Tariffs Getting In Way Of Ratifying North American Trade Deal

May 10, 2019

Despite the U.S., Mexico, and Canada signing a deal to replace the North American Free Trade Agreement, tariffs and national politics have kept speedbumps in the way of closure. 

“I may be looking at the donut rather than the hole here, being a little more optimistic, but let’s face it: It’s a better deal in every respect for Democrats in Congress,” said Sen. Rob Portman (R-Ohio) on CNBC Wednesday.

Portman says he believes the deal, the U.S.-Mexico-Canda Agreement, will pass Congress eventually.

“For some Republicans, there are some concerns about it, things like the minimum wage in Mexico for some of the auto workers, or rules of origin/domestic content rules,” Portman says. “I do think ultimately it’s a better agreement than NAFTA.”

Someone else who thinks it’s a good deal from Canada’s perspective is the Canadian Minister of Transport Marc Garneau. But he says there is a problem.

“And that is that the United States has placed tariffs on steel and aluminum from Canada—25% on steel, 10% on aluminum. The President had said that this was a negotiating tool,” Garneau said. “We have signed now, and so from our point of view for us to ratify—which is passing it through our Parliament and making it official—is very challenging given the presence of these tariffs.”

Garneau says an upcoming election in Canada adds to the time pressure for tariffs to be dropped, and ratification can move forward.

Canada doesn’t consider the tariffs to be legitimate under national security and supply concerns, Garneau says, given a $2 billion surplus of steel going into Canada at the time of the tariffs. He says many stakeholders he’s talked to consider tariffs bad for both the U.S. and Canada.

Ohio State University economist Ned Hill recently tried to measure the impact of the tariffs, but his conclusion was that the effects are confusing, muddied by strong consumer confidence, for example.

What is clear to Hill, is that Canada’s counter – or retaliatory tariffs – are hitting Ohio.

“Ohio’s the front line of the trade war,” Hill said in March. “The estimates we make off of 2017 data looking at the structure of the Canadian retaliatory tariffs, Ohio is the largest paying state. Well, it’s actually Canadian consumers buying Ohio products. And it was carefully crafted—I mean, they actually picked on preserves to get poor Smucker’s down in Orrville.”

Garneau says the retaliatory tariffs are doing what Canada intended.

“But what we’d really like to do is to see the tariffs on aluminum and steel be dropped, then we would drop our tariffs, and we’d proceed with ratification,” Garneau says.

“We are not only joined at the hip in terms of trade, and a 5,000-mile border, we have strong security interests in common,” Garneau continues, speaking about Canada-U.S. ties. “This is a very powerful relationship between the two people, and it will withstand any differences, we occasionally have differences. But it shouldn’t stop us from trying to solve those, and that’s what we’re trying to do right now.”