Canada and the U.S. struck an eleventh hour agreement on NAFTA, now called the USMCA. What’s new and who are the winners and losers? Kim Parlee speaks with Chuck Gastle, lawyer at Bennett Gastle Professional Corp.
Chuck Gastle's our favorite lawyer in all things trade. He joins us tonight, and has been talking us through as we got to this point. All of us, I think, a bit surprised at what had actually did come through. But let's just start with the basics. Is this deal done, in your opinion? I mean, is there a risk it may not get done?
There is risk that it may not get done. But I think it's a very small risk. I think it's going to be done. I think it's going to be passed by the three legislatures. I think the real trick is Obrador in Mexico. He said that he would pass it through. He becomes the president on December 1. And I think that's where the risk comes from.
But again, you still think it's minimum risk.
I think it'll be done. Yeah, I think it'll be done.
Let's go through some of the good things and some of the interesting things that came out of this deal. I mean, the good thing, I think, for a lot of people is the autos were settled. And I think people are feeling pretty good. What do you think of the auto section of the deal?
It was ridiculous that we were going to be facing any tariffs at all. It's completely trade illegal. It's a bully tactic by Trump. And it never should have been there. But that was the gun we had to our heads.
Well, that gun seems to have been taken off us. But it's a disappointing agreement because of the steel tariffs--
--and aluminum tariffs that are still there. That's completely ridiculous from a trade standpoint. And there's some talk that it's going to go into quotas. But the mere fact that we have a free trade agreement, we have those duties there that were imposed on us on a pretext, which is totally trade illegal, is completely ridiculous.
So why-- and take me through. I mean, I know some of this is law. And some of this is negotiation tactics. And sometimes it's hard for the layman to kind of figure out what is what. You got a deal in place. Why wouldn't those get lifted? Like, what's the reasoning? What have we the-- I guess the-- I mean, legally, you've told us those are not legal tarriffs. But why would they keep them in place?
Trump doesn't want to.
That's what it comes down to.
It really does. I mean, to make it very easy, very quickly, he's claimed that imports of steel and aluminum from Canada represent a threat to the American's national security, which is taking advantage of a loophole in the WTO, which has never been used. And he runs the risk of blowing up the WTO as a result of it. It's just crazy.
What about the non-market economy clause? And again, you know, we saw lots of media in this in the past few days, where there is something in this agreement now that if Canada chooses to get a deal with a non-market economy-- I guess that might mean China, I think it's people looking at-- they actually have to let the US know they're going to do that. And then afterwards, they have to let them see the agreement. What is going to be the net effect of that? I mean, what's the bottom line?
It's the Trump clause. It means that there will be no negotiations with China as long as Trump is president. Because what the sanction is is that Trump or the United States can declare that they'll be out of the agreement in six months. So the moment Canada or Mexico indicates that they're going to negotiate with China, I would expect Trump to say, OK, we'll cancel USMCA.
And so the net effect that is while he's president--
There'll be no negotiations with China. I would expect that.
Yeah, and is this--
Now normally, I don't think it would be if you had Obama or if you had other people there. Because these agreements have always had a six-month exit clause. But no one's ever used it, or even thought of using it.
So this basically gives them the platform, then, to negotiate with China.
Yeah, well, you've got fortress North America. And he's going to try to isolate China. Now what does China do? I mean, China is expanding its trade into Asia. It's into Africa. It's trying to do deals with everything else. So again, we're building barriers around North America, which could inure to our disadvantage.
Yeah, I mean, specifically I guess, to our disadvantage, I mean, Canada's disadvantage, not North America's. I mean, what is--
I would say North America's disadvantage.
Yeah, but what about Canada though? I mean, because this is a company-- whenever we go through this, we're like, oh, we wish we could diversify to other countries. This really doesn't help us do that.
Well, if you believe in diversification. I don't. I don't think it's possible to diversify our trade. It's been something that's been discussed since about 1970s. And our concentration in the United States has generally gone up. Now, it's gone down a little bit lately. But to truly diversify our trade to a point where we're no longer quite as dependent on the United States?
I think that's very difficult, if impossible.
Do you think anything different could have come out of this, if something was-- I mean, is there anything you kind of look to this agreement going, I wish this had happened, that realistically could have happened? I mean, I think there's lots of things we wished could have happened. But is this the best we could have done in these circumstances?
The best we could have done in these circumstances is not have the steel and aluminum tariffs. And that's very disappointing. Apart from that, there's a cost of doing business with the United States. And we're seeing what it is. You want to do a deal with us, make some concessions.
Yeah, and that's what it was.
And we're a smaller economy. We're incredibly dependent upon the United States. And we had to do a deal. And so hold your nose and do the deal, and live with it, and be glad that the major part of our economy is not under threat.
Chuck, always a pleasure. Thank you.
Chuck Gastle, lawyer, Bennett Gastle Professional Corporation, joining me here in studio.