now we take you to john hopkins university's washington dc campus for a panel discussion about the ongoing nafta discussions between the u.s., canada and mexico. >> welcome everyone to our nafta -- can i pronounce that? nafta-apocalypse panel. [ laughter ] >> looking at the latest developments under nafta, we have -- well, we have a very distinguished set of panelists. and hopefully an extremely interesting discussion as well given that all of these issues are playing out as we go along. a couple of weeks ago i was walking across the street nearby to brookings for lunch. and i ran into mary.

and another colleague of ours from the peterson institute where i'm also affiliated, and then chris walked by. and the four of us got into a conversation about nafta, evidently, because the announcement had just been made that the u.s. and mexico had struck a deal. in the middle of that conversation, one of us said we need to do an event about this. and here we are. i'm monica debols, the director of the american studies program, and sitting to my right and mayor lovely, a senior fellow at the peterson institute for international economics, a professor at syracuse. and then to her right is a visiting scholar at the kato institute. so with that, let me open up our

initial remarks. the idea is that we have sort of a fairly informal discussion between the three of us. then we're gonna switch over to a second panel looking at the politics of everything that's going on from the mexican perspective and from the canadian perspective. the u.s. recently announced that it struck a deal with mexico. and canada had been up to that point sort of out of the discussions. it's now been brought back into the discussions. but nothing has really progressed. and the latest news is that, nos are ongoing -- negotiations are ongoing. nothing more we can say. [ laughter ] >> on the mexico, u.s. deal, the interesting thing is that what came out in terms of the deal was the document that usdr

actually published, it said that it is a preliminary agreement in principle. within itself, it's something that is kind of hard. language of it is kind of hard to disentangle. what is a preliminary agreement in principle? it's not a deal set in stone. and it's something that is gonna be subject to a lot of things, a lot more back and forth. within that deal, there were three things that sort of stood out. the first was the issue of rules of origin which we will get into in the panel. rules of origin specifically on the auto sector were raised from 62.5%, the agreement in principle is that they be raised from 62.5% to 75%. and many of you in the room know rules of origin are -- they're a staple of trade agreements. and what they usually specify is how much

content in a given product has to be sourced from within the region. so the 62.5% rule was saying that 62.5% of anything produced within north america had to be sourced within north america. now that's up to 75%. the second element of what we're gonna announce was that out of auto production, 40% to 45% of what is produced has to be produced by workers that are earning at least $16 an hour in wages. this is probably the first time that a minimum wage requirement has been built into a trade agreement. as all of you know, minimum wage issues and minimum wage policy is usually subject to a lot of political -- it's a very politically charged issue to say the least.

and having that in a trade agreement with no clear enforceability is certainly another issue they think we should discuss here in the panel. and finally, there is apparently a side letter to what was agreed that basically stipulates that imports of automobiles from mexico may be limited. so there may be an import cap. and there is no clarity really on what that letter says. but it seems to imply that that cap would be in place in order for mexico not to be hit by the potential auto tariff that the u.s. is intending to impose on other trading partners. this is just to remind all of you under the section 232, the national security investigation that the trump administration has launched on several different

products, they've already done so very aluminum and steel as you all know. and there's a report that's due to come out on autos, and there is a threat that tariffs on autos imported from other countries here in the u.s. may rise 20% to 25%. the current wto most nations for countries that trade with the u.s. on autos is 2.5%. so that would be a very big bump! and it would make cars very expensive, which is something that my colleague mary lovely has done a lot of work on. i won't talk anymore. let me pass the word first to mary. >> i think that brings us up-to-date because there's still so much that we don't know where this will end up. i want to take a step back and take a bigger view of how this fits into more of the trump administration's general approach to trade

policy. my area of expertise is trade with china. and so although i did write a case study for the kennedy school years ago, 1994, when the united states signed the nafta agreement, and it was on capitol hill today to vote. very exciting. although many of us are americans and remember when we signed an agreement with canada, which is a much larger economy, most american his no idea it was happening. at the time when we signed an agreement with mexico however, the economy that at the time was about the size of the economy of los angeles, everybody was up in arms that it was truly a nafta-apocalypse. so this is the second one that we have had. and i think it speaks to the fears that people have of trade with lower income countries in the united states. i'm reminded

first of the agreement that the trump administration has signed with south korea. it's not a renegotiation, of course. it's a slight tweaking of course. and basically it granted exemptions from steel and aluminum tariffs to south korea by basically forcing south korea to engage in managed trade. and managed trade i think is a good way to think about what's happening. particularly in the traditional heavy industries that this administration favor, such as auto, steel and aluminum. and we may see appliances early on. one may just look at an election map and you'll figure out why those are the industries that are being chosen. and that may be

true, but goes back to this sort of belief that these are key to a strong and prosperous nation. so i think we're looking back at a kind of mindset and a worldview that is shared by many people in the administration, and many people i would say in the voting public. so we see and move toward managed trades. the unfortunate thing about the nafta agreement, it's clear that that's going to be coming out. the auto industry provisions that monica just spoke about are clearly the most obvious example of this. but trump's focus on supply management for dairy also speaks to this idea. because he certainly well knows, and we also have dairy management in the united states, and when you look even more broadly, we look at what's happening with the european union, the european union seems to believe that it

can head off problems with autos and autotariffs hitting the european union would be a gigantic, seismic shock to the global trading system. they believe they can head it off. but president trump is already talking hike a man who wants -- like a man who wants managed trade. when the european union suggested they would remove all tariffs on autos, he said that wasn't good enough because they wouldn't be buying our automobiles. seeming to completely dismiss the fact that ford, for example, produces automobiles quite successfully for the european market in the region. so we have a general tendency toward basically managed trade temperature seems to grow with -- trade. it seems to agree each passing week. china seems to be the exception. everyone seems to agree that it's time to gang up on china. i would question whether this is really what we want.

it's been a long time since we really talked about how we can move forward in a cooperative way to create a peaceful and successful trading; trading rules, and maybe it's time that those of us who are in the academic community and other communities really start to think about alternatives to managed trade. >> and just on the issue that mary mentioned, the south korea u.s. free-trade agreement, it important to know that -- to note that apart from the managed trade perspective, these are negotiations too. there's an additional thing. the renegotiations took place, but the actual renegotiation, the actual agreement, renegotiated agreement, has not yet been signed. so this is something that could under what's currently happening with nafta, that could very well happen with nafta. so in other words, it's

very possible that we might have these ongoing negotiations, and these announcements of deals where preliminary agreements in principle really aren't actual deals that have been negotiated at all but are wide-open and thus would still -- what still remains in place is not the renegotiated deal but indeed what was already in place in the first place. name leash the nafta that was negotiated 24 years ago. >> i want to pick up on a thing that mary brought up and how we broad he think about nafta. we think about what brought president trump to office, he rallied on the idea of this populist agenda. part of it was saying we're gonna tackle trade and make it better for everybody. we think about that framework, you have to look at what he's done and proposed to make this better for everybody. well, we look at course, and we see that with course, there were small tweaks, not many changes. you don't have to go back to congress for a vote.

the small things that make it look better means getting a few more cars into korea. that's not really gonna change preferences that korean people have. in addition to that, having voluntary export restraints on steel. this is a policy straight out of the 1980s. and we have seen that these aren't the ways to actually improve trade agreements. not the discussion for academic s and other scholars have been having about how to improve trade at all. see this is a very different agenda. and this is what they call a populist agenda. when we look at nafta, we look at auto, steel, and what's come out of the negotiations, again we're seeing kind of things working on the margins. we're seeing auto rules of ordinance in kind, and rules of ordinance across the board have been tightened.

nafta already has some of the most stringent rules of origin in any agreement in the world. so to make this even tougher, it's clear what the goal is here. to limit the imports of nonnorth american products into the north american marketplace. in addition to that, there's a specific goal of increasing u.s. production in all of these inputs as well. and the tech sales is a good example of that, with the increasing or tightening the u.s. products in the onboard rule. what i see in the terms of the provisions being put forward, and not just the preprovisioning of nafta to make it better, but we need to scale it back and take a lot of the free trade out of nafta. and that is inherently problematic. i think it's also problematic in how the, nos are being handled. where -- negotiations are being handled. we are isolating some long-term partners, friends and allies that have been with us from the very beginning through

a lot of difficult things. and where we're challenging negotiations of globalized supply chains and the way things are actually made today, autos is a great example of this, we have a supply chain where we're not just making parts in one place and putting the whole car together and sending it to a country. we're making things together. and so you have across the boarder from detroit and also ontario, you're seeing things going back and forth throughout the day. so we're talking about billions of dollars of trade. and we're different countries building these things together. that's impressive. if you put a tariff, it's the equivalent of putting a wall in the middle of the factory floor. and that's what's being proposed in many ways. so what's the main goal and the aim that the administration has in going forward with this? and if this is the template that they're gonna put on the rest of the world with the negotiations that are going to happen in the future, that's something to be quite concerned about. in the nafta context, what we really have been careful that we have

intertwined economies that can be very disruptive depending on where the goals land. so once we see the final text of this, which i'm excited to see, if it comes out, we're gonna start digging at it and find out exactly who's gonna get purand who's gonna benefit. and until then, we're gonna have to wait and see. >> with that in mind, one thing in picking up on your comment, one thing we can already say which is if some of these things, especially on autos but also on other products, if some of these things do come into effect, and if some of these walls are being built as is very well illustrated within factories, and within supply chains, there are two things that might happen. one is that companies might try to get around those walls. so by trying to get around those walls, they would basically not fulfill the requirement and the criteria that have currently been put in place or are currently being

negotiated. and we going around that, you would -- these companies would then have to start paying the most favored nations' tariffs, which on autos happen to be 2.5%. but it's a lot of stuff going across the border. you don't take 2.5% once, you probably pay it many times over. and that has implications for ultimately how much cares are gonna cost in north america in general. that's one first point. the second point is that supply chains would have to, if they were to abide by these new rules, they would have to completely reorganize and restructure themselves. which is also extremely costly. so this is also going to have a price impact. this is also going to have an impact on the prices of cars within the north american region. which brings to light one point about nafta that is

very stark. when nafta came into effect, years after nafta came into effect, the north american region became extremely competitive in the auto sector. so whereas it was suffering in the 1980s, the reason for why a lot of these managed trade practices and measures were put in place because it was having all this competition from japan chiefly from japan, but then later from other asian countries. with nafta, this industry became extremely competitive within north america. so ultimately what all of these measures are doing is taking away these competitivenesses gained for all countries involved and sort of regressing back to a time when the region was not competitive. and that is something certainly that is harmful to all within this broad context of managed

trade. mary, i want to go back to the issue of higher prices for autos that i was talking about before. because you have a very interesting piece which i hope you can talk a little bit about on what happens. this is not nafta related but it could come into play under nafta. there is currently an ongoing 232 national security investigation on automobiles. and there may be a point when the new tariffs, 20%, 25%, whatever they might be, will be imposed on cars that are imported from outside of the u.s. so mary has a very interesting paper that she there ared alongside -- authored alongside two other colleagues looking at what those impacts might be. >> let me just talk about why i chose nafta. it's my kind of

mission because the tariff on autos is 2.5% in the united states. so if the united states ratchets up the requirement for automakers to access 0% movement of vehicles across the two boundaries, it may be that the automakers simply turn around and say, we'll forget it, we'll pay the 2.5%. if you have 40% of the vehicle has to be made with labor at $16 an hour, on less expensive auto deals where competition is very fierce, you may say i cannot sell the vehicle if i produce more of it in mexico as i have been doing. therefore i'll simply take the higher tariff. it seems that the

25% tariffs are coming. otherwise these -- all this attention to raiding the costs -- raising the costs of producing auto-diehls in the north american region doesn't make any sense. what does it mean for the united states? it valleys by market statement. for a low-end vehicle, we would see anywhere from doll 1,500 to $-- $1,500 to $2,500. for luxury vehicles, more in the region of $4,000. so it's quite a big hit. this is no such thing as a fully american-made vehicle. every vehicle would be hit to some extent. we find that the vehicles that have more north

american -- actually, canadian/american. we can't even sort out this production process. it's so intertwined that we don't know how much american versus canadian content, and people would say if they can do that really don't in my mind have very good methodology. they're adding in a whole bunch of other stuff that really isn't what we're talking about. i have no idea how the custom will be able to figure out how to actually tax imports of autos and auto parts from canada. it's sort of unthinkable until now. so anyway just looking at american and canadian content, you see that vehicles that are not really popular that hit smaller niche markets are those which have less canadian content are more at risk. so if you're the type of person who likes italian sports cars or japanese luxury vehicles, or kind of quirky

little vehicles that get great gas mileage, you're the one who's probably going to be driving a vehicle that has less american and canadian content. and will probably face higher price increases. having said that, every vehicle will face a price increase. if you were alive in the 1980s, you know exactly what happened with the voluntary export restraints from japan. all of a sudden, the u.s. auto prices went way up. even though, of course, they were restraining the japanese. here we'll see vehicles that are hit with high tariffs as those manufacturers try to raise the price, it'll push demand toward vehicles that'll have more american content. such as the toyota camry. and that will free the producers up to increase prices on all vehicles. we'll also see an increase in the price of used vehicleses for the simple fact -- vehicles for the simple fact that people will be priced out of the new car market and push demand into used cars.

we'll see very broad increases in prices. there will be no place to hide from them. perhaps less obvious would be the fact that we simply will not see certain vehicles coming into marketplace. this was brought home this week when ford said no, it would not be, after president trump tweeted that he wanted them to make this very low-cost vehicle that they had scheduled to produce in china, and then export back to the united states, they said no, they will not be making it in the united states. or exporting it to the united states. obviously the 25% tariff would make it impossible. but it's also not going to be profitable to make it in united states. which means that that particular segment will not appear. so less choice, some things physically disappear in the market, other things are gonna be more expensive. looking ahead we know this is an area where we're gonna see tremendous change. electronic vehicles are coming whether president trump likes it

or not. china is definitely on a path to become the world's largest consumer of electronic vehicles. other countries are following. and 1 has to wonder if we will simply be left out of it. this will not be the place to get the best electronic vehicles. all of that is extremely sad for anyone who's been in the marketplace recently as i have buying my son a -- i would say entry level vehicle. [ laughter ] >> but the industry has been doing very well. it was hit really hard in the great recession, no doubt about it. but jobs in the auto sector have grown much more rapidly than jobs overall. and the types of vehicles that are being produced in north america are terrific. very competitive, the amount of technology you can buy on a $23,000 vehicle. it blows my mind. yet we're risking all that for -- it's not really clear what. so i think there's a lot at risk.

we see nafta as keying that up and creating this fortress north america. and we have to really ask what is going to be the long-term cost of that in terms of the u.s. competitiveness? >> let me switch gears a bit. and ask if you may -- if i may, the big sticking point for canada. so we have ferry disputes, lumber dispute, all sorts of disputes. and on top of all that, we have a dispute settlement mechanism under dispute. [ laughter ] >> sure. i think the key top sticking point everyone has heard over the last few weeks has been chapter 19. and the other one would be the dairy issues. dairy is kind of a mess. dairy has always been a mess for canada. but it's always been a mess for the united states too. we all do different things

subsidizing our producers. canada has a quota system by which producers make dairy products and that's heavily controlled. canada can give a little on dairy. we saw this with tpp. they give up 2.25% of their market share. that was given with the united states in mind. the that you was the u.s. would be in that agreement and they would show that quota. with the u.s. out, a lot of that quota is probably gonna remain empty. and canada is pretty much okay with that i think at this point. so there is a little bit of tinkering that has to be done to figure out what this extra market share is gonna be out of nafta. and that's gonna be a really difficult thing for canada to swallow, especially if countries like new zealand which are big dairy producers decide to fill the quota that the u.s. left behind. so there is a single problem for canada there. then there's the issue of the class 7 milk products. it's really difficult to get into what exactly it is. but suffice it to say, the canadian producers had an agreement with

their government about pricing a milk product below a certain price. they say it priced u.s. producers out of the market. this was a product created after nafta essentially came into this. so it's outside of the dairy sector for canada. u.s. producers also have an oversupply, that is a problem that the u.s. has to address. so it's messy and complicated. at the end of the day, they can come to some sort of an agreement. i don't think it's beyond logic that they can do this. canada did it with the europeans in which they gave them more access. so there is room to maneuver. what that final compromise is, that's the big question. what's the final number they decide to. the other big issue is chapter 19. i think there's a big mythology around chapter 19 in canada. when you look back to the original negotiations with the canada/u.s. free-trade agreement, it's fascinating.

it's fascinating how excited canada was to get this out of the united states. they finally got them! and i think there's a feeling that we just need to keep it no matter what. and this is something that we need to get because canada won this against the united states, and they caved to us for once. so we need to keep it within this agreement. so there's that. and canadians might have to take a hit and they're gonna be very upset if they do. but chapter 19 is something they can live without. and when we look at the data on what's happened with chapter 19 cases, and then what's happened with other cases that go to the core of national trade in the u.s. which is essentially the egive len of what chapter 19 does, there's not much of a difference anymore. there used to be a concern in the '80s that the international trade was biassed against foreigners, it took too long for them to settle their cases. and they had no expertise on trade matters. clearly that's not a problem anymore. and most lawyers say that's not an issue and they have no difference in opinion on whether they go to the chapter 19 panels or the court of international trade.

so for canadian company, there should be no problem to go through this domestic u.s. process. i think chapter 19 is like last holdout. canada is just keeping it right now, and they think a lot of it is a negotiating bluster to get concessions from the united states. that's a good strategy. and that's what they should do. but i don't think chapter 19 is the pill they should die on. so if they can find a way to get something else from the united states, that's a good win for canada, it's a good win for everyone. but i don't think these are issues that are so difficult they can't come to a solution. so we just hope they come back soon and can get this over with because we're dying over here. [ laughter ] >> let me move to the audience and see if there are questions for our panelists and we have a mic here. please raise your right hand and come to you.

>> thanks. i was very intrigued by your last comment about chapter 19. and you've obviously looked at the record of chapter 19 versus cit. and you're probably right in terms of the substance. but given that prime minister trudeau has outlined this publicly as a red line, how does he convince the canadians the cit is just good? >> i think that's a good question. i think politically it's gonna be a tough sell. the way that i see it, when you look at the comment that he made, he said we need something like chapter 19. he didn't say we need chapter 19. i take that as saying okay, we've gotta give them something. something that can cover dealing with these issues, either an agreement on the side where the parties agree to basically bring back the wto as the u.s. is going to do with the eu. that's one way forward or to find another way to sign the agreement to address some of these things. i think it's gonna have to be done quite quietly.

but i don't think mr. trudeau is gonna lose anything with not facing an election any time soon on backtracking on this. so i think he can get away with it. >> anymore questions? >> over here. michael. >> i think we're still pretty scant on details, but i was curious how this would affect the agricultural sector. >> well, it would not be good. [ laughter ] >> as we have seen manifestations already happening in the u.s. we've seen throughout the whole process, it's been very noisy. the nafta re, nos officially started in august -- renegotiations officially started in august, 2017. and there were several rounds of negotiations taking place in each country on an

alternating basis. and then there came a point when evident sort of realized that well, this whole negotiation might actually unravel. of course that was not helped by some tweeting out of the white house on several occasions. and many states within the u.s. started to look at themselves and realized that actually we are very dependent on nafta, and this was particularly true of a lot of different states. but it was very true of agricultural producing ones. and they paid attention even more when mexico started to very marginally started to buy soy beans and corn and other grains from argentina and brazil. again very marginally. the alls we're talking about here are -- the amounts we're talking about are small. but the effect was very symbolic in sort of driving

members of congress represent some of these localities as well as farmers associations in the u.s. to start speaking up. so everybody realized suddenly that there was a lot at stake. if indeed nafta did unravel. and that sort of pushback that came from the agricultural side, and also came from the manufacturing side by the way, it what i think to a large extent made these negotiations continue. it seems from the kind s of things that we've seen published that there were several points in time when the administration was sort of ready to pull the plug on nafta and it didn't happen because some of these lawmakers and some of these representatives from particular industries and particular sectors typically from agriculture sectors were very vocal in getting their point across that they were gonna lose out in a very big way.

>> i'm just wondering, so if this trade agreement goes through, could you speak to how it might have discrepancies with other trade agreements that canada and mexico have with the eu or other partners or tpp? and somewhat separately, what is mexico agreeing on quotas on autos mean for all the foreign manufacturers? manufacturers of autos in mexico for export to the u.s? the tpp is gonna be the main thing we're gonna compare nafta through anyway to, see how much they borrow. when we look at the e-commerce, trade environment, probably gonna be copied and pasted in many ways.

and we're seeing that that difference is gonna be important. nafta has signed trade to the labor environment. nafta also faces institutions to deal with this. we don't know what's going on with these institutions either. the other issue to, with ip, international copyright, there was an extension of the copyright from 70 to 75 years in the new nafta. and from tpp, photograph is the 70 -- which was at 70. there's a discrepancy with five years and the tpp plus the extra you can get if you meet certain provisions. that's money for canada because canada's domestic law requires them to have only a lot years of exclusivity. so this is an issue for that, and compliance with these other agreements. with the eu, an interesting thing that's kind of tucked inside the nafta release was this provision that said that you are not allowed to protect the origins of -- canada

basically agreed to protect these. so i have no idea how this is gonna work out. this is kind of a mess when you think about it. and how they're gonna sort this -- it's gonna be very complicated. that's gonna be something to see. what that provision looks like, it's gonna be very interesting. and i think we're gonna have to keep an eye on unravelling this massive spaghetti bowl. >> i just had one thing. so i do think it's interesting to think about the fact that canada will be in tpp. and we will not be. and this desire to tighten rules of origin, that stems from that. you can imagine that canada becomes more deeply integrated into the asia-pacific through tpp. and the u.s. would be worried about competition from that integration.

through supply chains. so the fact that we're not in tpp is also driving some of that, i think, behavior that we've seen. >> > can you talk about the politics of this in mexico? and is there any chance that the negotiations don't conclude before the new government takes over? and if so what happens? >> this is precisely the topic of our next panel. [ laughter ] >> we will be dealing with that very soon! [ laughter ] >> anymore questions? there's one over here. michael. let me collect a couple or maybe three questions because we're right at the end of our time. there are a couple of questions over here. >> can you give a sort of professorial, basic analysis of

what trump has repeated called for which is international trade tariffs with the u.s. to drop to zero? for everybody. no exceptions. he calls for that over and over again. and his objective among other things is he says to end the debasement of our currency by the unending massive current account deficits. what i'm looking for is just is trump wrong in his goal of saying we ought to have zero tariffs? i'm sort of thinking it's probably jumping for joy even in his grave. [ laughter ] >> oh, let me -- well, let me take a stab at that. the zero tariffs from all sides, that would include the u.s. so if the u.s. wants other countries to lower their tariffs to zero, the u.s. is going to have to lower its tariffs to zero. and i don't

think the calculations have actually been made to substantiate that kind of statement in terms of what it would ultimately imply. so it's one of these sort of broad, broad political statements that are thrown out there without the actual data to back it up and to actually be able to trace what it effectively means. the debasement of the currency because of a current account deficit, this is something that is just not true. the dollar is the international reserve currency. period. there's no other international reserve currency circulating in the world. you have other currencies that come a little bit close to that but fall very short of being actually international reserve currency. and the dollar has maintained its status despite the different bouts of turbulence that we've lived through in the past few years. the current account deficit has a counterpart. so when you're looking at the overall payment

structure of the balance of payment structure of a country, there's the current account balance, and then there's the financial account. you know, the balance of payments are composed of both. if you're running a high current account deficit with the rest of the world, basically what's happening is that a lot of people, a lot of countries from around the world are actually investing in your assets. so money is flowing into the u.s. that's the other side of a current account deficit. an investment surplus. [ laughter ] >> so there's a surplus coming in from the other side. which is to say a current account deficit alone says absolutely nothing about the state of the currency, the state of the economy, whether things are good or bad. you can't make value judgments on the face of having a current account deficit. it just means that you're buying more from the rest of the world, and the rest of the world, the counterpart to

that, is the rest of the world is investing more in the u.s. so if you were to bring the current account deficit of the u.s. to zero, that would have an implication for investment in the u.s. not a good one. so that's something to think about. let me collect two more questions life we end the panel -- before ween the panel. >> you mentioned it would be unprecedented for minimum wage policy to be based into the agreement. and i'm wondering whether that would be a good thing. if it were to raise wages for particular sections, it would be a worthy goal. but could it have adverse consequences? >> okay. >> and my question was you had mentioned at the outset that the view of the people in the white house and the administration on trade is very different from the one in the larger academic community. and clearly what they're doing with nast doesn't make sense to -- nafta doesn't make sense to you guys. but how does it make sense to them? what kind of alternate theory are they operating under that would make this make sense in their

minds? >> thank you. on the question of minimum wage, we're gonna discuss that at greater length in the following panel. let me just say this. there'sab enforceability problem -- an enforceability problem. when you stipulate a minimum wage requirement in a trade agreement, who is gonna enforce it? ultimately minimum wage policy is a century issue. so it's something -- sovereign issue. so it's something governed by a sovereign government. we can discuss whether that is something that is desirable or not, and certainly in the case of mexico, as we will be talking about in the next panel, there is an issue with wages, with the minimum wage policy not being strictly adhered to. but be that as it may, doing this, trying to do minimum wage policy in a trade agreement does not have any kind of enforceability attached to it. and it doesn't

have any kind of political legitimacy either. as i said, this is a sovereign policy issue. this is a government policy issue, which is very politically charged usually. so there's a lot to unravel there, and we'll do that in the following panel. >> the other question about the minimum wage is the fact that it's being done bilaterally. when you think about it, mexico still has to compete with other countries. and by raising its minimum wage, particularly in certain sectors that it may not want to do on its own, just to appease the united states, it puts itself at disadvantage in other areas. there are still many poor areas of mexico t. has its own development agenda, and for the united states to then tell mexican citizens how they're going to develop because of the agreements just with us, it puts them at a disadvantage. it's not like we're all in a multilateral setting talking about how to raise wages for the

world's poorest workers. >> can i add one more thing? think about what trade agreements are supposed to do, right? to lower trade barriers. and right now what we're ending up doing is to add more and more stuff that has nothing to do with trade at all. and we have to ask ourselves for all the people who have that populist backlash against trade, we want to add more stuff in the trade agreement, this is really what we want to do? do we think trade can solve all these problems? no, it can't. and adding all these things that are unrelated to it is not gonna solve these problems that are domestic policy issues. so this is a debate that happens at the domestic level and they should adjust their policies as they see fit, as they want. i wonder if it's even relevant at the global governance level to discuss issues that are so different in each country. so i don't think they should be in the trade agreement at all. >> the final question, do any of you want to address the

mindset of the administration? [ laughter ] ronald reagan which is going around with a lot of people, which is sort of funny because many of them are not republican. where he says it's great that we have a trade deficit tshows how many people -- it shows how many people have faith in america and want to invest in america. so he did understand the counterpart to the current account deficit with the capital account surplus. so i -- there is no one voice in this administration. we have very different voices. in the end, i do believe it will be president trump who makes the decision. and that is partly why i think that we are very likely to get the auto tariffs. with that, let me thank our pans who were very eloquent. [ cheering and applause ]

>> so our second panel is more on the political economy nast and on the specific politics playing out -- nafta, and on the pacific politics playing out on the ground in mech co and canada in relation to the negotiations. and i have two very single digit

wished professors -- distinguished prefer professors here. and christopher fenwho is my -- who was my co-collaborator on this event today. he's the director of canadian studies for those of you who don't know. and let me just kick it off with the question that everybody has in their minds. politics in mexico. and nafta. >> 10 minute, no more. [ laughter ] >> thanks for having us, monica. brilliant and very timely event. in mexico, there's

been what's already been considered revolutionary elections. not only to such presidents, but to the exec branch since 1930. but also simple plural majority in both chambers of the senate and congress. they will be controlled by the left. this has never happened before. in the runup to the change of government in mexico, and there was a question about will it happen before the current government steps down or after, that happens on december the 1st. december the 1st, this left wing coalition, and very s block supported very significantly by a comfortable majority of the mech can electorate will take -- mexican

government will take power. on the american side, one of the main issues -- and someone in the panel mentioned it, one of the key topics that propels mr. trump's presidency was after the worst trade deal ever, ever in the history of human kind. mr. trump has to get something, a piece of paper, a shake of hands with the mexican president to go and be able to show the core base and the floating electorate that he's promised he's delivered. there's no more nafta. even if it's just changing name. the symbolism of that is important for the political electoral calendar and for what's coming in november 6th. so at the end of the day what we have is an outgoing government, the mexican government which is a

neoliberal, pro-washington, pro-free trade, pro imf, pro world bank, they're leaving. they have been in power since the 1980s. in one guise or another. two different parties. center, and center right. they colonized the economic policy establishment, and they made what are known as neoliberal policy basket as something written in stone. for the first time in more than a quarter of a century, that is being culled. that is not written in stone anymore. and there could be changes. radical revolutionary? no. highly, highly unlikely. changes on the margins? certain changes of substance. highly likely. so the outgoing

government is really, really desperate to strike a deal with the u.s. because for this generation of u.s., european trained technocrats, who support neo-political economics and who made it really the bread and butter of economic policy-making in mexico for more than a quarter of a century, the potential of ending up with nothing, the potential with president trump's loss becoming a reality and losing a market for 80% of mexico's exports is catastrophic. so they gave in and we can get into the context, agriculture, autos, different iterations. they gave in in order to simply be able to lock in 80%, 85% of what's on the table and has been on the table the last 24, 25 years. on the size of the u.s., there was the

positive incentive for the current administration about having something at least symbolically tangible. we are delivering. nafta does not exist anymore. now it's going to be called the us/mexico trade deal. or the us/canada/mexico trade deal. it's not nafta. even if 95% of things remain the same. that's the positive. the negative one of course is exactly the incoming left-wing government in mexico. this was a surprise not only to mexicans but also to americans all over the world. the magnitude of the victory by the left has not been really forecast. and therefore the united states suddenly finds itself with the possibility of

having on the other side of the table an antineoliberal, nationalist, not anti-american, but pro-mexicanist, a nationally populist government that wants to have as its no. 1 priority social justice issues. and regarding nafta, of course, there have been winners and losers. we talk a lot about many of the winners. we also on industry no doubt has hurt mexico and propelled its economy very significantly. mexico being the late 1980s was a petrolized economy. not as bad as venezuela. 98% of the tech was with oil. 80%, 85% were. it is

very difficult to imagine or try to go back to those times. today more than 25% of our gdp is mass factory. and the horsepower behind that is the auto industry. so there have been a lot of benefits there for mexican workers, for mexican suppliers. for people who rent land. but there have been very significant losers. and the agricultural side is something that i'm happy to talk about subsequently is one of them. so there's a significant -- that's backing the incoming leftist government and would be happy to see them negotiate things in a sterner fashion than the outgoing government has been. so at the end of the day, we end up with this critical juncture

where these two governments are aware about very significant impending political changes which might jeopardize everything that's been done, not only the last 13 months of negotiations, but in fact the 24, 25 plus years of agreement. >> so we have had sin the negotiations started in august of last year, we had at first all of the very strong rhetoric against mexico. and mexico trades with us unfairly, treats us unfairly, everything is unfair when it comes to mexico. and then all of a sudden this shifted into canada. and it became about canada. so canada is very unfair, canada trades with us very unfairly, we're gonna sideline canada and speak only to mexico. and then we're gonna force canada back to the

table once we have struck a deal with mexico. how this is going down in canada? >> well -- [ laughter ] >> not very well. [ laughter ] >> i think a lot of canadians are a little surprised. they never thought they'd be the villain. they're so nice. [ laughter ] >> and i think it worries them sometimes to think that donald trump may be convincing americans who know canadians pretty well that they are this evil force to the north. that threatens us like southern ontario, a dagger to the heart of america. it's just not the way that canadians are used to being seen or see themselves. so that's the first part of it. the second part of it is you have to give the canadians i think a lot of credit. they're a very mature people in terms of the relationship with the united states. when steven harper of the previous prime minister was in office he started with g w. bush, they were both conservative and liked each other. and then harper had adjust to obama.

they didn't see the world in the same way. but steven harper knew that he had to be pragmatic and deal with the united states. and he did mitt romney well. but he at least tried -- more or less well, but he tried. when trudeau get elected, he had a brief broman with woim, they got -- with obama, they got along really, really well. and according to cheap shots in the press, everyone is gonna do their best for positive, constructive relationships. with the president and this administration. and they maintained that dignified friendly approach all the way through the start of the negotiations and then as the negotiations proceeded. until we approached the 1-year point. it was difficult for trudeau to point to anything that niceness had achieved.

canada was being hit hard with tariffs. they started saying, some deals would not be acceptable and we have to stand up for ourselves. the president accused prime

minister justin trudeau is a liar and traitor and his minions come out. presidential advisors came out and took cheap shots at prime minister justin trudeau. we talk about politics and canadian politics matter and that prime minister justin trudeau was elected in 2013. they adopted a fixed election system. the parliamentary system is expected or all things being equal in 2019 and the problem is that the prime minister knowing he has an election next year is looking at how a nafta agreement will affect him. >> they have been taken too many shots but we are starting to see the electoral impact at

the presidential level. first we saw the election of doug ford. for those of you who remember rob ford. 's brother was mayor of toronto and he is the clean and sober brother. he is not on cocaine but he is a populist as well as a politician and he used the platform now to -- criticize the government and other things. there is a fear among liberals that his next move is to see the audio -- audio -- auto industry is in trouble. he does not have to solve the problem but has to raise the alarm and it is almost to for the media to pass up. quibec has an election on october 4 the day we may not see that but that selection favors

the insertion populist party in the coalition for the future of quibec and not the incumbent party but the election next spring before the federal election in alberta and it has the social democratic government which is behind in the polls to a conservative alternative partner -- party one a former cabinet minister. the political calculus for justin trudeau's bed and that he needs to be firm and fair and come out with a deal because the canadians know how importuned nafta has been to them. they do not understand how the americans can treat them this way. the canadians like us here in the united states and in case you are wondering, i am just from detroit. but, the canadians like us and

they know us well and in some cases like in the u.s. china relations ordinary chinese people see trump and wonder if americans have gone crazy but if you have canadian french that no that the americans are still there friend. they think trump is an aberration. they have managed this so far without it becoming a real disaster for the trees and economy. there is an attempt to boycott american products that did not go well. they are ready to forgive us for trump and the deal that can be arrived at and that is the awkward position of the government and where we find ourselves now.>> thank you. let me explore or dive deeper into another question with both of you. he talked about the shift in mexican politics and how there

is no or there will be very soon in place a government that is very unlike previous or current government which will soon be the previous government in the way they think about policies and they position themselves. you use the word nationalists a few times. it makes one wonder given that the trump administration position is a nationalist position in so many respects and you have the incoming administration in mexico that also has nationalist police -- beliefs in canada does not have nationalist leanings but some provinces might or might start moving in that direction. i wonder if both of you could comment on this. if it takes a while for the nafta deal if

there is one to finally come to fruition, hal -- how do we shift the makeup of the two governments with the nationalistic bend of the u.s. middle -- administration and how does that give us something that makes sense in terms of a pretrade agreement? >> a very good question and substantial pick on the mexican side, prima fascia might appear as if having a strong nationalist and power in the u.s., which has not been the case for a long time, and also having one in mexico, which used to be the case up into the 1980s, it would be the worst for those people who believe in free trade and those who want to build bridges rather than

worlds. when we scratch the surface, the reality is that the incoming government in mexico is quite pragmatic. it is a government that understands that the livelihood of a majority of mexicans and the rate of growth of the economy for the country which has been ready -- very mediocre, not even 2% or at least in real terms but the key issues regarding the promise to deliver social justice and deliver results that close one of the widest gaps in income and wealth distribution anywhere in the world. the country is sadly in the

company with 20 % of countries anywhere in the world. it is in the companies of some south asian companies and many that team -- latin america countries but if this government is going to be successful, it does not believe in the venezuela formula of starting to nationalize return to statism. not even to the middle way house, if you want to call it that way, that brazil or argentina adopted it was not the revolution like venezuela but it was a significant move for the nationalist policy.

in mexico what you have is on one hand a level of rhetoric which is strongly with the majority pick the majority has not seen the benefits of free trade and of this beneficial association with the united states and canada. on the other, you have a country very well acquainted with the current financial crisis. the crisis which took place first and foremost due to the types of nationalists interventional is -- policy such as capital control, licensing agreements, imports and exports, many this portions -- distortions of financial circumstances. in 1976, in 1982, in 1988 and

89 and was signed in 1994 and 95 and we have not seen that since then and the left is aware of it. we do not have and power and ideological left. we have one that is pragmatic, that is focused on delivering and on that being said, the main issue depends on the relationship between the two nationalist. can they get along? 's president elect going to get in president trump's head? the likelihood is very likely because most anyone gets into his head. anyone and everyone.

humans, animals, vegetables, minerals. i think we have to discount that. president trump picked offense with the new mexican president and the prime minister of canada with the president of france and china. the president of russia but for some reason -- thinking about the mexican side, people have thought a lot about the quintessential populist but he is incredibly pragmatic. he runs for the presidency. the first time the presidential race was stolen pick we still don't know about 2006. 2012 was a different story . in the run up to 2018, this is a story of someone when people

started dissecting the electrical result and trying to make sense of how the poorest and the most highly educated mexicans could have voted for this man so people without having completed junior high school voted. is genuine. he will smile, he will talk very, very slowly and it will be difficult to get in his head . someone who has learned the virtues of buddhist peace

because the fiery brand did not catapult him pick the previous two times, previously the first one, he lost a lot of appeals when the conflict said the institutions go to a lot of the middle-class, the educated as well as the poor populist support ended up distancing themselves from him after those pronouncements. after 2006. this is someone who ended up having the staff and people that surround him forced him to mellow out.

is he on medication? his personality is dramatically different from the post 2015 individual. as long as he takes his medicine . it is hard to see him becoming a child and trying to start poking president trump in the eye. >> a very interesting segway. you might not have thought they were connections but there is some in the canadian case. one is institutions. for those of you that don't follow the relations, canada is a small country that is intensely focused on the u.s. because of the trade dependency on the u.s. and security dependency and is relatively isolated on the northern end of the world with one neighbor.

mostly the united states. the united states was always more global, far reaching and they have got along by agreements that set up institutions that take politics out of the management of the relationship. we sound a treaty that created an international commission that looks at management of the great lakes, water quality. invasive species and presidents don't need to worry about that at all. it is coming along below the surface. we have and air defense agreement set up in the early cold war to protect the shared airspace because we feared they would come over north america and we needed the institution. when it is needed it is not necessary to go back to the president -- of the united states as in 9/11 when we

needed to do something because we did not know. the canadians ordered american and canadian fighters to secure the airspace. they were not trying to get around the politics. nafta is the most central institution in the relationship. what is unnerving them is shaking up of something foundational that they thought was settled. if you go back, canadians were more interventionist in the economy and feeling like the smaller partner and they were going to have to intervene and help the companies out. over time, we convinced them to give the protections up in the spirit of free trade. a better speech on the overtures of free trade and help it is helped global growth than anyone. they are telling us our story

back. that dynamic is real. the second thing that we have done that is causing problems -- you are also good-looking and fabulous but imagine you have a good friend growing up who is not so good-looking. you get all the dates or maybe they are not as rich as you are. we all have these in our friendships. if you want to stay friends, you don't bring it up. not that it is not true but it is bedform to rub the other guys face. we operate as if we are equal. we do joint things as partners. this is the kind of treatment mexico would dream of but canada is used to it and it comes as a shock that donald trump -- the u.s. has the upper

hand and get a good deal because canada needs to deal with the united states but it is not usually right to say that which you press.. that leads me to where we go pick i don't think the canadians will be nationalist picked the have a little bit but i think the weakness of the way that we are negotiating is we think we can do a deal, sign it. disagreement and principle that is not worked out and everything will be fixed. after the ribbon has been cut and we declared a new era, they very quietly work to protect their own under the new rules. the president focuses on dairy because it is one of the few products where there is a high tariff. we really have is our

misaligned regulations. we have had, under the clinton administration and bush administration a regulatory dialogue that was getting rid of the barriers. it requires trust and inter- workings between the governments. it is not necessarily going to happen after the agreement signed that leaves canadians not sure they can trust us in the same way. that is where we are going. the gradual unraveling of the open of easy access to canada. i don't mean to say that the canadians are as evil as trump says they are but the government has to look out for canadians and they are competitive in a lot of ways but they will look for ways that they can help their own. that will be to the detriment of canadians and for americans. >> thank you. before i turned to the audience, let me ask the

question about minimum age -- minimum wage. you spoke a lot about this social justice platform. how does this minimum wage requirement that is building into the preliminary agreement in principle, how does that square off with the social justice platform and how does canada respond given that the issue of low wages in mexico has always been a big sticking point for canada? >> very quickly, no one would have ever believed that the nationalists u.s. president will potentially be the champion of mexican workers. he might end up being that. not of all the workers. they supply to the auto

industry but this is the most dynamic sector of mexican manufacturing. if 40 % of the cars built in mexico were to be required to be built by people who earn at least $16 per hour, that would put pressure on all wages. scaled, semiskilled and unskilled. the problem is workers in mexico have -- since the 1980s, i have the financial crisis. they lost a lot of their bargaining capacity. the most important objective for the mexican ended up just clinging by the nails to a formal tool. if you had that you had the privilege.

the population does not have that. the wages in mexico are regulated by a national commission of minimum wages. a typical tripod setting was where the state gets employers and workers to agree on negotiations about the wage. as mentioned given the recipe of the mexican government between the 80s and now and the recipe whereby the mantra was to remain contented of -- competitive and it lies in cheap labor and wages and that has been time and again. the argument made for carrying out what is wage repression. gains in manufacturing since

the early 2010 airspace which has grown significantly and factor that into it. most segments have not seen major improvements in their wages and the great paradox here is a case that needs to be written about and however -- they tried to make wage gains for the affiliates and it is the make or break of this bilateral agreement and the blessing of that from the united states saying if you

don't do it, we walk away. it ends up carrying out a revolution and wages in mexico. incredible.>> is very interesting to watch the u.s. relations. in a funny way, i say this not being an expert, it is a matchup of justin trudeau and donald trump you have this nationalistic man who runs against the establishment who challenges mexico city and champions the people that nafta leaves behind. a man who is a progressive and is concerned about ordinary people and social justice. it is interesting and i think in general it has left the canadians a little uncertain how to deal with the new

government. what justin trudeau can take credit for is repairing mexico canadian relations. contentions over some migration that was unanticipated and coming from mexico into canada which led to a visa requirement that was not received well. a few high profile criminal cases in which canadians in mexico and something happened and they became sympathetic cases where canadians would have concern about the corruption or the rule of law mexico. justin trudeau reached out but he has relatively good relationships but i don't think he knows what to do yet. if we are lucky, one of the things we will get out of it is much better relations. it is the weaker end of the nafta triangle because we were in the middle but two countries are starting to see

that they have common interest. they will improve in the future.>> a positive note is good. let's turn to the audience. we only have a few minutes. michael. >> i am interested on your thought on whether you think the u.s. is a reliable negotiator in the talks and she said she was negotiating and the u.s. has to deliver both congress and the president on any deal.>> let's take a couple. >> let's take three.>> that works because i agree that the minister is eloquent but it is

a strategic question. the united states is the dominant player. did she misplayed her hand by staying away from the tables for so long and doesn't that give credence to the criticism that is been coming from there? >> i have a couple questions. i should preferences saying that i had the two chapters in the new nafta. if it becomes a binding agreement, would not -- that be the agreement? the second question about the tariffs. there is a lot of trade agreements out there and the tires are low and this is one chapter of the trade agreement. are you looking at non-tariff barriers and the impact of removing those? i know it is hard to quantify

the impact but in general, is academia looking at that? my third question is is it worth updating the existing agreements or should we be pursuing a different strategy such as multilateral agreements ? is that better or is it were -- worth looking at the old ones and updating? what would be on your wish list? >> we divided it up reasonably. the first thing is, are we reliable? this is a very unusual negotiation. normally they are the good cops expressing confidence that something good will come out and the negotiators in the background are the tough guys and they work toward it.

of one of the problems now being the web md moment we are in. people go to their doctor and say i have read all of my symptoms, i know what it is. let me explain to you, that relationship between the establishment and the people, people have their own idea of what the agreement is. i think it makes it very hard to negotiate, irrespective of how we behave.

then there is the congressional component. the trade authority bill of 2015 that we are operating under is the most interventionist by congress since the trade act, in terms of oversight. the trump administration, for all the criticism that they are unpredictable has been pretty good about meeting these requirements. the congress, even though it gave itself role in the talk, it has been waiting to see what comes out of it. congress is the x factor. we have seen talk of adding canada back in after the fact. something we haven't seen in quite a time. so i feel the u.s. is not a predictable negotiating partner. we will have to see.

i am hesitant to criticize the way she has conducted the negotiations. she is a very articulate spokesperson. she really knows how to talk about trade then she has been trying to find a way to get the public on her side while negotiating. that said, she is also taking on the bad cop role. i think some of the criticism that has been aimed at her is because of the role she has been assigned. there is evidence that suggests she is gunning for the prime minister's job down the road. that does happen sometimes in parliamentary systems. but i think she is putting her job first and not worrying too

much. >> very quickly, very little on the surface has been revealed. as my colleague mentioned beforehand, whatever it is that ends up being hammered out, whatever agreement, the likelihood is it will be geared toward the u.s., as the u.s. is the strongest party. much more to the u.s. than the other way around. once something is hammered out, you can bet that canadians and mexicans are going to try, not to restore, but to create as good of positions as they can

manage, with the new rules that may be a bit less official than previous ones. they focus on these five elements which usually have less visibility than newswires, newspapers, whatever. i think that extra ammunition is keeping in use. on the minimum wage, you are absolutely right. monica also mentioned this at the beginning of this session. this is a first. therefore there are no pressures to understand how these things work. in the absence of an enforcing mechanism, what the people have been talking about is an agreement that would create conditions where canadian, americans and mexicans would

stay to monitor the wage situation in mexico. the mexican government, even if they commit to it, after-the- fact, they might very well turn to the public and say this is unacceptable. where else's this happening in the world? nowhere else. so, you are absolutely right in saying that organized labor in the u.s. and canada do not trust mexican government and mexican government implementation of policies. of law. for that matter, mexican labor and mexicans in general do not trust what their government implements. that is the multilateralism, rather than by -- rather than bilateral.

mexico has said, they have not given details about this preliminary agreement that they agreed to with the united states. one thing they said is that the same basic provisions regarding paris, as you mentioned about low tariffs, that there was no way that mexico was going to give in to having different conditions from those that they signed up to. or the free trade agreement that mexico has with the european union under the 1999- 2000 agreement. which creates a level playing field, which is consummate, by and large, with the rules.

that is at least what they are saying. >> thank you, both. let me make one observation. i am afraid we will run out of time for questions. on the updating of agreements, rather than going at it regionally. let's step back a bit and remind ourselves that the negotiation or the updating of nafta would have happened naturally had tpp come into effect. both canada and mexico were in tpp and nafta would have been automatically updated, had tpp come into effect. since it did not come into effect, we are in the situation we are in. in principle, when you have agreements that are 24 years old, the economy changes. evidently, updating is needed. there is nothing wrong with updating. it doesn't make much sense to

scratch it all and start from scratch. you already have an agreement. i am sorry that we have run out of questions. this was an extremely interesting panel. i, at least, thought so. i learned a lot. thank you very much for coming. thank you for your time and answers. >> and a great audience. >> a great audience, with great questions. with that, i am calling the adjournment. c-span, where history unfolds daily. in 1979, c-span was created as a public service by america's

cable television companies. today we continue to bring you unfiltered coverage of congress, the white house, the supreme court and public policy events in washington dc and around the country. c-span is brought to you by your cable or satellite provider. here is what we are covering live thursday. the house debates changes to the affordable care act employer mandate. on c-span two, -- on c-span2, the judiciary committee debates the nomination of brett kavanaugh. the foreign affairs committee takes up legislation requesting that the white house and secretary of state turnover all records regarding the meeting between president trump and russian president vladimir putin. in the evening, boris johnson speaks at the american enterprise instite.