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NAFTA, CETA, and Canada’s Growing Neglect of Mexican Trade Relations

Last week, Prime Minister Harper, President Obama, and President Peña Nieto met in Toluca, Mexico for the North American Leaders’ Summit, more popularly known as the “Three Amigos Summit.” But 20 years after the signing of NAFTA, trade relations between the three countries are characterized more by tension than by amiability, with topics such as immigration policy and the Keystone XL Pipeline bringing considerable friction into negotiations. 

Canada’s relationship with Mexico has been suffering from a major setback since 2009, when the Conservative government implemented stringent visa requirements for Mexicans travelling to Canada in order to curb the number of false refugee claims filed by Mexican citizens. While the visa requirements have reportedly lowered the number of claims by as much as 85%, some speculate that they’ve also inhibited Mexican travel and tourism to Canada by nearly 80%. This, in turn, has had a very negative impact on business flows from Mexico to Canada, a fact which hasn’t been lost on Mexicans in government and in the private sector.

One of the more vocal critics of Canada’s immigration and tourism policies in recent months has been Mexican Ambassador Francisco Suarez, who recently asserted that “Canada has the most stringent visa system for Mexicans of any country in the world”. Additionally, while speaking to students at Carleton University, Suarez was pessimistic about the state of Canada-Mexico relations, saying that “The relationship has lost dynamism” and “has become stagnant.”  The visa requirements have been criticized by business interests within Canada as well, with the Canadian Council of Chief Executives pointing out in a recent report that tourism from Mexico to Canada has dropped from $365 million in 2008 to under $200 million in 2012, and that this has been a significant factor in discouraging Mexican foreign investment in Canada. Harper himself referred to the trade between Canada and Mexico as “a very unbalanced relationship” in a meeting with Canadian business leaders just prior to the Three Amigos Summit, citing exactly this lack of foreign investment. Yet at the end of the Summit, the talks came to a close without Peña Nieto having received any definitive commitments from Harper regarding immigration and travel policy. Clearly, when it comes to political and economic relations between the two countries, things have been better.

Canada’s trade frictions with Mexico are thrown into stark relief when compared to the resounding successes of the Comprehensive Economic and Trade Agreement (CETA) with the European Union. Since the agreement was signed in October 2013, the Harper government has spent considerable instant cash advance payday loans online time and energy promoting CETA to Canadians, and the media has been relentless in its analysis of CETA and its potential consequences. And rightly so: after the agreement comes into effect, about 98 percent of the EU’s tariff lines will be duty free, giving Canadians nearly unparalleled access to a 17 trillion dollar economy. It’s the largest and most important free trade agreement Canada has signed since NAFTA, and its projected benefits to Canadians are immense. What’s unfortunate is that the government’s focus on CETA seems to have come at the expense of preserving good economic relations with its southernmost NAFTA partner. For example, Canada has proven to be unwilling to lower travel barriers for Mexico, and yet at the same time has eliminated similar visa requirements for the Czech Republic (a necessary condition for the ratification of CETA). Whether the Czech concession was the result of Canada’s immigration concerns being truly satisfied, or whether it was simply the result of CETA negotiation pressure, it’s unlikely that the Mexican government was impressed with Canada’s decision.

Mexico is currently the 11th largest economy in the world (in terms of purchasing power parity), and by 2050 it’s projected to climb to 7th place.  Having such a powerful emerging market in close geographic proximity and preferential access to it under NAFTA gives Canada an immense advantage over other countries. Yet despite this opportunity, Canada’s trade with Mexico as a percentage of its total global trade remains surprisingly low, at just under 3.5%. In comparison, the United States in 2013 accounted for 75.08% of total Canadian exports and 52.1% of its total imports, and the European Union in 2013 accounted for 11.18% of all Canadian imports and 7% of its total exports.  The last two figures are only expected to grow as CETA comes into effect and the Canada-EU markets become more closely linked. But in its rush to crack into the EU market, the Canadian government has overlooked the profits to be gained from maintaining strong economic ties with Mexico. As Mexico emerges as a dominant world economy, and begins to turn its gaze across the Pacific for potential trade relationships, Canada will become subject to increasing amounts of outside competition for its market in coming years. Whether or not this government is willing to overcome stagnant trade relations with Mexico will determine whether future Canadians consider Mexico to be an important economic partner, or a missed opportunity.

 

 -Mike Custer

 

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