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Canada without NAFTA

As published in the Victoria Standard: September 17, 2018.

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 actually 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 interfering 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’s 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 relationship China was almost inevitable. Unfortunately, this reality is very annoying to 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.

However, problems began when U.S. and also 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.

If NAFTA has been tough on working Canadians, it has brutalized their Mexican counterparts and this desperation has lured Mexicans into unsafe factory work and even the lucrative but deadly world of drug cartels. Perhaps the best example of the harm caused by U.S. protectionist policies is the damage inflicted on Mexico’s agricultural sector by the dumping of subsidized U.S. corn into that market.

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, which 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, Justin Trudeau has sought negotiating advice from NAFTA booster 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 prosperous low-carbon future.