USMCA is a good deal for Canadians Chrystia Freeland is Canada’s Minister of Foreign Affairs
The United States Mexico Canada Agreement (USMCA) is an updated, modernized North American trade agreement that is good for Canada and good for Canadians.
It is the result of Canada being tough at the negotiation table, united at home, and getting the job done.
Canada negotiated hard. We stayed strong, even when some were urging capitulation. We held out for a good deal, and we got a good deal. Canadians can be justly proud of this.
The Canadian Chamber of Commerce, which represents 200,000 businesses of all sizes across our country, has strongly welcomed the United States Mexico Canada Agreement. So has Unifor, Canada’s largest labour union. That is a wellbalanced outcome.
Consider the facts: in the face of possible and widespread disruption to our integrated North American economy, we have protected more than $2-billion a day in cross-border trade and tarifffree access for more than 70 per cent of Canadian exports. Every Canadian whose livelihood relies on trade – which is most of us – benefits from the renewed certainty.
This agreement is good news for the hundreds of thousands of Canadians who work in the auto industry, and indeed for all Canadian workers. That’s because the agreement preserves crucial cross-border auto supply chains, and improves wages and labour rights for Mexican workers, which levels the playing field for workers here at home. The car industry now has stability and room to grow and thrive.
This agreement is good for Canadian exporters. It preserves Canada’s preferential access to the U.S. market, while updating and modernizing the agreement for the 21st Century, in areas such as digital trade, telecommunications, and anti-corruption. These changes have not been headline news, but they will make a real difference to Canadian businesses, by making trade easier.
Together with CETA in Europe and the CPTPP in the Pacific, the USMCA means Canada now has tariff-free access to 1.5 billion consumers around the world. For a nation of traders and exporters, this represents an enormous opportunity.
In a relationship like that between Canada and the United States, where one partner is economically so much larger, rules matter. And we need to make sure the rules can be enforced. The USMCA retains, in its entirety, the impartial dispute system – an independent tribunal that judges disagreements – which Canada fought so hard to include in the original NAFTA. These tribunals are what our forestry workers have long used to protect their jobs from unjust trade actions. Keeping them was essential. It was hard to do. But we did it. And that is a win for Canada.
And, the agreement helps strengthen Canada’s identity and culture, and an independent Canadian media. The cultural exemption, which helps safeguard 650,000 jobs in cultural industries, has been protected.
The USMCA is good for Canadian farmers. It preserves tariff-free access to the U.S. market for Canadian ranchers and grain farmers. And it maintains supply management in dairy, eggs and poultry. With CETA, CPTPP and the USMCA moving forward, supply management is preserved.
Changes to the dairy sector are roughly in line with changes made in CETA and CPTPP, and we will fully and fairly compensate our farmers. The government is establishing a working group, in partnership with the dairy industry, to ensure its vitality long into the future.
The USMCA is good for Canada’s energy sector. The existing NAFTA contained a clause that infringed on Canadian sovereignty by preventing our country from controlling where we sell our energy resources. That clause is gone. The sector will also benefit from administrative improvements that will save the energy sector more than $60 million a year in duties and other fees.
And this agreement is good for the environment. It contains a new environment chapter, with strong, enforceable standards for clean air and water.
In the same vein, the USMCA supports women’s rights and minority rights. Indeed, the labour chapter contains the toughest enforceable measures upholding gender and minority rights in any Canadian trade agreement.
Likewise, this agreement is positive for Indigenous peoples. The renegotiated NAFTA contains language that recognizes and upholds the unique role of First Nations, Metis and Inuit in protecting and preserving the environment.
Perhaps one of the achievements I’m most proud of is that the investor-state dispute resolution system, which in the past allowed foreign companies to sue Canada, will be gone. This means that Canada can make its own rules, about public health and safety, for example, without the risk of being sued by foreign corporations. Known as ISDS, this provision has cost Canadian taxpayers more than $300 million in penalties and legal fees.
The road to a successful agreement in principle with the United States and Mexico was not easy, or free from drama. Nor is any deal of this kind ever perfect. That’s the nature of negotiations.
As Canadians take stock and move forward, we can rest assured of one thing: Team Canada, including key players from across the country and from across the political spectrum, maintained a united front.
We hung together. We stayed strong. And we succeeded.
This article was originally published on The Conversation, an independent and nonprofit source of news, analysis and commentary from academic experts. Disclosure information is available on the original site.
Now that the threat of the Nafta-pocalypse has lifted for Canada, the Monday morning quarter-backing is well under way on whether the new United States-mexico-canada (USMCA) Agreement is better or worse than trade pact that preceded it.
But beyond the negative headlines, the USMCA probably leaves Canada stronger than it was going into the negotiations when it comes to future trade negotiations.
Three components of the deal, however — those surrounding dairy, the non-market economy clause and the new sunset provision — are worth reviewing for how they change Canadian trade politics both domestically and globally.
Dairy
Canadian dairy farmers have long been largely untouchable politically. That may now be changing, and they should expect to have their market access further eroded in future trade agreements.
In the short run, U.S. President Donald Trump was probably the best thing that ever happened to them. His disdain for Canadian dairy caused Canada to close ranks to support supply management even though it was already under intense scrutiny domestically as well.
An important turning point came with a seminal 2012 research
paper. In the report, author Martha Hall Findlay argued that the 1970s version of supply management was outdated, unjustified, was enriching dairy farmers on the backs of middleclass and low-income consumers and interfering with our trade agenda.
When Trump demanded dairy concessions, it not only solidified but calcified support among politicians for a system in Canada that was otherwise losing ground. Nonetheless he probably only delayed the inevitable.
The number of dairy farmers actually in the system is down about 90 per cent since supply management’s start in the early 1970s to around 11,500 from about 140,000 in the late 1960s and early 1970s, and they have been a key irritant in nearly all of the country’s trade negotiations.
The political power of Canada’s dairy farmers rests on a crumbling consensus about the value of supply management. The Institute for Research on Public Policy recently found many Canadians supported dismantling the system.
Nearly every other country has phased out similar supply management systems. With Canadian concessions in the Trans Pacific Partnership (TPP) with the Pacific rim, the Comprehensive Economic Trade Agreement with the European Union (CETA) and now the USMCA, it seems likely that supply management is something that will be increasingly bargained away.
Despite the promise of compensation from Ottawa, the industry needs to prepare now for long-term liberalization.
Section 32.10
Probably no section of the new agreement has raised as many eyebrows as Section 32. It compels each of the three parties to
notify the others three months before they start trade negotiations with a country defined as having a “non-market” economy — namely, China.
A trade pact’s text must be disclosed within 30 days of signing it for review by the other two USMCA partners. If the other two countries don’t like it, they can kick that country out of the USMCA.
The provisions have been erroneously reported as giving the United States a veto over Canadian trade policy. It doesn’t (but don’t take my word for it, go ahead and read it).
Further, given that under Section 34.6, the USMCA allows for withdrawal on six months’ notice from any country for any reason at all, the clause is more political than legal. Even without the China clause, if the U.S. doesn’t like Canadian trade policy, it can just leave the USMCA under 34.6.
So who wins with this largely symbolic provision? Trump, for domestic reasons. The president can present this to his protectionist base as part of his wider trade war on China. This gives him a win as both the mid-term elections and 2020 loom.
But longer term, Section 32 may actually serve Mexico’s and Canada’s interests more than America’s. It symbolically ties the U.S. tightly to the USMCA by linking its global anti-china ambitions to the trade agreement. That’s not a bad thing for Canada from a trade perspective.
Why?
‘Political cudgel’
Presenting the USMCA to the world as a common front against China — the American intent with Section 32 — means abandoning the trade agreement is now more difficult for the United States. Any future threat to kill the agreement from
But beyond the negative headlines, the USMCA probably leaves Canada stronger than it was going into the negotiations when it comes to future trade negotiations. Three components of the deal, however — those surrounding dairy, the non-market economy clause and the new sunset provision — are worth reviewing for how they change Canadian trade politics both domestically and globally.
Washington (and it won’t come from anywhere else) can now be framed by supporters of the USMCA as being weak on China.
That will likely reduce any chance it will be scrapped, which benefits Mexico and Canada.
The agreement comes up for its first mandatory review in six years to decide whether it should be extended. At that time, Section 32 provides a political cudgel to Ottawa and Mexico City to remind the United States that the USMCA helps to cement their global leadership against countries it views as strategic competitors.
There was no similar provision in NAFTA, but if there was, there’s no doubt it would have helped us at the bargaining table.
Does this risk our relationship with China? Not likely. Remember, we’re nowhere near a trade agreement with China anyway given very different perspectives on environment and labour standards.
But that doesn’t mean there aren’t options, and Canada has every right to pursue an agreement if we want. Mexico has already told China that it doesn’t see the USMCA as hindering any future agreements. Canada can and should do the same.
Canada can also use the USMCA to its advantage with China — a country many times its size. While NAFTA was in doubt, Canada was in a weaker position negotiating with China.
Now, by fully securing continental trade, Canada can leverage its more secure position at the bargaining table to more credibly insist on a deal that works for North America.
Sunset clause
The U.S. walked back its insistence on a five-year sunset clause on NAFTA. Now, the USMCA technically expires every 16
years, unless all parties commit to renewing it after the first six years.
Failure to do so will lead to an automatic expiry after 10 years, but with meetings held annually to work out the differences. The parties meet every six years otherwise to review the agreement.
Again, there is less here than meets the eye. The agreement can theoretically be terminated on six months’ notice anyway. But this process has some potential upsides for keeping the deal up to date.
Overhaul was long overdue
Drama aside, there was nothing wrong with updating NAFTA. It was time; the agreement was 24 years old and included nothing on topics like the digital economy. Yet there was scant motivation by its three members to overhaul it.
We shouldn’t wait for a crisis to break out every quarter century to review our most important trade agreement. The technical expiry dates of the USMCA can and should be used to make regular changes that will keep the agreement fresh and remind all three countries of its importance to their economies.
That means we may end up with a better, more flexible USMCA.
To summarize, the USMCA, while imperfect, is overall a positive development for Canada. It has a number of structural elements that may very well leave us stronger when negotiating trade pacts in the future. This article is republished from The Conversation under a Creative Commons license. Disclosure information is available on the original site. Read the original article: https://theconversation.com/ how-the-new-usmca-strengthens-canadain-future-trade-deals-104814