During a U.N. press conference President Trump was asked if he rejected a meeting with Canadian Prime Minister Justin Trudeau. President Trump affirmed he did reject a meeting over the ongoing conflict within the U.S-Canada trade issues. CTH Readers will likely remember when President Trump was going to announce the U.S-Mexico trade deal, Trump attempted to call Trudeau in advance. Justin from Canada rejected the phone call.
Justin and Chrystia from Canada have made a political decision to reject any trade negotiations in favor of using conflict with President Trump to aide their domestic political agenda. Justin and Chrystia are counting on U.S. political opposition to block POTUS Trump from ending the tri-lateral NAFTA deal.
However, what Justin and Chrystia have not considered (nor anyone else), was U.S. Commerce Secretary Wilbur Ross and President Trump anticipated a political approach several months ago. No-one dissects the details within a contract better than Commerce Secretary Wilbur Ross. He is legendary in the business world for this specific skill-set.
There is a very good reason why the U.S-Mexico deal was structured with strong benefit toward the Mexican economy. POTUS Trump and Wilbur Ross knew prior corporate investment in Mexico, tens of billions, combined with modifications to the ‘Rules of Origin’ would benefit both Mexico and the U.S.
Specifically, EU auto companies using Mexico for manufacturing would need to add to their investment within Mexico to meet higher content requirements.
Additionally, within another part of the strategic agreement, President Trump and Wilbur Ross structured the big picture to enhance U.S. investment in Mexico in the energy sector.
USTR Robert Lighthizer then executed on the U.S-Mexico strategy by building the framework for a trade bloc that is actually better for Mexico than the original NAFTA. In essence, Lighthizer made Mexico a regional “MFN” (Most Favored Nation).
The result of the U.S-Mexico agreement is a joint trade bloc that enhances the Mexican economy with a much larger (expanded investment) and stronger (industrial/manufacturing) relationship to the U.S. This joint agreement makes Mexico far stronger.
Why was so much emphasis put on making the terms so much better for Mexico than the existing NAFTA?
The answer circles back to the political approach by Canada to oppose President Trump.
After AMLO won the election…. long before anyone was paying attention…. Team USA entered into a joint “trade strategy” with AMLO’s objectives in mind. The AMLO objectives, to expand the Mexican economic base, are based on different policies from the Pena Nieto administration.
In August Mexican trade representative Jesus Seade (AMLO) and USTR Lighthizer (Trump) privately cemented the framework. After the U.S-Mexico deal was announced, in the past six weeks the details have been filled in.
What Canada did not factor into their political approach was the likelihood that Mexico, not the U.S., will actually be the first country to exit NAFTA.
Mexico exiting NAFTA first removes the political leverage from all of Trump’s opposition.
The political dynamic changes. President Trump is then responding to the Mexican withdrawal.
After Mexico announces their exit, the U.S. team will announce the details of the U.S-Mexico deal that are based on a bilateral agreement. The bilateral agreement means the U.S. must also withdraw from NAFTA. This move negates Canada’s ill-fated political scheme.
What’s Canada going to do, start publicly denouncing Mexico?