We would be far better off with just a Canada-US Trade Agreement.
While negotiations continue between Canada, the U.S., and Mexico, one thing that hasn’t been discussed enough is whether Canada actually benefits from free trade with Mexico.
I asked that question on Twitter last night, and the results were pretty clear:
So far, just 23% say Canada benefits, while 77% say Canada suffers.
Lack of tariffs has let Mexico take our auto manufacturing jobs
The real beneficiary of Canada-Mexico free trade has been large corporations, and some auto workers in Mexico. Yet, even many of those workers are paid horribly and have few – if any – labour protections. Mexico also routinely ignores environment regulations that are imposed on Canada.
Additionally, Mexico’s rate of growth actually declined in the first decade of NAFTA, so the promised wealth to the people of Mexico didn’t materialize either.
So, Canadian auto workers suffered and most people in Mexico didn’t benefit.
That leaves global auto manufacturers as the only true beneficiaries of Canada-Mexico free trade
Dropping tariffs with Mexico served only to make it easy for companies to build cars with cheap-labour. Yet, where are the savings for Canadian consumers? When people go to buy a Chevy, is there a giant price difference between the Canadian made & Mexican made cars? Of course not. Any savings were pocketed by corporations or taken by governments through taxes and increased regulations.
So, Canada lost high-paying manufacturing jobs in order to make some global corporations richer. All because we were told how great “free trade” would be.
Of course, our own foolish politicians have made things even worse. By increasing taxes and energy costs, they have made Canadian manufacturing even less competitive. However, had we not eliminated tariffs on Mexico, we would have been better able to protect Canadian auto manufacturing jobs.
Mexico is a poor market for Canada
As Ian Fletcher explained in his book Free Trade Doesn’t Work, Mexico is simply too poor to be a great market for wealthy countries.
Close trade ties between wealthy nations like Canada and the United States makes sense. Both countries can pay high wages (relative to Mexico or China), so auto manufacturing jobs can be sustained by domestic demand in both nations – so long as those jobs are protected by tariff barriers and strong industrial policy. And despite the free trade zealots claiming “those jobs are gone forever,” why is it that wealthy nations like Japan and Germany are able to sustain big auto-manufacturing sectors?
Japan, with less than half the population of the United States, produces far more cars than the U.S. does. Japan is also far more protectionist than the U.S. (and Canada). That’s no coincidence.
Canadian workers fighting to save their jobs
This issue has come up again because Canadian workers are now fighting to save our remaining auto sector jobs from being shipped off to Mexico. While our foolish government has declared “solidarity” with Mexico in the NAFTA talks, they are so locked in to their globalist trade ideology that they don’t realize (or more likely don’t care) our workers are being sold out.
Consider this from a recent Bloomberg report discussing the strike at the GM CAMI plant in Ingersoll, Ontario:
“The move (shifting production of the GMC Terrain to Mexico) left CAMI with one vehicle, the Equinox sport utility vehicle. GM recently spent C$800 million ($649 million) retooling the plant for the 2019 model, an indication it has a healthy future though it also began producing the SUV at two factories in Mexico. This is the main issue that led to the strike: workers want CAMI to be designated the lead producer of the Equinox, which would mean any downsizing would have to happen in Mexico first.
“Let’s put it this way: if the economy tanks and they have to take production out of the system, where are they going to take production out of? The country that’s making $5 all-in, or Canada where we’re significantly higher? Our members could go back to $0 an hour and we still couldn’t compete with Mexico,” said Dan Borthwick, president of Unifor Local 88, which represents the 2,500 hourly workers at CAMI.
It’s a problem facing all Canadian autoworkers. Unifor’s Dias called CAMI “the poster child for what’s wrong with Nafta.” The plant is one of the most productive GM has, yet its jobs are still threatened, he said.”
Disturbingly, out of nine new vehicle assembly plants in North America announced since 2011, Mexico has receive eight of them.
One Canadian worker at CAMI put the issue perfectly: “We hope the representatives at Nafta can understand that it’s not an equal fight right now. We have to open their eyes to that. We can’t lose everything to Mexico.”
Time for tariffs
While Canada’s elite goes insane and panics when discussing any changes to NAFTA, the truth is that Canada would be far better off with just a Canada-US trade agreement, and the imposition of tariffs on Mexico. The U.S. would benefit from that as well, and despite the conventional wisdom, so would Mexico. Their leaders would be forced to build up a stronger domestic economy with better wages, more investment, and less corruption. As it stands now, they can just rely on cheap labour – which isn’t good for them in the long-run.
In the absence of tariffs, the next best thing would be demanding a big increase in wages for workers in Mexico – not just the labour standard increases Canada’s negotiators are requesting. If Mexico wants the privilege sell vehicles into Canada, they should have to massively raise wages to levels similar to Canada, be held to the exact environmental standards as Canada, and be willing to prove that they are following the rules so as not to unfairly undercut Canadian workers.
Mexico is highly unlikely to agree to that, meaning Canada should be willing to walk away from NAFTA if necessary. It’s important to note that the biggest NAFTA concern in the United States is their trade deficit with Mexico, while their trade with Canada is quite balanced. Additionally, countless American states would support a Canada-US trade deal in a heartbeat.
It’s time for Canada dis-enthrall ourselves from the free trade zealots who have made tons of money for global corporations at the expense of our workers and middle class. Eliminating tariffs on cheap-labour nations is a big mistake, and it’s time for Canada to realize that we would be far better off without free trade with Mexico.
The elites want to hide their many failures behind political correctness, deception, and manipulation. We need to push back and spread the truth.
That’s why I write.
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