Canada with­out NAFTA

The Victoria Standard - - Commentary - MOR­GAN DUCHESNEY

Canada doesn’t need NAFTA, es­pe­cially a deal ne­go­ti­ated with a U.S. pres­i­dent who can’t be trusted to act re­spon­si­bly. The no­tion that Canada is some­how ca­pa­ble of abus­ing or tak­ing trade lib­er­ties with the United States is be­yond ridicu­lous.

Rather than a free trade deal, NAFTA is a cor­po­rate rights pact that vastly fa­vors the more pow­er­ful United States. NAFTA’S Chap­ter 11 al­lows U.S. cor­po­ra­tions to sue the Cana­dian govern­ment for pass­ing laws that might in­ter­fere with their prof­itabil­ity. Eight suc­cess­ful law­suits have al­ready cost Cana­di­ans a to­tal of $314 mil­lion.

NAFTA’S Chap­ter Six forces Canada to make 75 per­cent of its en­ergy re­sources avail­able for U.S. ex­port on de­mand. This “en­ergy pro­por­tion­al­ity” clause pre­vents Canada from re­duc­ing the amount of bi­tu­men ex­ported to the U.S. and hin­ders the na­tion’s green en­ergy po­ten­tial by lock­ing Canada into the U.S. car­bon econ­omy. It is worth not­ing that Canada-u.s. tar­iffs were quite low even be­fore the 1989 Canada-u.s. Free Trade Agree­ment (FTA) un­der World Trade Or­ga­ni­za­tion (WTO) rules.

In spite of its anti-pro­tec­tion­ist rhetoric, the United States has tra­di­tion­ally been one of the most pro­tec­tion­ist coun­tries on the planet, so Canada’s grow­ing trade al­liance with China was al­most in­evitable. Un­for­tu­nately, the bur­geon­ing re­la­tion­ship an­noys a Trump ad­min­is­tra­tion locked in a de­struc­tive trade war with the Chi­nese.

Cana­dian NAFTA pro­mot­ers, like the Cana­dian Coun­cil of Chief Ex­ec­u­tives, orig­i­nally claimed that grad­u­ally re­mov­ing more trade bar­ri­ers would even­tu­ally cre­ate con­sis­tent em­ploy­ment. Elim­i­nat­ing tar­iffs or fed­eral tax on im­port and ex­port of goods is a good idea, in the­ory.

Prob­lems be­gan when U.S. and Cana­dian com­pa­nies started out­sourc­ing man­u­fac­tur­ing jobs to Mex­ico where favourable tax treat­ment, weak la­bor laws and lax en­vi­ron­men­tal stan­dards were avail­able. Cana­dian man­u­fac­tur­ing sec­tors, like the auto in­dus­try, have never fully re­cov­ered from the move.

If NAFTA has been tough on work­ing Cana­di­ans, it has bru­tal­ized Mex­ico’s agri­cul­tural sec­tor and its work­force by the forced dump­ing of sub­si­dized U.S. corn into Mex­ico, cost­ing farm­ers over $1 bil­lion per year and re­duc­ing la­bor re­quire­ments. As a re­sult, many for­mer Mexican farm work­ers have been lured into un­safe fac­tory work and even the lu­cra­tive, but deadly, world of drug car­tels.

Even­tu­ally, Mex­ico’s Maquiladora Pro­gram be­came an im­por­tant fea­ture of NAFTA since it al­lowed Amer­i­can and Cana­dian man­u­fac­tur­ers to op­er­ate tax-free in cer­tain ar­eas of north­ern Mex­ico that ba­si­cally be­came eco­nomic free-fire zones no­to­ri­ous for worker abuse, pol­lu­tion and cor­rup­tion. The ex­treme mil­i­ta­riza­tion of the U.s.-mex­ico bor­der that be­gan un­der Pres­i­dent Bill Clin­ton in 1994 is one clear in­di­ca­tion that NAFTA seems more con­cerned with en­sur­ing the free­dom of in­vestors and cor­po­ra­tions than hu­man be­ings.

While Mex­ico has ac­cepted U.S. terms, three out­stand­ing is­sues re­main un­re­solved in the cur­rent ne­go­ti­a­tions be­tween Canada and the U.S. These in­clude dis­pute res­o­lu­tion, cul­tural pro­tec­tion for Cana­dian me­dia and Canada’s sub­si­dized dairy in­dus­try.

Prime Min­is­ter Trudeau is cur­rently fac­ing stiff re­sis­tance from Cana­dian dairy farm­ers who claim their liveli­hoods are be­ing frit­tered away by con­ces­sions to the U.S. Their po­si­tion is un­likely to change un­less gen­er­ous sub­si­dies are pro­vided to com­pen­sate them for lost rev­enue. It is likely that Trudeau will stand firm on cul­tural pro­tec­tion, but com­pro­mise on the dairy is­sue.

The dis­pute res­o­lu­tion mech­a­nism is the most del­i­cate part of the ne­go­ti­a­tion since ex­ces­sive com­pro­mise in this area will weaken Canada’s fu­ture bar­gain­ing po­si­tion. In a re­lated devel­op­ment, Canada has joined other na­tions in a bid to re­or­ga­nize the WTO in re­sponse to grow­ing U.S. pro­tec­tion­ism and iso­la­tion­ism. Trump is cur­rently ham­per­ing WTO op­er­a­tions by fail­ing to ap­point or reap­point mem­bers to the or­ga­ni­za­tion’s rul­ing body. As well, Canada is in­volved in the WTO’S on­go­ing ef­forts to ad­dress tech­no­log­i­cal change in all ar­eas of in­ter­na­tional trade and fi­nance.

As the new Oc­to­ber 1 dead­line looms, Trudeau has sought ne­go­ti­at­ing ad­vice from NAFTA booster and for­mer Prime Min­is­ter Brian Mul­roney. Peo­ple like Mul­roney claim NAFTA is an eco­nomic suc­cess story, and I sup­pose it is, if you profit from the oil sands or own a fac­tory in a Mexican Maquiladora. Per­haps it is time for Canada to re­al­ize its full eco­nomic po­ten­tial by leav­ing NAFTA and seek­ing new trad­ing part­ners ea­ger to work for a safer and more pros­per­ous low-car­bon fu­ture.

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