Is the USMCA a good deal for Canadians?
At best, it’s a mixed bag, and changes are needed before ratification
Foreign Affairs Minister Chrystia Freeland claims the tentative United States, Mexico and Canada Agreement (USMCA) is a good deal for Canada. You be the judge.
The good news:
No Chapter 11.
The USMCA eliminates the Chapter 11 Investor-State Dispute Settlement (ISDS) provisions.
ISDS allowed foreign corporations and investors to sue Canadian governments if they believed they were unjustifiably harmed by a government’s laws or policies.
No energy proportionality.
The existing NAFTA Energy Chapter contained a provision that Canada could not reduce U.S. access to Canada’s oil, natural gas, coal and electricity without a corresponding reduction in Canada’s own access to these products.
Improved labour rights.
The USMCA Labour Chapter requires the three partners to uphold fundamental labour rights contained in the International Labor Organization’s Declaration on Fundamental Principles and Rights at Work. The USMCA contains an Annex that commits Mexico to legislative actions to provide for the recognition of the right to collective bargaining for workers.
The USMCA increases the North American content requirement for vehicles to 75 per cent by 2023. When USMCA is fully phased in, 40 per cent of the material and manufacturing costs of an automobile and 45 per cent of a truck will have to originate in facilities where direct production workers have an average hourly basewage of at least US$16 per hour.
The bad news:
Auto sector improvements. Extension of data and patent protections for pharmaceuticals.
Canada caved in under the pressure from the high-powered pharmaceutical industry at the expense of Canadian patients struggling to foot the cost of their medications. Canada agreed to extend data protection for biological drugs from the current eight years to at least ten years. This will result in further delay of manufacturing cheaper generic medications.
Concessions in Canada’s supply managed agricultural industries.
The USMCA opens Canada’s market to more U.S. dairy, eggs and poultry products. In terms of dairy products, this includes products that contain bovine growth hormone (BGH), a genetically modified hormone that is injected in cows to make them produce more milk. BGH has been banned in Canada due to its link to serious health concerns.
Maintaining of tariffs.
The USMCA fails to eliminate tariffs on Canadian steel, aluminum and forestry products. These illegal and unjustified tariffs pose a serious threat to Canadian jobs and communities. The U.S. administration has made it clear that they have the power to override the “free-trade” elements of the USMCA for reasons of “national security.” There is no protection in the USMCA to stop the U.S. from imposing tariffs on whatever it wishes in the name of U.S. “national security.”
The poison pills:
State-Owned Enterprises.
USMCA Chapter 22 classifies State-Owned Enterprises (SOE’s) such as Canada Post, public hospitals, etc., as nonmarket entities subject to restrictions. The USMCA targets SOE’s and demands that they not compete with private sector companies. The USMCA text spells out specific penalties to be paid for noncompliance if a nonmarket entity uses public money to develop an enterprise in the public interest. This has serious implications for the Bank of Canada and the Infrastructure Bank that uses public money to fund major infrastructure projects.
Macroeconomic policies and exchange rate matters.
USMCA Chapter 33 gives the U.S. power over Canada’s currency, government spending and taxation. Canada has agreed to let a tripartite committee monitor its exchange rate and tax policies. Chapter 33 in effect has the potential to undermine the Bank of Canada’s independence.
Article 32.10 Non-Market Country.
This Article will give the U.S. a veto over any future trade agreement between Canada and a nonmarket economy (code name: China). Ottawa now must notify the USMCA partners if it intends to pursue a trade deal with a nonmarket economy. If the U.S. doesn’t like what Canada negotiates, then Canada gets kicked out of the USMCA. By agreeing to Article 32.10, Canada has sacrificed its independent trade and foreign policy on the alter of the USMCA.
The government is urged to do the following prior to the USMC being ratified:
• Renegotiate the extension of data and patent protections for pharmaceuticals to ensure that drug patents are not extended but reduced to five years.
• Chapters 22 and 33 and Article 32.10 be redrafted to ensure Canadian sovereignty and trade independence is guaranteed.
• All existing tariffs imposed by the U.S. on Canadian steel, aluminum and forestry products must be lifted.
• That language be included in the USMCA text to ensure that no tariffs will be imposed by any partner on any product during the life of the USMCA.
Malcolm Buchanan is of the president Hamilton Area Congress of Union Retirees of Canada.