National Column: Donald Trump isn’t all wrong about NAFTA

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by Thomas Walkom

Oops. Donald Trump’s critique of the North American Free Trade Agreement may not be that crazy after all.

The U.S. president routinely savages NAFTA, charging that the three-nation trade and investment pact is biased in favour of low-wage Mexico.

Equally routinely, he is chastised as a know-nothing protectionist for making these remarks.

But it seems that he may be right. Last week, General Motors informed workers at its Ingersoll, Ont., CAMI plant that it plans to deal with a month-long strike there by ramping up production at two of its cheaper Mexican operations.

Under NAFTA, automobiles manufactured anywhere in North America may be sold duty-free in Canada, the U.S. or Mexico.

Since, at $2.45 (U.S.) an hour, Mexican wages are a fraction of what they are in the other two NAFTA countries, this is a powerful incentive to locate production there.

As a recent report by former CIBC chief economist Jeff Rubin shows, this is exactly what has happened. Rubin calculates that the number of auto jobs in Mexico has quadrupled over the past decade. Over the same period, auto manufacturing jobs shrank by 26 per cent in Canada and 28 per cent in the U.S.

It was to deal with this problem that the workers at GM’s Ingersoll plant went on strike. Their demands did not focus on the usual issues such as wages. Rather employees sought ironclad assurances from GM that Ingersoll would continue to be the lead plant in North America for production of the popular Chevy Equinox sport utility vehicle.

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Earlier this year, GM moved production of its Terrain model to Mexico from Ingersoll – at a cost of 400 Canadian jobs.

The CAMI workers and their union, Unifor, wanted to make sure this didn’t happen again.

We shall see whether this was a wise strategy on the part of the union. Perversely, the strike may end up encouraging GM to shift production to Mexico.

But the broader point is that, under NAFTA as it is currently written, the auto giant is able to do so without penalty.

Trump, for all his many faults, has a solution for that. He would require that cars sold duty-free in the U.S. under NAFTA contain not only minimum North American content but minimum American content.

Linking domestic sales to domestic content is not an unusual principle. It is the same one that informed the very successful 1965 Auto Pact between Canada and the U.S.

If Trump weren’t so unpopular in Canada, there might be political pressure on Prime Minister Justin Trudeau to follow suit by demanding Canadian content rules for autos sold here under NAFTA.

But Trump is that unpopular in Canada. Anything he supports tends to be treated here as either racist or nuts.

In 2016, before Trump became president, polls showed that Canadians were split over NAFTA with 25 per cent in favour, 25 per cent opposed and the rest indifferent.

Now that NAFTA-hater Trump is president, polls show that an overwhelming majority of Canadians support the deal.

If Trump were a NAFTA backer, my guess is that most Canadians would say they opposed it.

There are many reasons to dislike Trump. He is a bully and a boor. His brinksmanship in the North Korean crisis is dangerous. He panders to xenophobes and nativists.

But his economic nationalism should be familiar to Canadians. Until recently, it was the position of the New Democratic Party. A little further back, it was the position of the Liberal Party.

Justin Trudeau may reject economic nationalism as dangerous. But his father, Pierre, did not.

Indeed, Pierre Trudeau recognized that sometimes even the most cosmopolitan of nations need to protect themselves from the buffeting winds of the global economy.

In that, the elder Trudeau was right. It is ironic that one of the few politicians who understand this today is Donald Trump.

Thomas Walkom appears Monday, Wednesday and Friday.
Copyright 2017-Torstar Syndication Services

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