Conflicts between strengthening the North American supply chain and new attempts at US protection trade are key issues for Canadian, US and Mexican leaders to host their first trilateral conference since 2016.
The North American Leaders Summit is in the midst of a new US protection trade principle, one of Canada’s several stimuli. President Joe Biden’s infrastructure bill, which was signed on November 15, has many “by American” provisions. The Build Back Better Act, introduced by Congress, will give buyers of new electric vehicles manufactured in the United States a tax credit of up to US $ 12,500 by members of the United Auto Workers, saying Ottawa will have a negative impact on vehicles. I am. Industry and related work.
Prior to the November 18 summit at the White House, Foreign Minister Melanie Joly said she had pressured US Secretary of State Antony Blinken to oppose tax credits and protect the Line 5 pipeline. Canada’s Ambassador to the United States, Karsten Hillman, reiterated Ottawa’s view that tax credits violate the North American Free Trade Agreement, the Canada-US-Mexico Agreement (CUSMA).
Dave Perry, vice president and senior analyst at the Canada Global Affairs Institute, said America’s protection trade principle is natural given Biden’s campaign.
“American economy, American workers, made in the United States. It took a while to register that the Canadians performed the message very much,” Perry told the era.
Mr Perry said the impact of the proposed US tax credit was significant and it was timely for Trudeau to have “substantial” time to meet Biden.
“This could be the first step in unraveling the integrated North American automotive sector since the automotive agreement in the 1960s,” he said. “This faces the premise of the North American automotive sector, which has been an integrated industry for most of the decade.”
Jeffrey Hale, a professor of political science at the University of Lethbridge, says there are many separate bilateral issues at work that may present a challenge to form a unified continental vision.
“All three leaders are full of domestic politics. There may be overlapping agendas here, but I’m not sure if the priorities overlap,” Hale said in an interview. Told.
“Americans generally have a wishlist that goes beyond window dressing at such meetings, but they aren’t talking about it in public.”
Lack of free trade in transportation
Barry Prentice, a professor of supply chain management at the University of Manitoba’s Asper School of Business, said he didn’t expect much from the summit “due to the nature of the three countries and their vested interests,” but “noticeable.” “Impact” will change the restrictions on US cabotage.
Cabotage is the transportation of goods and passengers between two locations in the same country by a foreign carrier. In 1920, the United States passed the Merchant Shipping Act (Article 27 is known as the Jones Law), prohibiting foreign-owned vessels from loading and unloading cargo at one port in the United States. .. To be able to do so, the ship must sail under the American flag, be built in the United States, be owned by the United States, and be an American.
recently analysis According to Peter C. Earle of the American Institute for Economic Research, the law remains in the interests of US shipbuilders and members. Both see “low cost foreign competitors” as their biggest challenge. However, the rules of protected trade principles lead to higher transportation-related costs, which in turn push up the prices of final products.
“More employment opportunities, commercial diversity, and a wider range of goods and services from abroad are inevitably hampered by the artificial restraints on trade that it reveals,” Earl writes.
Canada is no different from its neighbors in that both countries are exercising similar protected trade principles in the operation of shipping, plane and truck companies, Prentice said. This allows Canadian carriers to virtually depart in Canada, pick up and drop off in different parts of the United States, and prevent the “milk run opportunity” that follows Mexico.
“The original NAFTA agreement was to allow free trucking between Mexico and the United States and Canada across borders, but that hasn’t happened either. Here we look at Mexican airlines. No, they aren’t allowed to enter the United States. That’s the only protection trade principle, “he says.
according to International Monetary FundThe United States’ gross domestic product in 2021 is projected to be $ 22.675 trillion, below Canada’s $ 1.88 trillion and Mexico’s $ 1.19 trillion.of In 2020, the U.S. Department of Transportation reported US exports to Canada are $ 255.1 billion and imports from Canada are $ 270,380 million, while US exports to Mexico are $ 212,670 million and imports are $ 325,390 million. Most US imports and exports to these countries are by truck.
Prentice believes that true free trade in transportation enhances these dollar values, especially in the north-south railroad corridors. If regulatory authorities approve the purchase, the Canadian Pacific Railway will purchase Southern Kansas City in September, facilitating one such connection. Another example is the railroad corridor connecting Mazatlan, Mexico and Winnipeg, proposed by the Caxxor Group in Mexico on November 12.
“A single line has advantages over Interline in terms of equipment control, schedule, and customer reliability. It’s just another one of those opportunities. [in] This is what we call nearshoring, “Prentice said.