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Trudeau Gets it Right on North America

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JUSTIN TRUDEAU
CP
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Justin Trudeau's speech on the importance of North America on Monday echoed most of the current wisdom on Canada's standing in North America -- we're in trouble and the issue needs some serious attention.

This was the consensus in hearings held in parliament a few weeks ago and in a recent Senate report.

It's also a sentiment that is echoed, if not amplified, in private conversations in both Mexico City and Washington, D.C.

Trudeau has been the first leadership candidate to respond to rising unease in Canada about its place in North America and his speech largely got the big issues right.

On one hand, the Americans have had about enough of Canada going on about Keystone. Regardless of Canada's perception of the wrongness of the American position, fact is a decision has been made (or postponed) and Canada's yelling about it will not change minds. In fact, it is doing just the opposite.

The Americans are quick to point out that the U.S.-Canada trade relationship is a US$2 billion a day enterprise and are miffed that it -- and the special access that Canada gets -- are being overlooked and undervalued.

The fact that President Barack Obama entered office with no particular interest in Canada and open contempt for NAFTA hasn't helped Canada's case in Washington. But rather than responding and adapting to the new reality, it's been "dam the torpedoes and full steam ahead" from Canada. In hindsight, the decision to cut the enhanced Canadian representation initiative in the United States and close six consulates might not have been such a good idea.

So, the idea for a cabinet level committee on the U.S. relationship proposed by Trudeau is good, but in reality it would have to be a committee on North America, which means including Mexico. And Trudeau seemed half way there in his speech.

The fact is that the Americans have less time to focus on the bilateral relationship now and will have even less time once the Trans-Pacific Partnership (TPP) turns North American from a table for three into a table for 12. As much as the U.S. administration may not like NAFTA , it dislikes the idea of, in its view, wasting time doing everything on North America twice. That calculation will only get harder under the TPP.

Further, Mexico is a huge opportunity for Canada. An opportunity most observers feel has been under exploited. The decision to impose visas on Mexicans travelling to Canada had a clear cost on tourism, some estimates were that the hit was as high as $300 million . But it impacted trade and investment, too. Recent academic work puts the cost of unilaterally imposing visas on trade between two countries at a 17.5 per cent hit on trade and investment. Applying this to Canada-Mexico trade and investment yields a quick back-of-the-napkin calculation of a roughly $7 billion hit.

Of course, the visa issue also damaged the relationship. Given the rising importance of Mexico in the U.S., and the tilt of the balance of power in North America south toward Mexico, that's going to come back to bite Canada. Ideas such as seeking to join forces with Mexico when its version of Keystone -- the trans-boundary hydro-carbons agreement -- was stuck in the U.S. Senate were off the table since the visa issue soured the relationship.

What Canada just doesn't seem to "get" with its decision to impose visas is exactly what is missed in Washington about the decision not to approve Keystone.

Canada is upset with Mexico's non-stop complaints about the visa issue and does not understand why Mexicans are so upset about the visa. Mexicans, on the other hand, are upset that Canada doesn't understand their anger about the visa issue and, in particular, why Mexico would take exception with Canada throwing it under the bus (and shooting itself in the foot economically) all for a domestic political stunt.

Sound familiar? For Canadians it should. It's essentially a Spanish translation of Keystone.

And so, that is the real news in Trudeau's speech.

His announcement that he would immediately lift the visa requirement was akin to a U.S. presidential candidate announcing that she or he would immediately approve Keystone. It would be a game changer for Canada's standing with Mexico and more broadly North America.

Trudeau is the first candidate out with a substantive vision statement on North America. it will be interesting to see where the other candidates stand.

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