Canadian Official on NAFTA and Trading with Nebraska

Canadian Consul General Paul Connors (photo by Mike Tobias, NET News)
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May 31, 2018 - 1:42pm

Nebraska exports billions of dollars of goods to Canada and Mexico, U.S. partners in the North American Free Trade Agreement. So it’s no surprise White House threats to withdraw from the 1993 pact weigh heavy on the minds of Nebraskans, but also Canadians.

Last week, before the White House announced new tariffs on steel and aluminum imports from Canada and Mexico citing a lack of progress on NAFTA, we talked one-on-one with Canadian Consul General Paul Connors.

“With good will, we'll get the puck in the net,” Connors said twice in the interview.

Leave it to a Canadian to use a hockey reference to talk about hopes for a positive outcome to NAFTA negotiations. Connors is the Minneapolis-based Canadian Consul General, basically Canada’s ambassador for a five-state region that includes Nebraska. He says annually Nebraska exports to Canada are worth $1.6 billion, and imports from Canada to Nebraska are worth $800 million.

Last week he was making the rounds in Nebraska and South Dakota, talking with government, industry and business leaders. Talking a lot about the uncertain future of NAFTA. We caught up with Connors in the lobby of a downtown Omaha hotel.


MIKE TOBIAS, NET NEWS: What are you hearing from people you talk to about the struggle over NAFTA right now?

TARIFF TALK

Last week, before the White House announced new tariffs on imports of steel and aluminum from NAFTA trading partners Canada and Mexico, Canadian Consul General Paul Connors said this: "It's Canada's view that that exemption on the steel tariffs should be permanent, and Canada would agree with our American friends that there is a challenge with Chinese steel overproduction, and we want to work with our American friends on addressing that."

U.S. Commerce Secretary Wilbur Ross says tariff exemptions for Canada and Mexico were lifted because NAFTA talks were taking longer than "we had hoped" (NPR story)

Canadian Prime Minister Justin Trudeau calls the tariffs "totally unacceptable" (CTV News story)

Nebraska U.S. Senator Ben Sasse on newly-announced tariffs on Canada, Mexico and the European Union: "this is dumb" (Sasse news release)

PAUL CONNORS, CANADIAN CONSUL GENERAL: What I'm hearing is the same message. We seem to be on the same songbook, which is, we all agree that NAFTA has been a good thing for the three countries. We all agree that it needs to be improved. It dates from 1994. We've never significantly gone through the text and updated it. In the current NAFTA, there's provisions in the automotive chapter that tell you how you go about measuring content requirement when you're putting a cassette tape deck into a car. We haven't put a cassette tape deck in a car in North America in over a decade. So the three countries agree we could usefully update it. Another thing is when we did NAFTA back in 1994, we didn't have the internet. So there's nothing in there about digital trade, e-commerce as it were, so we want to do a new chapter on that. So it needs updating. Then the third thing I would say that we all agree on is what I would call, a do no harm, new and improved approach, which is we all want to make it better, and we don't want to throw the baby out with the bath water.

TOBIAS: How hard is it to make these sort of changes involving things as innocuous as cassette tapes and e-trade, in the environment of the United States threatening to pull out of the agreement?

CONNORS: What I would say on that is, we have politicians in Canada too, and we took notice during your last election campaign when some rhetoric was done about NAFTA not being a good deal, and all of that. We thought, well okay, well we have politicians, too. But, when the election was over, I can tell you the discussion between the three countries, when we launched the negotiations, was one not of ripping up NAFTA, but one of, let's take some time and get this treaty updated to the benefit of all of us. Vice President Mike Pence gave a great speech at your National Governors Association last July, in Rhode Island, where he said that the administration's position on NAFTA was to get it updated, new and improved, and he specifically said, “and we get to a win, win, win for all three countries.” That is the spirit that's in the negotiating room, and it's in that spirit that we work and we try to get, we make great progress and there's good momentum in the negotiations. There was some press speculation that we were getting close about a week or so ago. We're not quite there. We need some more time. As always happens, we're down to the last few issues, and the last few are always the toughest issues for the countries, but Canada's view is let's just stay at it and keep going. We've been into a permanent negotiation since April now, in Washington, and our view is let's just keep at it, and with good will we'll “get the puck in the net,” as we like to say in Canada.

TOBIAS: When you see discussion of the talks being stalled and missing the mid-May deadline that was set by Speaker (Paul) Ryan, is that a concern?

CONNORS: It's a concern that we all want to get a deal as soon as possible, but we all don't want any deal, so we all want to keep working at it, but we also want a good deal. You know, a month ago we were talking about getting a deal done before the Summit of the Americas in Lima, Peru, so there was Speaker Ryan's deadline last week that you mentioned. There may be more instances of this going forward. From our perspective, instead of focusing on what the deadline should be, or what the date is, we want to focus on can we stay at the negotiations on a permanent basis as we've been doing since early April, and let's just work those few remaining issues and get to a deal. We hope it's as soon as possible, but we want a good deal for all three countries.

TOBIAS: Right now, is NAFTA a good deal for Canada and Nebraska? 

CONNORS: Canada is the United States' largest export market. We're your largest trading partner. The United States sells more to Canada each year than it does to China, Japan, and the United Kingdom, combined. We were your largest trade partner before NAFTA. Your second largest trading market is Mexico. Those statistics are true for Nebraska. Those statistics are true for Iowa. Canada's your largest export market. Mexico is number two. So it makes sense, from our perspective, that back in the 1990s that we took this trade and we put it on steroids. The factoid that I would point to you is, since we did NAFTA, if you looked at the GDP of each of the countries, it's a little more than doubled, which is pretty good, but our trade with each other has tripled, and our trade in the agriculture has quadrupled. If you're wondering why the agriculture sector did so well, well guess what? Before NAFTA, as much as we had a good trading relationship, the tariffs in the industrial sector averaged 5 percent to 7 percent between the countries, but the tariffs in the agricultural sector were 20 percent and higher. They were the highest tariffs, so it's not surprising that when we moved to a Free Trade Agreement in the '90s, we saw the most growth in the areas where we reduced tariff the most. The other phenomena you get with the Free Trade Agreement is you start getting a lot more intra-sector and intra-firm trade. Most people think of trade as, I sell you televisions, you sell me widgets. That certainly goes on, but when you have a free trade economic zone, you actually get supply chains integrating. So, if I could take Nebraska as an example, your largest export to Canada is machinery. That's overwhelmingly, agricultural machinery. You've got a great manufacturer here in Nebraska, CLAAS, and they sell about a quarter to a third of their combines and tractors every year to Canada. That's your number one export to Canada. Also in the top five is animal feed and finished beef products, mainly beef, but also some pork. Then, if you looked at Canada's top five exports to Nebraska, what you would see there is live cattle coming down. So, the agricultural chain has economically integrated. Your great at building Ag machinery. You're good at animal feed. That comes up to us. We are good at birthing and growing calves and piglets, and then you're very good at producing that into meat. That comes back down. 

TOBIAS: The time that it's taken to renegotiate, has that caused any problems in terms of what's happening trade-wise? 

CONNORS: I would make two points. One is, we have a current NAFTA which continues. We've not ended the original NAFTA. So, we have a good treaty in place that continues on while we're negotiating the new treaty. I would say that's a good point favoring it. The other thing I would point out, when you consider what we're doing, we are going through the existing treaty, chapter by chapter, and rewriting that, and we're adding some new chapters that were at the year mark, is not surprising. It took us four years to negotiate and finalize the original NAFTA. That we're about at the year mark on the update is probably not surprising.

 

 

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