NAFTA is finished: It’s time to move on to some­thing new

The Welland Tribune - - Opinion - THOMAS WALKOM Twit­ter: @tomwalkom

Prime Min­is­ter Justin Trudeau’s govern­ment has ruled out re­plac­ing the North Amer­i­can Free Trade Agree­ment with a bi­lat­eral Canada-U.S. deal. It’s the right de­ci­sion. It is be­ing made for the wrong rea­sons.

The ques­tion comes up be­cause Don­ald Trump is mus­ing again. The U.S. pres­i­dent has long said he prefers bi­lat­eral trade pacts over mul­ti­lat­eral ones. He was back at it last week when talk­ing about NAFTA. Maybe he’s se­ri­ous.

Trump says that since Mex­ico and Canada have vastly dif­fer­ent economies, it doesn’t make sense for the U.S. to try fit­ting them into one tem­plate.

In fact, he’s got a point. Trade deals be­tween coun­tries at a sim­i­lar stage of de­vel­op­ment are much eas­ier than those that try to link rich and poor na­tions.

The pact be­tween Canada and the Euro­pean Union is un­con­tro­ver­sial pre­cisely be­cause both are, in the main, ad­vanced economies. No one ex­pects Cana­dian busi­nesses to de­camp en masse to Ger­many, for in­stance. The wage lev­els in both coun­tries are too sim­i­lar.

But when NAFTA came into effect in 1994, peo­ple did ex­pect man­u­fac­tur­ers to re­lo­cate from Canada and the U.S. to lowwage Mex­ico. And that’s ex­actly what hap­pened. For multi­na­tion­als like the big auto com­pa­nies, it was the whole point of the ex­er­cise.

The de­ci­sion to in­clude Mex­ico in what had been, up to that point, a bi­lat­eral Canada-U.S. Free Trade Agree­ment also led to the de­ci­sion to write into NAFTA a chap­ter giv­ing for­eign in­vestors the right to chal­lenge and over­ride do­mes­tic laws.

Known as Chap­ter 11, it was de­signed to pro­tect Cana­dian and U.S. busi­nesses in­vest­ing in Mex­ico from the whims of of­fi­cial­dom in a coun­try where cor­rup­tion is not un­known. In­stead it has been used against Cana­dian gov­ern­ments try­ing to en­force en­vi­ron­men­tal laws and reg­u­la­tions. So why not do as Trump sug­gests? Why not tear up NAFTA and re­place it with sim­pler bi­lat­eral deals?

Canada al­ready has an al­ter­na­tive trade ar­range­ment with Mex­ico through the re­vamped 11-na­tion Trans-Pa­cific Part­ner­ship. And in the­ory it could eas­ily dust off the orig­i­nal 1989 Canada-U.S. Free Trade Agree­ment, which has the virtue of not in­clud­ing Chap­ter 11-style cor­po­rate over­ride pow­ers.

But Ottawa, it seems, doesn’t want to go in that di­rec­tion. Min­is­ters say they are com­mit­ted to three-na­tion talks and plan to con­tinue in that vein. The only of­fi­cial rea­son I can glean is that Canada seems to think it can strike a bet­ter deal with Trump if it main­tains a united front with Mex­ico.

But trade is a com­pli­cated busi­ness. As writ­ten, NAFTA al­ready con­tains asym­me­tries. Un­der the pact, Canada is com­mit­ted to shar­ing its en­ergy pro­por­tion­ally with the U.S. in times of scarcity. Mex­ico does not face that re­quire­ment.

The real rea­son for re­ject­ing Trump’s sug­ges­tion is sim­pler. Whether he’s op­er­at­ing bi­lat­er­ally or tri­lat­er­ally, he wants too much.

If he of­fered Canada a bi­lat­eral deal that met Ottawa’s min­i­mal de­mands — such as in­clu­sion of a dis­pute res­o­lu­tion sys­tem and govern­ment pro­cure­ment rules that weren’t bi­ased in favour of the U.S. — that would be one thing.

But Trump has shown he’s not will­ing to com­pro­mise un­less forced to.

In­stead, he uses what he calls max­i­mum pres­sure to achieve his de­mands. In Canada’s case, this means ap­ply­ing pun­ish­ing tar­iffs on steel and alu­minum ex­ports to the U.S. and threat­en­ing to do the same with au­tos and auto parts.

There is no point in ne­go­ti­at­ing any­thing with a man like this un­less, like North Korean dic­ta­tor Kim Jong Un, you do so with a pis­tol in your pocket.

The Trump-Kim talks over end­ing the nu­clear stand­off on the Korean Penin­sula may get some­where. The NAFTA ne­go­ti­a­tions, whether two-way or three-way, will not. It’s time to ad­mit that this thing isn’t work­ing and try some­thing else.

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