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Mexico just passed China to become America’s largest trading partner. Here’s why Canada is lagging behind

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Mexico leapfrogged China last month to become the largest American trading partner while the U.S. continues its efforts to “friendshore” its trade and decouple from the Chinese economy. 

And even though Canada was the top trading partner of the U.S. until 2014, experts say that Canada will have trouble competing with Mexico’s larger population and cheaper labour.

Several factors have contributed to Mexico’s rise as the top U.S. trading partner, including the demographic advantage of the Mexican market, with over 126 million people compared to Canada’s 40 million, and the composition of trade in sectors like the auto industry, says Christopher Sands, the director of the Wilson Center’s Canada Institute in Washington. 

“Canada has been an auto parts supplier for a long time. It’s very good at what it contributes in terms of final assembly and auto workers and skilled work,” says Sands. “The problem for Canada in auto has been relatively high wages. The Canadian unions have been more strike prone, a little more militant than the American unions.” 

China had been the largest American trading partner since 2014, when it overtook Canada, whose trade surplus with the United States declined by $2 billion from April to May this year, bringing it no closer to reclaiming the top spot on the list of U.S. trade partners. 

Manufacturing in the North American auto market is spread across all three of the continent’s countries, and has been for almost a century. 

The hourly wage of full-time workers at two Ontario paint shops for automobiles is approximately $27.19 USD. Auto workers in Ohio make as little as $16.50, while auto workers at a plant north of Mexico City can earn less than $9 for a whole day’s work. 

“Mexico’s an attractive place to put your capital so, they’ve been building and building, and some of that’s coming from China, some of that’s new growth,” says Sands. “That makes it harder for Canada, which is still a little bit more expensive on the hourly labour and requires the same amount of capital to build a facility as you would in Ohio or anywhere else.” 

In addition to friendshoring, U.S. President Joe Biden’s Inflation Reduction Act, which passed in 2022, included heavy subsidies for industries like auto-manufacturing to place their operations in the U.S., threatening to erode Canada’s appeal as a destination for investment. 

Jonathan Berkshire Miller, the director of foreign affairs, national security, and defence at the Macdonald-Laurier Institute, says that the U.S. government is not trying to deliberately antagonize Canada. 

“It’s not necessarily the United States saying that they don’t want to be privileged trading partners with Canada versus Mexico, but we just don’t have the price competitiveness, we just don’t have the comparative advantage in certain sectors,” says Miller. 

Rafael Fernández de Castro Medina, the director of the Center for U.S. Mexican Studies at UC San Diego, says Mexico’s growing trade with the U.S. is a byproduct of the decoupling with China, rather than a meticulously planned objective by Biden, who Fernández de Castro says has other priorities. 

“Mexico nowadays, under Biden, has not been an important player for Washington” says Fernández de Castro. “Biden talks about a North American vision, but there’s no vision out there, he has no outline on what is at issue.” 

Fernández de Castro says the relationship between North America’s three countries is similar to the Cold War era when countering the Soviet Union and the spread of communism was a greater priority for the Americans. 

“Washington was fairly negligent towards its neighbours, because it had higher priorities. And now it has higher priorities with China, Ukraine, and domestic political polarization,” Fernández de Castro.

Sands says another contributor to the lagging growth of Canada-U.S. trade is energy, which has been affected by what Sands says is Canada’s limited capacity to ship oil south. In 2018, Canadian energy accounted for over 25 percent of all U.S. imports from Canada. 

Specifically, Sands mentions the Keystone XL pipeline project’s cancellation in 2021 and the legal threats to the Enbridge 5 pipeline from Michigan on environmental grounds. 

“(Oil) prices are still relatively high, so you can get a good return on it, but there’s just an upper limit on what you can ship in terms of natural gas,” says Sands. 

Since 2018, Mexico’s government has been led by Andrés Manuel López Obrador (often referred to as AMLO), an outspoken populist and nationalist, who has deployed harsh rhetoric towards the U.S. regarding issues like immigration and endorses ending American energy imports. 

However, Sands says Mexico has benefited from the U.S. efforts to decouple from China in recent years, even if it is for reasons AMLO dislikes, such as the competitive advantage of Mexico’s comparatively low-wage labour. 

“Mexico’s a very young country. You can scale up young people for working in manufacturing, and they’ve got the kind of stable economy where it’s possible to invest in the latest robotics,” says Sands. “Because it’s greenfield, you’re often building without having to deal with legacy workers or an old plant and have a union conversation about how we’re going to go forward.” 

New manufacturing facilities have been springing up across Mexico over the past few years, producing products like plastics, medical technologies, and high-end electric vehicles for Tesla.  

“You can tell that every single industrial park in Mexico business is getting busy,” says Fernández de Castro.

Canada is described as possessing an advantage in certain sectors like the auto industry due to its extensive infrastructure for the sector, but the Canadian government has still controversially been providing tens of billions of dollars in subsidies for EV manufacturing plants in cities like Windsor and St. Thomas. Proponents of the subsidies say they are necessary to ensure Canadian participation in the EV production industry. 

Both Ottawa and Nova Scotia’s provincial government contributed roughly $100 million in subsidies to ensure Michelin built an EV tire plant in the Atlantic province, which was announced in March. Nova Scotia’s minister for economic development stated that the subsidies were required for the province to outcompete alternative sites elsewhere in the world.

Canada’s strange connection to the U.S. UFO hearings

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The U.S. Congress heard last week that the American government possesses “non-human biologics,” presumably alien life forms recovered from fallen spaceships.

And the incredulity of the U.S. lawmakers was tempered by the fact that they were hearing from three apparently credible witnesses, including retired United States Air Force Major David Grusch, who was part of the Pentagon’s Unidentified Anomalous Phenomena (UAPs) task force.

Among the claims made by Grusch at the congressional subcommittee investigating the issue were that the U.S. has been collecting UAPs for decades and that the program is beyond congressional oversight and funded by misappropriated funds. Although Grusch said he hadn’t personally seen any UAPs, he told lawmakers that his comments were based on interviews with dozens of witnesses.

Along with Grusch, other Americans with a “longstanding track record of legitimacy and service to this country,” have reported their own UFO/UAP sightings or signaled publicly that they’ve seen enough information so as to take them seriously. One of them was former President Barack Obama, who, when asked about the potential existence of UAPs and the U.S. government’s knowledge of them, noted that “there is footage and records of objects in the skies that we don’t know exactly what they are.”

A recent Pentagon report found little evidence of alien activity on Earth, but didn’t rule it out, either. More likely, the Pentagon believes, the reports are caused by optical illusions, drones, balloons or the lights from commercial airlines.

Lawmakers on the committee said it was an urgent issue to solve because, whether the sightings were alien activity or a rogue civilian drone, they could interfere with air travel and military activity.

But where does Canada fit into all this? Over the past few years, sightings of UFOs in Canadian airspace have become common.

According to Chris Rutkowski, with Ufology Research based out of Winnipeg, in Canada alone there were 768 UFO sightings in 2022, which is equivalent to two reported sightings per day. In an interview with the CBC, Rutkowski estimated that roughly 13 percent of sightings couldn’t be explained by natural phenomena.

To Canada’s former defence minister, Paul Hellyer, none of this would have come as a surprise.

Hellyer served as Canada’s minister of national defence under Lester B. Pearson from 1963 to 1967 and is widely recognized as the man who orchestrated the controversial unification of the Canadian Armed Forces. But, to some, he is better known as the first member of cabinet rank from a G8 country to publicly claim the existence of extraterrestrial life and UAPs.

While acting as defence minister, Hellyer mostly ignored reports of UAP sightings, stating in an interview with Vice in 2013 that he was “too busy unifying the Canadian Armed Forces to be able to worry about them.” However, as reports of UAP sightings began to pile up, Hellyer had trouble ignoring them comfortably.

After reading The Day After Roswell, a book claiming that the U.S. government covered up a UFO crash in 1947, his agnosticism dissolved into curiosity and partial belief. In the early 2000s, Hellyer was introduced to a United States Air Force general who encountered UAPs in his career. As Hellyer put it, the general greeted him by saying, “Every word of [The Day After Roswell] is true, and more.”

Hellyer claimed the general told him that there have been numerous occasions when U.S. government officials have been face-to-face with alien life forms. Shaken by the supposed lack of transparency from the U.S. government, Hellyer decided to go public with his newfound beliefs.

Until his death in 2021, Hellyer was adamant that aliens and UAPs existed and claimed so publicly since the early 2000s but no government, person, or respected organization on the planet had physical and publicly available proof of alien life, leaving most people skeptical of Hellyer’s argument.

He was seen as a conspiracy theorist; Maclean’s called him a “crazy person” in a 2015 article before he made his way around the country on the Disclosure Canada Tour to discuss “Earth’s cosmic Watergate.” After all, Hellyer said that there were up to 80 different alien species that have visited Earth, the proof for which was nonexistent.

The testimony given at the recent subcommittee hearing was reminiscent of the claims that Hellyer made, including that the U.S. government has been operating with utmost secrecy in relation to UAPs and that the U.S. government has been recovering large pieces of destroyed unearthly crafts for decades.