Robin V. Sears

What a Dif­fer­ence a Decade Makes: Free Trade at 30

Policy - - In This Issue - Robin V. Sears

Jac­ques Delors, the for­mer French so­cial­ist fi­nance min­is­ter who was the most ef­fec­tive head of the Euro­pean Com­mis­sion since the Euro­pean Union’s cre­ation, and who al­most sin­gle-hand­edly cre­ated the world’s mod­ern free trade agree­ment, spoke to the Bri­tish Trades Union Congress in Septem­ber 1988. In a pow­er­ful ad­dress about the ben­e­fits of the EU Sin­gle Mar­ket agree­ment to the Bri­tish union lead­ers, he out­lined the ben­e­fits of the 200-mil­lion strong free trade area to Euro­pean pro­gres­sives: tougher labour stan­dards, health and en­vi­ron­men­tal reg­u­la­tions, a level play­ing field across the whole of Europe for the small­est com­pa­nies and coun­tries.

Across the ocean a month later, a his­tory-mak­ing cam­paign de­bate took place among the lead­ers of Canada’s three fed­eral po­lit­i­cal par­ties. Lib­eral John Turner scored heavy blows against Prime Min­is­ter Brian Mul­roney, claim­ing that the Oc­to­ber 1987 free trade agree­ment be­tween Canada and the United States would “erase the bor­der” sep­a­rat­ing us. “I be­lieve you have sold us out,” Turner told Mul­roney in the defin­ing mo­ment of the de­bate. NDP Leader Ed Broad­bent was sim­i­larly harsh in his cri­tique of what was widely seen by pro­gres­sive Cana­di­ans as a blow to our sovereignty.

Partly as a re­sult of Delors pow­er­ful ad­vo­cacy, Euro­pean so­cial democrats were con­vinced of the ben­e­fits to so­cial jus­tice of a broad agree­ment on trade and in­vest­ment. Their Cana­dian cousins were on the other side. Euro­pean con­ser­va­tives were luke­warm about the sin­gle mar­ket, Cana­dian Con­ser­va­tives were free trade evan­ge­lists. To­day the roles have re­versed again, with Cana­dian pro­gres­sives fighting for changes to im­prove the Canada-U.S. FTA’s suc­ces­sor ne­go­ti­ated in 1992, NAFTA, with Lib­er­als lead­ing the charge, and Con­ser­va­tives tak­ing shots from the side­lines. What a dif­fer­ence a decade can make.

Three things have changed since North Amer­i­can free trade turned 20. The first is that what was once con­sid­ered rad­i­cal is now the norm. Re­gional and bi­lat­eral trade agree­ments now cir­cle the globe in an ever-tight­en­ing web of in­ter­con­nected trade and in­vest­ment pol­icy net­works.

The sec­ond is named Trump.

For the first time since Her­bert Hoover, the United States is led by an overtly na­tion­al­is­tic, pro­tec­tion­ist pres­i­dent. Among his first acts was to rip up the Trans-Pa­cific Part­ner­ship, an as­ton­ish­ingly dam­ag­ing move to Amer­i­can self-in­ter­est. In­stead of an agree­ment that placed the United States at the cen­tre of al­most ev­ery fast-grow­ing econ­omy on ei­ther side of the Pa­cific, Trump has handed an huge op­por­tu­nity to China to re-or­ga­nize those trad­ing re­la­tion­ships in its self-in­ter­est. Chi­nese Pres­i­dent Xi Jin­ping was openly cel­e­bra­tory about Trump’s dis­as­trous de­ci­sion.

Now he is threat­en­ing NAFTA, hav­ing is­sued a list of de­mands im­pos­si­ble for ei­ther na­tional part­ner—Canada and Mex­ico—to meet as out­lined. The is­sue that stalled the orig­i­nal Canada-U.S. Free Trade Agree­ment, and re­mained a fric­tion point in the NAFTA talks, was dis­pute set­tle­ment. Brian Mul­roney pulled his ne­go­ti­at­ing team home over the Rea­gan Ad­min­is­tra­tion’s un­will­ing­ness to give on the is­sue. That de­ci­sion, a tac­ti­cal echo from Mul­roney’s past as a labour lawyer, worked.

Es­tab­lish­ing an in­de­pen­dent panel with its own rules, staffed by “for­eign­ers” as well as your own na­tion­als, is clearly wor­ry­ing to eco­nomic na­tion­al­ists. It’s much less de­sir­able than hav­ing dis­putes—in the case of the United States—set­tled by U.S. judges, in U.S. courts, ac­cord­ing to U.S. ju­rispru­dence…un­less you are not an Amer­i­can. Then some more neu­tral fo­rum is clearly es­sen­tial. Trade agree­ments will al­ways throw up win­ners and losers, cheaters and bound­ary testers. Their com­peti­tors will cry foul and seek le­gal re­dress.

But it is surely not se­ri­ous to sug­gest that a Cana­dian plain­tiff should ex­pect a neu­tral—let alone an in­formed—judg­ment from an Amer­i­can cir­cuit court judge, not ex­pe­ri­enced in in­ter­na­tional trade law or nonAmer­i­can ju­rispru­dence. Nor could an Amer­i­can com­plainant ex­pect any more from a Cana­dian-only tri­bunal. So, dis­pute set­tle­ment mech­a­nisms that are ex­pert, in­de­pen­dent and ef­fec­tive are es­sen­tial to mod­ern trade agree­ments. Per­haps Trump in­tends his op­po­si­tion to NAFTA’s Chap­ter 19 dis­pute set­tle­ment pro­vi­sion to be a bar­gain­ing chip but for Canada, main­tain­ing that pro­vi­sion is as much a deal-breaker for Justin Trudeau to­day as it was for Mul­roney 30 years ago.

But here he will run into the third ma­jor change since NAFTA’s last big birth­day: Cana­di­ans and Mex­i­cans are now ac­knowl­edged world lead­ers in trade ne­go­ti­a­tion skills. U.S. Sec­re­tary of State Rex Tiller­son re­turned from his first en­counter with se­nior Mex­i­can min­is­ters and of­fi­cials ap­par­ently shaken by how well the Mex­i­cans had pre­pared their “Plan B” op­tions in the event that the NAFTA talks failed. They out­lined for him all the bi­lat­eral part­ner shifts they had be­gun to de­velop as al­ter­na­tives to U.S.-Mex­i­can trade. The Cana­dian NAFTA team, and its list of out­side ad­vis­ers, is equally im­pres­sive and deeply ex­pe­ri­enced.

While the cur­rent fast track au­thor­ity, re­newed in 2015 to ex­pe­dite the now-de­funct TPP, doesn’t ex­pire un­til 2021 if the pres­i­dent re­quests an ex­ten­sion be­fore June 30, 2018, and cur­rent United States Trade Rep­re­sen­ta­tive Robert Lighthizer has said there is no of­fi­cial dead­line, most of the par­ties to the ne­go­ti­a­tions are con­sid­er­ing June 30, 2018 the op­er­a­tive dead­line.

Though Canada and Mex­ico have agreed to the agenda and timetable, con­di­tion­ally, it is clear that com­plet­ing talks by next spring is a pipe dream. From the Amer­i­can per­spec­tive, how­ever, the last thing they want is a loom­ing trade war as they head into the U.S. mid-term elec­tions. If, as

For the first time since Her­bert Hoover, the United States is led by an overtly na­tion­al­is­tic, pro­tec­tion­ist pres­i­dent. Among his first acts was to rip up the TransPa­cific Part­ner­ship, an as­ton­ish­ingly dam­ag­ing move to Amer­i­can self-in­ter­est.

seems in­creas­ingly likely, the GOP loses con­trol of the House, the en­tire dis­cus­sion will be moot as the Democrats are highly un­likely to give ap­proval to a Trump de­signed-trade deal.

Some of the changes in­cluded in any new deal will no doubt be im­pos­si­ble for some Re­pub­li­can politi­cians to swal­low in an elec­tion year. Given the in­creas­ing un­rav­el­ling of the Trump ad­min­is­tra­tion’s au­thor­ity over­all, it seems un­likely that they would want to ex­pend much of their se­ri­ously de­pleted po­lit­i­cal cap­i­tal at­tempt­ing to force an un­pop­u­lar deal through Congress.

How shift­ing are the winds of pol­i­tics. In 1975, Ed Meese, one of the se­nior play­ers in the Rea­gan cam­paign against Ger­ald Ford in the 1976 Re­pub­li­can nom­i­na­tion bat­tle and later Rea­gan’s at­tor­ney gen­eral, came to Canada to test the po­lit­i­cal waters about his man. At a lunch with three Cana­dian po­lit­i­cal hacks, he raised the prospect of a free trade agree­ment. Each of the Lib­eral, Tory and NDP par­tic­i­pants shuf­fled ner­vously at the ques­tion. Af­ter some po­lite Cana­dian hem­ming and haw­ing, one of the Cana­di­ans de­cided to be can­did with the earnest Amer­i­can vis­i­tor. “That would never be po­lit­i­cally pos­si­ble in Canada, Mr. Meese,” I said, with youth­ful cer­ti­tude.

Just over a decade later, the Mac­don­ald Com­mis­sion on the econ­omy launched the FTA project, and to­day it is a foun­da­tion stone in the con­ti­nen­tal econ­omy, what­ever games Trump may think he can play. Even some of the most bit­ter op­po­nents in labour and the cul­tural sec­tor in Canada have grudg­ingly come to terms with the new struc­tures now in place for a gen­er­a­tion. Uni­for—the suc­ces­sor to the Cana­dian United Auto Work­ers and then the Cana­dian Auto Work­ers—is this time be­ing con­sulted reg­u­larly by the gov­ern­ment’s ne­go­ti­at­ing team. The prospect of any deal was anath­ema to labour 30 years ago. To­day it is push­ing a set of ne­go­ti­at­ing de­mands it wants the Cana­dian side to seek. As long as the cul­ture sec­tor—and its con­nec­tions into tele­com and tech­nol­ogy sec­tors—re­mains off-lim­its to Amer­i­can de­mands for change, few Cana­di­ans are likely to mount the bar­ri­cades this time.

The prospect of any deal was anath­ema to labour 30 years ago. To­day it is push­ing a set of ne­go­ti­at­ing de­mands it wants the Cana­dian side to seek. As long as the cul­ture sec­tor—and its con­nec­tions into tele­com and tech­nol­ogy sec­tors—re­mains off-lim­its to Amer­i­can de­mands for change, few Cana­di­ans are likely to mount the bar­ri­cades this time.

For what has taken place in the years since the first con­sid­er­a­tion of such a deal is that the mul­ti­lat­eral process given birth as the Gen­eral Agree­ment on Tar­iffs and Trade [GATT] and its suc­ces­sor, the World Trade Or­ga­ni­za­tion [WTO] has ef­fec­tively died. The Doha round of talks has been par­a­lyzed on agri­cul­tural and ser­vice in­dus­try bat­tles since 2008, with no mean­ing­ful prospect of the NorthSouth di­vide be­hind the dead­lock be­ing re­solved, soon, if ever.

In its place has emerged an in­creas­ingly dense and in­ter­wo­ven set of re­gional and bi­lat­eral trade agree­ments. They have many com­mon el­e­ments and each new gen­er­a­tion typ­i­cally builds on the ex­pe­ri­ences, suc­cesses

and fail­ures of the ear­lier ver­sions. Yes, there have been too many losers at the in­di­vid­ual, sec­toral and even na­tional lev­els as a re­sult. Many of them could have and should have been avoided. Ad­just­ment and re­train­ing pro­grammes have been weak, un­der­funded and in­ef­fec­tive. That fail­ure con­trib­uted sig­nally to both Trump and Brexit.

But the Canada-Europe and TPP ne­go­tia­tors were in­formed by those fail­ures and the back­lash they pro­voked. They worked to im­prove labour codes, en­vi­ron­men­tal stan­dards, and in­tel­lec­tual prop­erty pro­tec­tions. They will need to go fur­ther to win wider po­lit­i­cal ac­cep­tance, es­pe­cially in the largest rich­est na­tions. But the bur­den of eco­nomic ad­just­ment needs to be bet­ter met by na­tional and local gov­ern­ments, as well. Ger­many and Scan­di­navia are the lead­ers in en­sur­ing that re­train­ing and re-equip­ping as­sis­tance has kept their labour forces and SMEs not only afloat but pros­per­ing. The NAFTA part­ners would do well to em­u­late their ap­proach.

What will the North Amer­i­can and global economies look like as we pass the 50th an­niver­sary of the dra­matic changes de­liv­ered by NAFTA and its cousins? If we have avoided the de­struc­tion of much of the globe ei­ther mil­i­tar­ily by mis­han­dling China’s rise, or en­vi­ron­men­tally by drown­ing our­selves in ris­ing oceans—big ifs, granted—we might see a dream, at least in part, come true.

The dream of the post-war founders of the global in­sti­tu­tions that have pro­vided sta­bil­ity and se­cu­rity for 75 years was that they were cre­at­ing a seam­less net­work of in­sti­tu­tions to pro­vide gover­nance, di­rec­tion and stan­dards on se­cu­rity, trade, dis­pute set­tle­ment and le­gal and so­cial stan­dards. By the end of the Cold War, that dream seemed un­re­al­is­ti­cally am­bi­tious. Even to­day with the as­sault on glob­al­iza­tion, and the re­nais­sance of the most prim­i­tive slo­gans of eco­nomic na­tion­al­ism, we seem to be far­ther away from such a con­sen­sus than af­ter the collapse of Com­mu­nism.

But to­day’s doom­sters are more like the wrong-headed—me, among oth­ers—in 1975, than be­liev­able fore­cast­ers. The drive of tech­nol­ogy and the global net­works it fa­cil­i­tates, more cheaply at higher speeds, is not stop­pable. Some na­tions may try to erect elec­tronic fences against the waves of data sweep­ing in and out of their economies, but they will fail. The fences will be pen­e­trated by per­sis­tent ef­fort or the suc­cess­fully iso­lated na­tions will de­cline.

If North Amer­ica, Asia and the EU were to be con­nected by such an in­ter­lock­ing set of trade and in­vest­ment agree­ments, they would set the frame­work for eco­nomic re­la­tions across bor­ders for the rest of the global econ­omy. The next gen­er­a­tion of trade ne­go­tia­tors can aim high on work­ers’ rights, health and safety, en­vi­ron­men­tal pro­tec­tions, as set out in the United Na­tions In­ter­na­tional Covenant on Eco­nomic, So­cial and Cul­tural Rights. Af­ter all, vir­tu­ally ev­ery trad­ing na­tion is al­ready a sig­na­tory to the treaty, even if most—in­clud­ing Canada—can­not claim to have fully im­ple­mented its pro­tec­tions.

Even if patchy, such a net­work would rep­re­sent an un­prece­dented ad­vance to­ward a global foun­da­tion for so­cial jus­tice. Surely a dream worth striv­ing for.

Li­brary photo Ge­orge Bush Pres­i­den­tial

Mex­i­can Pres­i­dent Car­los Sali­nas, U.S. Pres­i­dent Ge­orge Bush and Prime Min­is­ter Brian Mul­roney watch as trade min­is­ters Jaime Serra Puche, Carla Hills, and Michael Wil­son sign the NAFTA for their three coun­tries in San An­to­nio, Texas in Oc­to­ber 1992.

Ar­chives photo Montreal Gazette

“I be­lieve you have sold us out.” The defin­ing mo­ment of the 1988 lead­ers’ de­bate on free trade in which John Turner ac­cused Brian Mul­roney of sell­ing out Canada to the United States. As Robin Sears writes, it was the most con­se­quen­tial cam­paign of the mod­ern era.

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