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Trump has singled out Mexico. But some say NAFTA’s real challenge is to the north

US President Donald Trump and Canadian Prime Minister Justin Trudeau shake hands during a meeting in the Oval Office of the White House in Washington, DC, on February 13, 2017. / AFP PHOTO / SAUL LOEBSAUL LOEB/AFP/Getty Images

Many of Donald Trump’s fiercest attacks during the campaign were centered on Mexico, and how our southern neighbor had used the North American Free Trade Agreement to take advantage of us and steal American jobs.

But among some politicians, trade analysts and business people, recent complaints about NAFTA have focused on a different target -- Canada.

The tension was on display last week at a confirmation hearing for Trump's main trade negotiator. One by one, both Democrats and Republicans pressed Robert Lighthizer, Trump’s nominee for United States Trade Representative, about what they described as Canada's transgressions in trade. The senators mentioned Mexico in a much more flattering light, as a major market for U.S. agricultural exports that they pressed Lighthizer to protect.

Lighthizer appeared to largely agree. “There are a number of issues we have to address with respect to Canada,” he said.

The hearing highlighted a contrast between Trump’s attacks on the campaign trail and what many businesses, politicians and analysts say are their real concerns about trade with neighbors. Some argue that, despite the harsh political rhetoric, Mexico has actually been more responsive to addressing U.S. concerns that have arisen under NAFTA – and that Canada is the partner that now needs to step up when it comes to enforcing intellectual property and opening its markets to trade.

Some of these claims may be overblown, and the Canadians certainly have plenty of complaints of their own about challenges they face in the U.S.

“The reality is in almost every aspect of our lives, we work co-operatively with our neighbor the United States of America,” David MacNaughton, Canada’s ambassador to the US, said in January. “Our challenge is that most of this relationship works so well it’s hardly noticed, particularly by many of our friends south of the border.”

Canada is the largest market for the U.S. as a whole, and for most American states. Since the North American Free Trade Agreement went into effect in 1994, the countries have only become more closely tied together, while trade between the U.S. and Canada has doubled.

But at least in the current political climate, many U.S. businesses, politicians and trade analysts seem more willing to complain about irritants in the U.S. trade relationship with Canada than with Mexico.

In Lighthizer's confirmation hearing, long-running complaints about a lack of openness in Canada’s dairy and poultry markets, the pricing of lumber imports from Canada into the U.S., and a lack of rigor in Canada’s enforcement of U.S. intellectual property were on full display.

Sen. Ron Wyden (D.-Ore.) called the conflict over lumber "the longest running battle since the Trojan war." Sen. Orrin Hatch (R-Utah) said it was "well documented that Canada refuses to enforce intellectual property rights for the in transit cargo destined for the United States." And Sen. Tom Carper (D-De.) contrasted Mexico's openness to U.S. agricultural exports with Canada's closed markets.

“Mexico is now maybe out top customer for American poultry in the whole world. And Canada maybe is among the last," Carper said.

“With Canada, the frustration is just that these problems have been ongoing for years, decades, and have not gotten resolved,” said Stephen Claeys, an international trade lawyer and partner at Wiley Rein, who says that the U.S. trade relationship with Canada often takes “a few steps forward and a few steps back.”

“A lot of frustration with Canada is rooted in the fact that these problems shouldn’t be so hard given how much we have in common,” says Claeys.

Chip Roh, a former trade lawyer and the deputy chief negotiator of NAFTA, says that Mexico has made a huge amount of progress in opening its markets under NAFTA, and that it has closely followed the rules of the agreement. However, he said he doesn’t think Mexico is more open than Canada today.

“The Mexican economy is way behind the U.S. and Canadian economy in terms of transparency, openness, development. So I don’t think objectively you could say Mexico is a fairer place to invest,” he said. Yet there have been a few issues about Canada that have persistently bugged U.S. producers for years.

“Part of the problem is the U.S. and Canada are so similar that we find it impossible to forgive ourselves our few differences,” said Roh.

Hatch, the chairman of the Senate Finance Committee, called the degree to which Mexico had reformed its economy under NAFTA "impressive." "Obviously, there is more work to be done to ensure that NAFTA, and all of our trade agreements, are fully enforced and reflect the highest possible standards," he said.

Economists say Canada probably hasn't become a target of the Trump administration in part because Trump and some of his advisers are so focused on trade deficits. The U.S. ran a trade deficit of nearly $50 billion in goods and services with Mexico in 2015, while trade with Canada was more balanced, ending in a goods and trade surplus of $11.9 billion that same year.

This may be why Trump commented in a meeting with Canadian prime minister Justin Trudeau in February that his biggest concern with NAFTA was the U.S. relationship with Mexico, while the U.S. agreement with Canada only needed “tweaking.”

Yet economists argue against Trump's emphasis on trade deficits and surpluses, saying these metrics are now good measures of a trade deal's success.

Douglas Irwin, an economist at Dartmouth, says the Trump administration has been vague in indicating what particular provisions of NAFTA they would like to revise. "The big problem is that they tend to discuss the success or failure of trade agreements by whether we have a trade surplus or trade deficit."

But, Irwin says, "trade agreements don’t dictate that... Trade agreements don’t guarantee you any outcome in terms of the balance of trade."

Trump's complaints about Mexican trade practices come within the context of a campaign that often blamed immigrants, particularly from Mexico, for many of the nation's problems. Trump has been far less focused on America's northern border and the people who may come across it.

Others note that Canada may be catching criticism from senators because, as one of the closest and more peaceful bilateral relationships in the world, the U.S.-Canada relationship is a safe target for political outrage.

Politicians today, especially free traders who previously supported NAFTA, may be hesitant to incite the administration to further action by criticizing Mexico. But with Canada, politicians are confident they can lob a criticism or two without touching off an international incident.

"There is some element of 'It’s always safe to complain about Canada,'" says Roh.