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USMCA frictions continue

Free Market Reflections with Steve Dittmer

After months of negotiation, it looked like maybe it would get easier. Yes, getting the USMCA through national legislatures would be difficult and the steel and aluminum tariffs and the retaliatory tariffs were still in place. But negotiations on steel and aluminum tariffs were ongoing and intense, we were told.

Yet up until the night before the formal signing ceremony, rumours flew that Mexico might not sign the USMCA if the steel tariffs were still in place. Canada had not publicly committed to signing.

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But there was a powerful incentive in place. Signatories of the USMCA would receive exemptions on many of the new auto and auto parts tariffs if President Trump imposed 25 per cent tariffs on imported autos. Both countries ended up signing but they were not happy. U.S. Trade Representative Robert Lighthizer said the metals talks would be split into two sets, one with Canada and one with Mexico.

Mexico said it was hoping for a deal by year’s end. Canada, on the other hand, was hoping for court victories against the tariffs and/or holding out for a better deal, even if it takes longer.

“We have to be sitting at the table to figure out how we get to the best answer,” Canadian Finance Minister Bill Morneau said. “Our view is these tariffs shouldn’t be there.”

The most discussion has been around whether the tariffs would be turned into negotiated quotas, as has been done with several other agreements.

Overall, Trump officials have said they expect USMCA to become a model for agreements with other countries.

While President Trump considers tariffs a tool for getting powerful and recalcitrant countries to the bargaining table, Canada’s Foreign Minister Chrystia Freeland doesn’t like them at all. She considers these illegal, and thinks that they should not have been part of these negotiations. Canada has filed legal complaints with the WTO and under the existing NAFTA rules.

President Trump, on the other hand, believes in playing hardball, with everyone, all the time. Soon after the signing, he began talking about pulling out of the existing NAFTA, so the U.S. Congress would have a stark choice: USMCA or nothing.

This brings up the 800-pound elephant in the room. Regardless of the struggle to structure and sign a deal, it still must be passed by the Congress or Parliament in all three countries. We already have congressmen and congresswomen down here looking very concerned, muttering that this or that won’t do or brazenly proclaiming that they could have done a much better job.

I don’t know about your members up there but I recall the last time we had trade treaties to vote on. Evidently, there were few humans on the planet with the unsurpassed intelligence and supreme arrogance of a member of congress or a senator. Faced with an up or down vote, no amendments allowed, they were still pontificating about this or that change. What part of up or down, no amendments can supreme intelligence fail to grasp?

Lighthizer explained that he had taken care to consult Democrats regarding more environmental and labour regulations so that it would be easier to earn their votes. We shall see. The more you give these folks, the more they want. To me as a free marketer, it smacks too much of us telling another country what to do with their labour and environmental policy. The far left never has any problem with that.

Of course, we are concerned with agriculture production and marketing. The sooner the steel and aluminum issues get resolved, the sooner folks raising hogs and soybeans get opportunities to recoup their losses.

The steel issue is complex and affects very basic industries like construction, auto manufacturing and dozens that use some steel. Steel mills have restarted and re-hired down here. Anyone who buys big steel is dealing with supply, pricing and bidding issues — all brought on by tariffs and, therefore, not something they’re accustomed to figuring.

Trump has been using tariffs as a tool to get countries like China and the EU to come to the table and not waste time negotiating ad nauseam. He is at heart mostly a free trader. His protectionist tendencies come out for certain basic industries he fears losing altogether, like steel and coal. It is hard to quantify how much of our competitiveness problem stems from environmental, safety and labour regulation and how much from changing demand and fierce competition. China dumping tons of money into its state steel industry and creating a global oversupply problem really chaps Trump’s hide.

As for Canadians’ hurt feelings over Trump’s sometimes overly rambunctious style and brutal timetables, I believe people at the level of cattle producers will get over these hurdles in time. Governments are supposed to set the framework. Then, the businessmen and women and entrepreneurs take over and do the real deals that make economies work.

About the author

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Steve Dittmer is the CEO of Agribusiness Freedom Foundation, a non-profit group promoting free market principles throughout the food chain. He can be reached at [email protected]

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