“It’s hard to see this as anything other than Canada getting played.”
Cross-posted from Zero Hedge
In what was the biggest economic news of the day, Donald Trump concluded bilateral trade negotiations with Mexico, a deal which he called the US-Mexico Trade Agreement (profiled previously) and which will replace the trilateral NAFTA which has – for now at least – been scrapped until Canada also comes to the negotiating table and hammers out an agreement with the US (read: concedes), from a position of weakness and virtually no negotiating capital.
There were some odd twists in the announced deal, for example the agreement on the “sunset clause”, which as some pointed out is strange as it is a “trilateral matter” – i.e., one which would involve Canada – and it was unclear how it squares with the U.S.Mexico pledge that their talks were purely on bilateral issues.
Confirming that Trump was engaging in some good old “divide and conquer”, was the announcement from a White House official that, if Canada doesn’t agree to a renegotiated NAFTA, it will go ahead with a two-way deal with Mexico, although another official claimed that splitting up the negotiations is “standard practice and not about squeezing Canada.”
That may not have been exactly true because even though Mexico’s foreign minister Luis Videgaray said it’s necessary for Canada to be part of the deal, he then said that if a trilateral Nafta deal with Canada is impossible, a bilateral agreement between the U.S. and Mexico would also be acceptable.
At this point the alarm bells went off, and as Globe and Mail correspondent Adrian Morrow said, “it looks like the U.S. and Mexico went far beyond bilateral issues and agreed to a pile of trilateral stuff without Canada.” He also noted that while it was unclear whether any of the negotiated terms were okay with Canada, “it puts enormous pressure on Ottawa to agree or hold up the deal.”
Furthermore, Morrow points out that unless Canada already agreed to these trilateral issues — sunset compromise, IP etc. — via its back-channel with Mexico, “the U.S. and Mexico have just massively cranked up the pressure.”
In other words, Mexico just stabbed Canada in the back in order to get a deal with the US on preferential terms to Canada, just as Trump desired, and in vivid demonstration of applied game theory in practice…