Brian Mulroney will never be accused of underestimating his own accomplishments, but the former prime minister was spot on when he was asked to comment on the new Canada-Europe free-trade agreement, a deal Stephen Harper calls the “biggest” our country has ever done.
“This one is significant,” Mr. Mulroney told CTV’s Question Period, “but it’s not in the same league” as the Canada-U.S. free-trade deal, which went into effect in 1989 and was expanded in 1994 to include Mexico.
The North American free-trade agreement turns 20 on Jan. 1, making it a “senior citizen” among the dozens of bilateral and regional trade deals negotiated since. With age has come not-so-benign neglect. As a forum for trilateralism, NAFTA has practically slid off the radar, with proposals to modernize or expand the agreement on no government’s formal agenda.
That is a serious mistake. Trade among the NAFTA partners reached a historic high of nearly $1.1-trillion last year, compared to about $90-billion in business between Canada and the European Union. Canada’s future remains far more dependent on further North American economic integration than on trade expansion with any other region. As Mr. Mulroney would say: “Ya dance with the one that brung ya.”
The “excitement” in trade circles over the Canada-EU deal, known as the Comprehensive Economic and Trade Agreement, stems not from its transformational potential, but from the fact that it tentatively tackles previously taboo topics such as subnational government procurement, intellectual property and services. It signals an orientation toward open markets that helps foster investor confidence. And CETA protects Canada’s interests in the likelihood of a free-trade deal between the United States and Europe.
The main reason CETA is not in the same league as NAFTA, however, lies in the overwhelming business case for supply-chain integration within North America. Linking our economies makes all three NAFTA countries richer, more competitive and better positioned to conquer global markets.
An example: Montreal-based Bombardier’s new Learjet 85 business aircraft might never have gotten off the ground without NAFTA. But the time and cost advantages that come with being able to source tariff-free components from Bombardier’s factory in Queretaro, Mexico, which makes the plane’s fuselage and wings, sustains final assembly jobs in Wichita, Kan., and secures even higher-skilled design and engineering jobs at the company’s aerospace development centre in suburban Montreal. Pratt & Whitney Canada Corp. makes the plane’s engine nearby in Longueuil.
“The depth of the NAFTA relationship means that small improvements in trade facilitation can deliver great benefits,” explains Michael McAdoo, Bombardier Aerospace’s vice-president of international business development.
Mr. McAdoo will be among the business and government officials meeting in San Diego this week for a conference aimed at rebooting the NAFTA relationship. The theme of the conference – three nations, two borders, one economy – underscores the point that we need not surrender sovereignty or erase borders to deepen economic integration. A common NAFTA external tariff, regulatory harmonization, a continental energy strategy, greater labour mobility and enhanced public consciousness about our interdependence can all be accomplished without merging into one country.
That’s not to say it’s easy. The glacial pace of progress of the Canada-U.S. Beyond the Border initiative is proof. NAFTA partners have reverted to dealing with each other on a bilateral basis rather than daring to think trilaterally. NAFTA is still such a touchy issue in U.S. politics, a catch-all acronym blamed for U.S. deindustrialization, that amending it is extremely difficult.
Canadian International Trade Minister Ed Fast, U.S. Commerce Secretary Penny Pritzker and Mexican Economy Secretary Ildefonso Guajardo will be in San Diego. But trade progress depends on political will at the top.
CETA carries negligible political risk for Mr. Harper. Who can really argue against more French wine and cheese? But deepening economic ties with Mexico – soon to be home to half of North American auto production – is a tougher political proposition. And talk of continental integration only stokes the latent anti-Americanism that New Democrats and some Liberals love to fan.
But for all the schadenfreude about American decline, the United States is still the world’s most innovative economy. And it still buys more than 70 per cent of Canada’s exports.
By NAFTA’s 40th birthday, Mexico’s economy will have surpassed Canada’s in size. And by mid-century, it’s poised to be twice as big as ours.
CETA’s nice. But NAFTA is essential.