Throwing Canada Under the Bus

I often stated, 'One way or the other, Mexico is going to pay for the Wall.'This has never changed. Our new deal with Mexico (and Canada), the USMCA, is so much better than the old, very costly & anti-USA NAFTA deal, that just by the money we save, Mexico is paying for the Wall!

Trump Tweet, 12/13/18

So, Donald, that means you do not need to get money from Congress for your wall, because Mexico is paying for it, right? How exactly do you get that in a useable form, cash for the wall, based on the expected value to… er… the American business community? There doesn’t seem to be any other request from Trump to Mexico, according to that country’s new President Andres Manuel Lopez Obrador, for any such “wall cash.” How does our federal government get that some of that trade-correction money to apply to the wall? There doesn’t seem to be any mechanism to do that. Does that mean any positive shift in any trade agreement is effectively funding the wall?

Is Canada also paying for the US/Mexican border wall, since they are part of the same US-Mexico-Canada Agreement (USMCA), otherwise known as NAFTA-lite? If we are able to negotiate a better trade agreement with China, is China also paying for that wall? Oh, I see, “alternative facts.” We simply “say” Mexico is paying for the wall when, wink-wink, when we know they are not. When you are preaching to a relatively unsophisticated “base,” they have no way of running the numbers to verify that Trump’s statements are simply wrong. They see more dollars coming into country that they believe is because of the President’s self-proclaimed excellence at negotiation, that somehow Trump is getting needed “wall cash.” Shut the federal government down over this?

And exactly how are those 90-day trade negotiations going with China? The moratorium on tariff increases expires on March 1, 2019. Trump points to a recent purchase of American soybeans by Chinese authorities, representing roughly ten percent of past levels, as evidence of wild success: “China resumed buying U.S. soybeans, bringing some relief to farmers in America’s heartland as Chinese President Xi Jinping works toward a trade deal with President Trump.

“The world’s largest consumer of the crop bought 1.5 million to 2 million metric tons of American soybeans over 24 hours, with shipments expected to occur sometime during the first quarter, the U.S. Soybean Export Council said, citing unidentified industry sources…This is the first significant purchase since the two countries began imposing tit-for-tat tariffs, with China slapping a 25% retaliatory levy on American soybeans after Trump imposed duties on billions of dollars’ worth of goods from China…

“But Thursday’s [12/13] news didn’t impress the market. Soybean futures fell.” Los Angeles Times, December 14^th. Remember, we are talking about massive theft (billions and billions of dollars) of U.S. intellectual property that has no remedy in sight and hundreds of billions of fundamental trade imbalance. The above soybean order is still mired in “millions.”

The bottom line remains: if Chinese President Xi Jinping were to make massive trade concessions to America, he would be committing political suicide. So Trump will have to exaggerate even small concessions, which will absolutely occur (like in the automotive sector), as the greatest deal in history. We have to remember that the last 100-day trade negotiation moratorium between the U.S. and China produced nothing.

The games being played by the China and the United States to needle each other over trade concessions are most interesting. My December 7^th blog, Espionage, Iran and a Mystery Arrest, tells of a U.S. arrest warrant for the Chief Financial Officer, Ms. Meng Wanzhou,  of Huawei, a huge PRC global telecommunications equipment and services provider, recently passing Apple to become the second-biggest smartphone maker after Samsung. Huawei is one of China’s proudest achievements, particularly since its founder, Ren Zhengfei, is himself a former People's Liberation Army officer. Did I mention that Ren just happens to be Ms. Meng’s father? The warrant apparently addresses Huawei’s and Meng’s violating recently reinstated U.S. sanctions against Iran… sanctions China considers to be illegal since the U.S. did sign the U.N.-sponsored six-party Iran nuclear accord, accepting a removal of most of those sanctions, then withdrew and reneged.

Meng lives part-time in Chinese-friendly Vancouver, Canada, and of course, that required U.S. feds to ask Canada to extradite her pursuant to a U.S.-Canadian treaty. Canada complied. Then came the bail hearing (pictured above), since even with millions of dollars of major real estate in Vancouver, mega-billionaire Meng’s family would consider that a drop in the bucket. Meng got bail. But China still railed, as the December 7^th blog describes, claiming “human rights violations.” Canada said that the extradition request was merely the implementation of an ordinary criminal complaint, not a political effort.

China was clearly not amused. But instead of taking their ire out on the United States, China focused instead on Canada. China began by taking high-ranking Canadians, not subject to diplomatic immunity, into custody. First, they detained a former Canadian diplomat, Michael Kovig, now working in Hong Kong as the North East Asia senior adviser for the International Crisis Group, a Brussels-based non-governmental organization, as he traveled through Beijing. 

The same day, a second Canadian, “Michael Spavor was taken into custody Monday [12/10] after being questioned in the country’s northeast, near the border with North Korea, Foreign Ministry spokesman Lu Kang confirmed.” Los Angeles Times, December 14^th. Spavor runs a cultural exchange program with North Korea and was responsible for bringing American basketball star, Dennis Rodman, into North Korea.

On December 20^th, PRC authorities announced the arrest of a third Canadian, Sarah McIver, an English teacher who received administrative punishment for illegal employment. It is not clear that this third detention is related to China’s retaliatory efforts over the extradition battle. Relations remained strained, nonetheless.

“Canada’s arrest of Meng Wanzhou, the daughter of one of China’s most prominent tech billionaires, Ren Zhengfei, infuriated Chinese officials. But Beijing’s tone has been noticeably more confrontational with Canada than with the U.S., which requested her arrest so that she could be extradited to face fraud charges related to U.S. sanctions on Iran. She was freed on bail Tuesday [12/11] but ordered to surrender her passport and remain in Vancouver, where she has two homes.

“Lu was vague when asked whether the apprehension of the men was retaliation for Meng’s arrest… ‘As for Canada’s wrongful detention of Ms. Meng Wanzhou, we have made clear our position. As for these two Canadian citizens who have been taken [under] compulsory measures by China’s state security authorities, I can assure you that the Chinese side will act in accordance with laws and regulations,’ he said.” LA Times.

Canada was a much easier target for China than a direct confrontation with the U.S. Contradicting Canadian P.M. Justin Trudeau’s statement that this was nothing more than a run-of-the-mill extradition request, Donald Trump threw Canada under the bus: “Confirmation that two Canadians are in custody has added to suspicions that the men were targeted in retaliation for Ottawa’s role in Meng’s arrest. Chinese officials see the arrest as a part of the Trump administration’s efforts to block Huawei’s advance and to contain China’s rise as a major technological rival to the U.S.

“Canadian officials maintain that Meng’s detention was simply a matter of legal process under the nation’s extradition treaty obligations. But President Trump undercut Canada’s position Tuesday [12/11] when he suggested Meng’s case could be used as a bargaining chip in the trade negotiations.

“Canadian Prime Minister Justin Trudeau responded sharply to Trump’s statements, saying, ‘Regardless of what goes on in other countries, Canada is, and will always remain, a country of the rule of law.’…Canada’s foreign minister, Chrystia Freeland, said Wednesday that any country seeking an extradition order should ensure the process is not politicized…

“The editor of the [PRC] state-owned Global Times newspaper, Hu Xijin, posted a video on the newspaper’s website Wednesday warning that China would ‘definitely take retaliatory measures against Canada” if it did not release Meng.

“He said that if Canada extradited Meng, “China’s revenge will be far worse than detaining a Canadian.’… Hu said Canada should not be drawn into tensions between China and the U.S. ‘but should try to remain neutral.’” LA Times. Ugly just got uglier. Like Trump cares about Canada and Trudeau anyway.

              I’m Peter Dekom, and aren’t you gratified that our trade policies are in such capable and experienced hands?