There is a yearning in Canada for the glory days of the North American free-trade deal – a time when exports soared, Americans loved our oil, and borders seemed to melt away.
Former federal cabinet minister and diplomat Michael Wilson says the way to get back to that sweet spot is to build a more muscular NAFTA partnership between Canada, the United States and Mexico.
NAFTA 2.0 would have common external tariffs and trade negotiating objectives, an integrated energy industry and more open government purchases. Regulations, standards and border policies would share a common goal of efficiency and effectiveness – everything short of a common currency and governance.
“We must expand the NAFTA brand, much in the same way as there is a European brand,” Mr. Wilson argued in a recent speech. “Governments, the private sector and trade organizations must adopt this brand and consciously strengthen it.”
It’s time to celebrate Buy North America over Buy America, he said. NAFTA could be a powerful counterweight to China. Together, businesses could better compete against rivals, according to Mr. Wilson, one of the architects of the NAFTA deal.
Lofty and noble, as far as plans go.
But it’s hard to see the “N.A.” brand gaining much traction politically when brand USA can’t get its act together. The United States seems incapable of making tough domestic political decisions that are so clearly in the national self-interest. Witness the ongoing budget and sequestration stalemate, which is threatening to trigger a chaotic slashing of government services.
So it seems unlikely that coordinating foreign policy with the likes of Canada and Mexico would be an easy sell in the U.S. Congress, no matter how advantageous to U.S. companies.
Even more modest efforts requiring minimal Congressional action have proven to be a tough slog. The Beyond the Border effort to coordinate and harmonize Canada-U.S. border practices is still more dream than reality.
Now, some business groups are pushing Ottawa to use the ongoing Trans-Pacific Partnership trade talks as a way to fix NAFTA’s flaws, including freeing up access to government contracts. The TPP negotiations involve Canada, the U.S., Mexico and several Asia-Pacific countries.
That seems like a long shot, given the complex tradeoffs involved in a multi-country trade deal, which is likely a year or more away.
That’s not to suggest a stronger NAFTA isn’t a good idea.
As Mr. Wilson rightly points out, companies are gradually moving towards North American integration of their supply chains anyway. Every dollar that Canada exports to the U.S. contains 25 cents worth of American content. Chinese products, on the other hand, are less than 4 per cent “Made in America.”
A recent trend to “on-shoring” of U.S. manufacturing from China and elsewhere may drive North American content even higher.
Plenty of irritants stand in the way of a well-functioning NAFTA free trade. Buy America restrictions continue to unfairly restrict access of Canadian companies to U.S. contracts, messing up efficient cross-border supply chains.
Cooperation on energy policy is obviously lacking, exemplified by the stalled Keystone XL oil pipeline.
And old trade wounds still hurt. Canada is shipping record volumes of lumber to China when it could be selling much more to its closest trading partner if a negotiated deal didn’t limit duty-free access to the U.S. market.
Before embarking on an ambitious new NAFTA project Canada might want to concentrate on bolstering its own brand.
A lot remains to be done to make Canada more competitive. Foreign competition is limited in key sectors, such as telecommunications and broadcasting. Inane barriers to trade within Canada still gum up the dairy and poultry industries, financial regulation and other sectors.
Ottawa and the provinces also need to improve the country’s environmental record in the oil sands to avoid being the scapegoat of environmentalists.
And finally, authorities must do a better job of cracking down on overseas corruption by Canadian companies and policing global resource companies that use our financial markets as an ATM.
Nostalgia isn’t going to bring back the time – before the terrorist attacks of Sept. 11, 2001 – when a euro-style open border in North America seemed possible.
But Canada can do a lot on its own, by building a brand that’s trusted and coveted in foreign markets.