are collaborating on this border and stemming the flow of migrants, but it is clear that Mexico views this as bilateral work as a benefit to the U.S. and that it could be at risk if relations continue to deteriorate.

Further, with the expiration of Temporary Protected Status (TPS) for 300,000 people currently residing in the United States fast approaching, migration will continue to complicate the discussions between the United States and Mexico.  On the other hand between Mexico and Canada appears to be viewed positively.  Mexican officials are happy with the changes to VISA requirements with Canada and both Canada and Mexico view seasonal workers between the countries as a positive.  On this and many other issues, the bilateral relationship between Canada and the U.S. is radically different to the Mexico and U.S. bilateral relationship.

3. Canada and the United States

In Washington it was clear that all elected officials and stakeholders view Canada positively, but do not have a high degree of knowledge of the issues important to Canada.  Canada appears to be a valued neighbour, but a neighbour that it not well understood.

Elected officials that were engaged in the visit view Canada as a great friend, but did not view NAFTA negotiations as a top priority at present.  Both Republican and Democrat members of the House of Representatives and Senate view tax reform, North Korea, and Iran as far more important considerations at present compared with NAFTA and trade generally.

 An impression was left that NAFTA will become more of a priority in political circles once the tax reform debate is concluded in Washington.  Accordingly, it is our view that elected official in the U.S. will be more open for political engagement in the early part of 2018.  It was surprising that even a member of the border caucus in the U.S. Congress was not aware that there was a Canada – U.S. Parliamentary Friendship Group.  It is clear that Canada needs to continue bilateral engagement and actually modernize it by making it more comprehensive.  The example of German-U.S. engagement was mentioned  by several people as the approach to follow.  It would also be important to enhance bilateral engagement in more parts of the United States.  Mexico has a consulate in every state and engages this network very well.  Canada has a much more modest consular network.   This should be expanded and parliamentarians should be encouraged to engage across the states to support our consular presence.

4. Industry must engage in NAFTA debate

The Committee heard from industry and the U.S. Chamber of Commerce.  Industry is beginning to pressure the Trump administration to be highly critical of their negotiation positions particularly that for the auto and auto parts industry.  Low tariff rates in the United States for automobiles could lead global manufacturers to abandon North American manufacturing if the U.S. continues to advance unreasonable domestic production positions.  The high degree of integration of the auto and auto parts industry in North America does not appear to be appreciated by the Trump administration. As a result of this industry’s great importance to all three economies Canada, Mexico and industry as a whole should ramp up pressure on the U.S. to show that their current demands on auto are putting the entire industry and millions of jobs at risk.

 U.S. industry is now getting more organized on the trade front and should be ramping up efforts in 2018.  Canada and our industry groups should collaborate even more in the New Year to apply pressure.  Industry does not take issue with the “progressive agenda” being advanced by Canada; however, we were informed that Canadian priorities like: indigenous issues, gender and the environment are being treated as inspirational and are viewed as non-binding elements of NAFTA modernization.  With this in mind, it is the Conservative view that priority and negotiating strategy for Canada needs to evolve to highlight the aspirational elements of this agenda, but to devote more negotiation time and effort for automotive rules of origin issues and defensive elements for agriculture and mobility.

CONCLUSION

The Conservative members of the Committee view the visit to Mexico and the United States as successful, yet, that enhanced engagement between Canada and the U.S. is needed in the New Year when NAFTA will become more of a priority.  It should also be highlighted that Canada and Mexico have and will continue to have some shared areas of interest, but that we will also have areas where relations with the United States are vastly different and that these differences should be recognized within the context of negotiations and a modernized NAFTA agreement.  Canada negotiation and final outcomes are best advance when we recognize differences between our interests and that divergence with Mexico does not diminish the strong and growing bilateral relationship between our two countries Mexico.