Trump’s NAFTA gambit could take aim at medicare
Medicare exemptions could be on the table if the U.S. health care industry wants it
Donald Trump has promised to renegotiate the 1994 North American Free Trade Agreement. Don’t be surprised if he takes a swipe at medicare.
Right now, Canadian medicare is relatively exempt from NAFTA, as it was from the original 1989 Canada-U.S. Free Trade Agreement.
I say “relatively exempt” because some analysts argue that any government effort to expand universal public health insurance into new areas where U.S. firms are involved could incur financial penalties under NAFTA.
That point was made in two separate papers commissioned by the 2002 Romanow royal commission on the future of health care. One was written by a corporate trade lawyer, the other by the Canadian Centre for Policy Alternatives.
But medicare as it is now gets a pass from NAFTA. One section of the free trade pact specifically exempts anything that is a “social service for a public purpose” from the overall NAFTA requirement that eligible foreigners be allowed to invest freely.
A second exempts existing provincial and local arrangements – like medicare – that otherwise contravene NAFTA principles.
Both allow the current medicare system to operate as a single-tier, public monopoly that limits the role of private insurers and for-profit hospitals.
When the defenders of free trade said the 1989 and 1994 deals left medicare alone, they were essentially correct.
But that doesn’t mean it will be left alone in any Trump-inspired renegotiation.
Free trade with Canada was not an American priority when talks began in 1985. It was Canada that wanted the deal.
Specifically, Canada wanted to be exempted from America’s sporadic bursts of protectionism.
As well, Ottawa wanted the U.S. to back off from its practice of imposing countervailing duties on Canadian products – particularly softwood lumber – whenever American competitors complained.
Ironically, Canada won neither point. Buy American programs that discriminate against Canadian goods still pop up. The softwood lumber dispute continues apace.
For their part, the Americans wanted full access to Canadian oil and gas plus freedom for U.S. companies to invest.
They won both in the 1989 bilateral deal. Those victories were carried over into NAFTA.
But gaining full access to the Canadian health care market was not a top priority for Washington in 1989.
Nor was it a top priority when the U.S. negotiated NAFTA a few years later. That pact was largely about Mexico. In particular, Washington hoped that marrying American capital to cheap Mexican labour would reduce the flow of illegal immigrants into the U.S.
Canada was less enthusiastic about NAFTA, joining the talks largely to keep the status quo intact.
During NAFTA talks, the U.S. focused on free trade for services, patent protection for drug companies and intellectual property protection for other producers, all of which it won.
It didn’t press for access to the Canadian health care sector.
The medicare exemptions set out in 1989 stayed.
Whether they will stay in a renegotiated NAFTA depends largely on what the U.S. health care industry wants.
That industry has been going through an unprecedented period of consolidation, with both hospital chains and health insurers merging in order to cut costs and increase their clout.
For these expanding U.S. healthcare insurers and hospitals, the medicare-protected Canadian market remains largely virgin territory. If it is in their interest to remove the Canadian medicare exemption from NAFTA in order to exploit this new opportunity, I expect Trump will listen sympathetically.
Canada’s problem in any renegotiation is that it has almost no bargaining power. Analysts still debate whether NAFTA has been a good deal for Canada. But most acknowledge that, for better or worse, free trade with the U.S. has reshaped this country’s economy.
A withdrawal from NAFTA would be wrenching for Canada. We know that. The Americans know that too.
They know that even if medicare is at risk, Ottawa will be reluctant to play the negotiator’s ultimate card: It will not easily walk away from NAFTA.