Trump Trade Threats Prompt Canada and Argentina to Get Cozy
By Charlie Devereux and Stephen Wicary, Bloomberg News
Justin Trudeau’s Latin American tour this week was meant to showcase Canada’s long-established goodwill toward its trade partners in the region, crowned by the announcement of a business deal or two, and hopefully give a push to the much discussed and much delayed Trans-Pacific Partnership.
All of that was before Donald Trump was elected president of the United States, casting a shadow over trade alliances throughout the Americas and adding urgency to Trudeau’s effort to break down barriers and boost investment.
“One of the great paradoxes precisely at the moment that the U.S. appears to have less interest in free trade is that there’s more of an appetite for it in Latin America,” said Michael Shifter, president of the Inter-American Dialogue in Washington. “If the United States isn’t prepared to be a serious partner in pursuing that agenda in Latin America, then Canada is likely to step up and fill that role.”
The Canadian prime minister arrives in Argentina Thursday, after visiting Cuba and before heading to Peru for the Asia-Pacific Economic Cooperation leaders summit. He already has an ally at the Casa Rosada: Mauricio Macri.
Like Trudeau, the businessman — who hails from Buenos Aires province — defeated a long-serving incumbent government in elections last year. He is pledging to open up the country after more than a decade of inward-looking policies and his dislike of the U.S. president-elect’s rhetoric has been widely publicized, once describing Trump as a “screwball.” But most important, Macri needs to bring investment back to Argentina quickly in order to kick-start its struggling economy.
Canada has pledged $4.1 billion in investments for the South American nation, about half the amount expected from U.S. companies through 2019, according to estimates by the Finance Ministry. A more protectionist approach in the U.S. could bring that amount down, and leave the door open for Canadian companies to fill the gap.
“A renewed relationship with Argentina will unlock increased trade and investment opportunities for our companies — particularly export opportunities — help grow the middle class, and create jobs,” said Alex Lawrence, spokesman for Canadian Trade Minister Chrystia Freeland, who is accompanying Trudeau.
Canada already has significant investments in Argentina, especially in mining. First Quantum Minerals Ltd. has pledged to invest $3 billion in its Taca Taca gold and copper mine in Salta province, according to the Argentine government. Among the companies accompanying Trudeau on his visit are Toronto Stock Exchange operator TMX Group Ltd.; gold producer Goldcorp Inc.; Canada’s largest construction and engineering company, SNC-Lavalin Group Inc.; and Canada Pension Plan Investment Board and Ontario Teachers’ Pension Plan Board.
Trudeau will meet Macri in the afternoon before attending a state dinner in the evening. On Friday, he will be a guest at a luncheon organized by the Argentina-Canada Chamber of commerce.
In addition to the extractive sector, Canada could also help Argentina with forestry as the U.S. readjusts its trade priorities under a new president, according to Dante Sica, director of Buenos Aires-based economic consultancy Abeceb. “The direction that Trump takes is generating tension and worry that the U.S. will harden and become more protectionist,” Sica said. “They’re an incentive to strengthen bilateral relations.”
Macri had been keen restore ties with the U.S. after 12 years of testy relations under his predecessors Nestor Kirchner and Cristina Fernandez de Kirchner. President Barack Obama gave Macri’s efforts to open up Argentina a boost during a visit in March, describing his counterpart as a “man in a hurry” in his attempts to reconnect the South American nation with the global economy. The two countries are in the process of putting together an accord to strengthen trade relations.
There’s also room for improvement with Canada. The northern nation exported just $210 million to Argentina in 2015, compared with $1.7 billion to Brazil and about $585 million each to Chile and Colombia. While Trump has described the North Atlantic Free Trade Agreement as the worst deal the U.S. ever signed, Canada has just closed a free-trade deal with the European Union and offered to renegotiate its pact with the U.S. and Mexico. Macri, meanwhile, has removed some import barriers and is now pledging to cut tariffs.
“Given the importance of Nafta to Canada, if I was the prime minister I would be looking around for lots of trade options until they settle whether Nafta will be open for discussion,” said Riordan Roett, director of the Latin American Studies Program at the Johns Hopkins School of Advanced International Studies.
One option would be for Trudeau to dust off exploratory talks the previous Canadian government had begun with the Mercosur trading bloc. Launched in 2011 by Freeland’s predecessor, Ed Fast, on a visit to Brazil, the negotiations never got off the ground because of the Argentine government’s protectionist bent, according to Adam Taylor, a consultant at Ensight Canada in Ottawa who worked in Fast’s office.
With Argentina reopening under Macri, Trudeau has a chance to revive that effort and perhaps put another regional free-trade notch on his belt. Doing so would be “a huge win for Canada, for this government and for businesses on both sides,” Taylor said.
Trump’s election in the U.S., Taylor added, gives Trudeau, Macri and their outward looking counterparts an urgent opportunity “to actually set an example, draw a line in the sand, and say no, we reject protectionism, we embrace open borders, we embrace free trade.”