Andrei Sulzenko is a former Canadian trade negotiator and is currently executive fellow at the School of Public Policy, University of Calgary.
The Trump administration published a list of more than 100 objectives in its renegotiation of the North American free-trade agreement with Canada and Mexico. The July 17 wish list will be debated in Congress and potentially adjusted before negotiations with Canada and Mexico start Aug. 16 in Washington. All this is required by U.S. law in order to secure "fast-track" authority so that an eventual deal can be voted up or down without amendment in Congress.
Canada's system has no similar requirement for prior parliamentary scrutiny and public debate. Notwithstanding this difference, should the federal government announce its own wish list in advance of the NAFTA negotiations? Aside from obvious considerations of openness and transparency, the operative question is whether such a move would help or hinder Canada's negotiating position.
On the plus side, it would send a signal that Canada is not playing only defence against an "America First" administration, and that we have our own list of "improvements" designed largely to mitigate a long history of U.S. protectionism regardless of which of the two parties wins the presidency or controls Congress. That option can be portrayed as "standing up to the elephant."
On the negative side, it would force a publicly arrived consensus on Canadian objectives, always hard fought and difficult to achieve, with little apparent prospect to shock and awe a protagonist inculcated with the conceit of being the only "fair trader" in the room. Indeed, it would be un-Canadian to go on offence. That's the mouse (or moose, according to Prime Minister Justin Trudeau) position.
My guess is that there will be no public debate in Canada going into the negotiations. Besides, we are out of time. Consultations with business and other interest groups and with provinces and territories will, however, go on in private before and during the negotiations.
It is interesting nevertheless to speculate on what Canada's offensive priorities should be. There are the usual suspects:
- Various versions of Buy American restrictions that make a mockery of fair, let alone free, trade, especially when the United States wants even better access to Canada’s procurement markets;
- Multibillion-dollar agricultural subsidies that impede Canadian exports to the U.S. and third-country markets, paling in comparison with Canada’s small supply-managed markets;
- Regulatory requirements (e.g., country-of-origin labelling) in the name of consumer protection but really for industry protection;
- American hypocrisy on continental energy markets, with existing arrangements enshrining equitable sharing during times of shortage but capriciously restricting Canadian access during times of surplus;
- Invoking a national-security override as a protectionist tool, notwithstanding Canada’s long-standing partnership in NATO and NORAD and the integration of defence industries between the two countries.
Over the years, Canada has had to go cap in hand to the United States seeking exemptions from many of these measures or has had to litigate better outcomes. NAFTA II should put an end to this kind of bad-for-business arbitrariness and uncertainty.
Even if Canada were able to negotiate breakthroughs on these usual suspects, there is one very big elephant in the room: the U.S. trade-remedy system, the commercial equivalent of the cherished right to bear arms. The negotiations for the 1987 bilateral Canada-U.S. free-trade agreement that preceded NAFTA almost foundered on this issue, and now NAFTA II is at some risk.
The essence of the challenge is as follows: U.S. trade-remedy provisions – anti-dumping duties (below-fair-market pricing), countervailing duties (subsidized imports) and emergency safeguards (damaging surge of imports) – are usually implemented following industry complaints; but there is no cost other than legal for industry to complain, and the payoff in terms of reduced competition is enormous, even if only temporarily.
Combining a litigious business culture with an industry-compliant Commerce Department that investigates complaints and a presidentially appointed trade tribunal that adjudicates whether there is injury to industry, more often than not leads to the imposition of punitive restrictions – witness the latest recurrence of the softwood lumber wars.
In effect, the very DNA of the U.S. trade-remedy system (Canada has similar provisions) is imbued with an antibody against imports into the United States, and the only effective antidote has been the binational panel system (first adopted bilaterally and then carried over in NAFTA) that ensures fair resolution of inevitable disputes. This is what the United States is targeting for elimination, ostensibly because they have lost more cases than they have won. By contrast, from a Canadian perspective, that would mean the system is working as it should.
When all is said and done, there is plenty of scope, based on NAFTA partners' explicit or implicit objectives, to modernize the agreement (with some help from provisions from the U.S.-rejected Trans-Pacific-Partnership that all three NAFTA partners helped negotiate). However, as was the case 30 years ago, the deal breaker could well be ensuring fair and impartial resolution of trade remedy disputes. Let's hope the moose knows how to play hardball.