Today is D-Day, the deadline President Donald Trump has given his much younger Canadian counterpart Prime Minister Justin Trudeau to sign the revamped North American Free Trade Agreement which was intensively renegotiated between the US and Mexico over the past five weeks.
If Trudeau does not acquiesce, then Canada has been threatened with punishing tariffs on its auto exports. Trump is even going up against Republican senators in the US Congress who have voiced near universal condemnation of the notion of leaving Canada out of a North American Free Trade Agreement.
Even if Trump gives notice today of a bilateral pact with Mexico and the termination of Nafta, the US Congress may give Canada 30 days to negotiate signing on to the deal.
The US and Mexico are proving to make strange bedfellows. The upside of this tentative new trade deal is that there may be a little more predictability and stability in the world system as a whole. The fact that the tentative bilateral agreement in principle is not comprehensive also leaves all sorts of room for further detailed negotiations. With respect to Canada, the Mexicans have done some of the tough work for them on autos and the agreement’s expiry date (set for 16 years), but there are still a number of issues to be ironed out.
Ironically, while Trump is touting the trade agreement hammered out with Mexico, he is still calling for his southern neighbour to pay for the building of a wall along its border with the US. What has pleased Trump about the deal reached with Mexico is its focus on manufacturing, and the new rules bolstering the North American auto industry against foreign competition, and provisions on intellectual property protections.
What the US wants Canada to agree to is to change its dairy and intellectual property protection policies. Canada, on the other hand, wants the US to drop tariffs on Canadian steel and aluminium imports.
The stand-off has become an extraordinary public feud between historic allies and neighbours. Sitting on the southernmost tip of Africa, the question worth asking is what we can learn from this distant feud, and how might we be affected? The lesson seems to be that no country, no matter how intimately connected to the US, is immune from a brutal trade spat fought in the trenches of national interest.
So where does this leave South Africa as we desperately try to hold on to our preferential access to the US market under the African Growth and Opportunity Act (Agoa)? After all, South Africa benefits more from Agoa than any other African country. If the US can bully an erstwhile ally such as Canada, then surely it won’t think twice about employing strong arm tactics when it comes to South Africa.
The new world order in the eyes of the American administration is based purely on what is best for the US. So preferential market access for African countries as a way to give developing nations a leg up in a global system where they are struggling to develop economies of scale is of little concern.
On the contrary, preferential market access will evaporate as soon as countries challenge US trade interests. Rwanda was a recent case in point.
When Rwanda decided to increase tariffs on used clothing and footwear, much of it coming from the US, the US retaliated by suspending Rwanda’s apparel preferences under Agoa.
It was not only Rwanda, but Tanzania and Kenya that took measures against the US dumping used clothing on their markets, which was ultimately harming local textile industries. The US threatened to end their membership in Agoa claiming that the preferences were killing potential US jobs. The message the US was sending to African countries is not to go up against US dumping practices.
South Africa tried to resist the dumping of US bone-in chicken at below cost prices on our market in order to protect our own poultry industry and ensure the quality of our chicken products, but later acquiesced under US pressure and now allows in 65000 tons of US chicken annually.
Our poultry industry is taking our government to court over the injustice of the US poultry concession given the insistence of the US on imposing tariffs on South African steel and aluminium exports.
At the end of the day it is worth watching with interest the outcome of the US-Canada trade spat, as chances are our own trade spat is likely just over the horizon.
Ebrahim is group foreign editor