Binyamin Appelbaum of the New York Times, reporting on the somewhat contentious formal opening of talks, noted that during the opening back and forth “the overarching issue” of disagreement was “the importance of trade deficits.”
The United States buys more goods made in Canada and Mexico than they buy from us, and US Trade Rep. Robert Lighthizer, the highest-ranking American official at the talks, said such deficits “can’t continue.”
Canada sent Freeland, a senior cabinet minister, to attend the talks and say that “Canada doesn’t view trade surpluses or deficits as a primary measure of whether trade works,” thus aligning her country with the view of the vast majority of experts who’ve looked at the issue. Even if America’s trade were perfectly balanced (and there’s no particular reason to think that it should be) there’s no reason to think that trade between any two countries in particular should be balanced.
Indeed, even as Canada runs a trade surplus with the United States (primarily because America, being adjacent to Canada, is a good export market for Canadian natural resources) it runs an overall trade deficit with the world (primarily because its population growth rate, like America’s, is above-average for a rich country).
But more importantly, as Phil Levy of the Chicago Council told my colleague Zeeshan Aleem, “there is no mechanism” for a trade deal to guarantee a bilateral trade balance.
If Trump wants to brag that he got Canada and Mexico to agree to incorporate reducing trade deficits as a stated objective into the treaty, then this is something they can give him essentially for free. Lighthizer’s opening statement also demanded “effective provisions to guard against currency manipulation.” This was hotly debated in the context of the Trans Pacific Partnership but is totally meaningless in terms of a trade deal with Canada and Mexico — both of whom (like the United States) float their currencies on international markets and don’t do any manipulation.
