Canada should not be satisfied with just tweaking NAFTA
Canada’s Liberal government says it wants only minor changes to the North American Free Trade Agreement. Prime Minister Justin Trudeau talks of “modernizing” the 23-year-old pact while leaving the fundamentals intact. Foreign Affairs Minister Chrystia Freeland has said her government’s aim in NAFTA renegotiation talks is to make “what is already a good deal even better.”
In fact, as the Liberals themselves used to acknowledge, there is much wrong with the pact linking the U.S., Canada and Mexico Why are the government’s current aims so modest?
True, the Liberals do call for some useful changes. In particular, they would add labour and environmental rights to the text of the agreement. Done correctly, this might make it easier for low-wage workers in Mexico to form legitimate unions.
Freeland also wants new chapters on gender and Indigenous rights, although she is vague about what exactly these
additions would be expected to accomplish.
Other proposed Liberal reforms — including harmonizing regulations across North America and limiting the ability of provinces and municipalities to favour local suppliers — are simply wrong-headed. They might make trade more efficient. But they would do so at the expense of jobs and political sovereignty.
And they would almost certainly end up being applied unevenly. U.S. states and cities are not likely to give up the right to boost their local economies through “Buy America” rules.
Missing from the Liberal agenda are promises to kill parts of the current deal that are clearly bad for Canada.
One of these is Chapter 11, which allows foreign investors to challenge before nonjudicial trade panels, any laws and regulations — including environmental rules — that interfere with their corporate profitability.
The Liberal government says it would tweak this so-called investor-state dispute settlement mechanism — which has been used successfully several times against Canada. It should be eliminated entirely.
Another NAFTA provision that deserves to go is the one that requires Canada to share its oil and gas with the U.S. during energy shortages. The Liberals vocally opposed this during the original NAFTA talks of the ‘90s. They don’t talk at all about it now.
Instead, the Liberals are making their stand on Chapter 19, a provision that allows NAFTA governments to challenge one another’s trade penalties before an independent panel. Trudeau has called it essential. But is it?
As written, this chapter simply requires each NAFTA member to follow its own trade laws. When the Americans have been ruled against in such cases they have sometimes acquiesced. But at other times, they have simply ignored the ruling.
The Liberals used to understand the limitations of Chapter 19. In the original NAFTA round, they criticized the then Conservative government for not coming up with a more robust solution to unfair trade penalties. But now, it seems they are ready to claim victory if the current second-best solution survives.
Certainly, the Canadian government could take a bolder approach to these talks. A brief presented to the government this summer by Unifor, the union representing autoworkers, contains some good ideas. Here are two.
First, Ottawa could suggest replacing free trade throughout North America in autos and auto parts with some kind of managed trade where production in each country is linked to sales. This would forestall the exodus of good jobs from Canada and the U.S. to low-wage Mexico. That would appeal to U.S. President Donald Trump. It would also benefit Canadian workers.
Second, Ottawa could insist on provisions that permit government to establish new public programs without fear of running afoul of NAFTA. This is not a trivial matter. In 1991, Bob Rae’s Ontario New Democratic Party government abandoned plans to introduce public auto insurance in part because of fears of a NAFTA challenge. It would be tragic if NAFTA were allowed to derail, say, a national pharmacare program.
In short, I am puzzled that the Liberals — who in 1988 vociferously opposed the first iteration of Canada-U.S. free trade - are so sanguine about its successor. NAFTA may not be, as Trump likes to claim, the worst deal ever. But it is not a good deal for Canada. It never was.