BITS AND BYTES, NOT CARS AND COWS
The digital chapters in NAFTA are key to Canada’s future, writes Kevin Carmichael.
Early in the NAFTA saga, I assumed Canada’s banks would be feeling some heat.
Robert Lighthizer, the United States Trade Representative, included financial services on his initial long list of complaints, noting specifically that the U.S. desired improved access to the Canadian market.
And why wouldn’t it? After years of watching TorontoDominion Bank, Bank of Montreal, and Royal Bank of Canada advance on their turf, the reopening of the North American Free Trade Agreement provided an opening to bust a hole in the ownership rules that protect the Oligopoly from international takeover.
Then I looked at the submissions the USTR received during its public consultation process.
If America’s banking giants ever really cared about Canadian ownership rules, they have moved on. There were thousands of submissions about NAFTA, but only a handful from banks. Of those, none encouraged Lighthizer to knock down the walls that protect Bay Street. Citigroup Inc. simply asked the U.S. government to “lock in existing levels of openness and integration in financial services.”
But you know what Citigroup did care about? Data.
First on the Wall Street behemoth’s NAFTA wish list was, “language ensuring the free flow of data across borders and prohibiting governments from imposing measures requiring local servers for data storage.” Welcome to the future.
If you’ve been following along, you will recall Foreign Affairs Minister Chrystia Freeland and others talking about how excited they were to update the preAmazon NAFTA for the internet age.
I commend you if you have managed to figure out what that means, because the 21st century doesn’t come up very often in the coverage of the talks.
As Bloomberg News put it in a headline this week, the main issues are cars and cows. Those are foundations of the old economy, not the new one.
Let’s pause for a moment so I can pre-empt some angry tweets and emails.
To be clear, nothing you just read, or will read, suggests Freeland should turn her back on autoworkers and farmers.
Canada is home to some of the world’s best auto parts makers, and the government should most definitely fight President Donald Trump’s attempts to skew North American production to the United States. And given Canada’s natural advantages in food production, especially as climate change pushes crop production north to avoid chronic droughts, there is a good argument for leaving supply management in place in order to solidify an area of strength.
But if the NAFTA talks are really about updating trade rules for the 21st century, who deserves pride of place on the Canadian agenda: Shopify Inc., the Canadian unit of General Motors Co., or the Dairy Farmers of Canada?
That should be a rhetorical question. Instead, it’s a skilltesting one for casual observers because all they will have read since negotiations started six months ago is minutiae about rules of origin in the car-andtruck business and tired debates about supply management.
If the coverage is indicative of the actual negotiations, then there is reason for concern.
Consider: If the priorities of smallish auto-parts makers, or Big Retail, become the public’s priorities, then Canada’s negotiators ultimately will make the trade-offs necessary to secure a deal that they can sell to voters.
Given what we have observed to date, it’s possible to imagine an American saying something like, “Want to keep your import tariffs on dairy and chicken? Fine, we hoped you’d say that; we will continue to govern intellectual property in a way that suits Silicon Valley, and if you are fool enough to give away all your data to Alphabet and Facebook, then they will get to decide what they do with it.”
“It’s a little bit worrisome,” Morgan Elliot, head of government relations at SOTI Inc., a Mississauga, Ont.-based mobile technology outfit, said of the NAFTA talks.
SOTI is the kind of company Prime Minister Justin Trudeau says he likes. It is a leader in its field; it has offices in the United Kingdom, India, Australia and the Middle East; and it employs some 600 people to keep up with 17,000 customers, including world beaters such as American Airlines Group Inc., Volkswagen AG, and fast-fashion retailer Hennes & Mauritz AB.
And yet SOTI and its counterparts at the Council of Canadian Innovators (CCI) feel like the “traditional players” are deciding the country’s trade policy.
Mexican business essentially is embedded with the country’s negotiating team, and American officials have been writing rules that favour U.S. technology companies for decades.
The experience of Canada’s tech lobby in Ottawa has left it unsure that ministers and officials care that much about what it has to say.
“There’s not a lot of visibility on what’s going on with the digital chapters,” Elliot said in a phone interview. “We’d love to be more engaged with the government,” he said.
Tech is partly to blame for its relative lack of influence. The millionaires and billionaires who make up this group of upstarts tend to moan about how Ottawa doesn’t understand what it takes to win; and then when you ask them to explain, they say they are “too busy running their companies” to get involved in policy.
“Part of the problem is us, in the past,” Elliot said.
Still, anyone with a subscription to The Economist knows that intellectual property and data must now form the foundation of any successful economy. The owners of those things will dictate the future — everyone else will be takers. No one in Ottawa should need the constant attention of lobbyists to be reminded of that.
The CCI has a list of trade priorities; among them, the extension of mobility rights to nonCanadians who are nonetheless official residents of Canada.
But the most important thing the NAFTA negotiators can do for them is to fight back against U.S. attempts to write the rules of the digital economy. That means retaining the right to demand that Canadian data be stored in Canada, and avoiding overly prescriptive rules, which Washington in the past has used to lock-in advantages for American firms. Elliot said the CCI favours periodic reviews of NAFTA to ensure rules keep pace technological change.
Let’s hope we start seeing more of this as the talks proceed. Trade agreements dictate the future, but they too often are written by those who owe their influence to past success.
It’s time for the current establishment to make some room at the table.