Canada and NAFTA

Eduardo del Buey
Foto: Afp
La Jornada Maya

Martes 11 de septiembre, 2018

Over the past week, Canadian and U.S. officials have been meeting to hammer out the conditions under which Canada could rejoin the trilateral talks that seemed to have disappeared when Mexico and the U.S. decided to negotiate a bilateral agreement. There has been considerable commentary in Canada as to whether Mexico threw Canada under the bus, or whether both decided that clearing up controversies between the U.S. and Mexico would be essential to a successful outcome. This is a matter for historians to judge.

Suffice it to say that the Mexico-U.S. deal has had some benefits for Canada, optics aside. The question of rules of origin for auto parts and of wages for auto workers are issues that benefit Canada, which has long sought parity between Mexican wages and the rest of North America in order to level the playing field.

So, what are Canada and the United States dealing with now?

There are three key issues on the table in the talks: (1) Chapter 19 (the dispute settlement mechanism); (2) protecting Canadian cultural productions, and (3) supply management in the dairy sector.

First, the mechanism in Chapter 19 has served all three NAFTA members well over the past twenty years and is seen as essential to ensure that Canada has an equal footing in resolving disputes. Moreover, Prime Minister Trudeau has stated his further concerns with regards to President Trump’s unpredictability and constant flaunting of rules-based mechanisms. Given the relative sizes of the Mexican and Canadian economies, Trudeau has stated that Canada wants something as effective as Chapter 19 with respect to an independent dispute mechanism. This may leave some room for maneuver; however, the core principle remains the same.

With respect to culture, the cultural exemption clause protects Canadian cultural industries such as production and distribution of publications, films, television programs, radio, television and cable broadcasting. Canada’s position is that these exemptions must stand in order to maintain Canadian sovereignty and identity. Canada will not accept American moves into Canadian media markets, preferring to keep Canadian media in Canadian hands. The United States wants changes in copyright and digital economy issues, and these rules of engagement are seen as essential for the management of a 21st Century economy. In this regard there may be room for negotiation especially where it relates to digital piracy in television, film and music.

Last but not least, supply management is a political hot potato in vote rich Ontario and Quebec where the protection of the dairy industry has always been seen as essential in order to keep prices stable and production flowing. While Prime Minister Trudeau has said that this is non-negotiable, it could well be a tool in the Canadian negotiating kit that can be modified to provide Trump with a tacit victory and save Trudeau from appearing to have caved in. Indeed, Canada agreed to some changes in the supply management regime in both the Trans Pacific Partnership and the Comprehensive Economic and Trade Agreement with the European Union (CETA), which leads me to believe that there is also room for negotiation on this point.

Does Canada have to give in?

I don’t think so, at least not at this point in time.

Canada has done an excellent job of getting a majority in Congress, state and local governments, and key opinion makers in the United States to advocate that Canada is essential for a continental trade deal given the integration of many key industries among the three member states.

As the U.S.’s major trading partner, Canada brings some clout to the tables despite differences in the size of each country’s economy.

Canadian public diplomacy, developed over some thirty years, is making a difference in creating a coalition that could well stand up to Trump should he double down on trying to pull out of NAFTA. I believe that Congress, which has the last word on trade deals, will pressure Trump to deal fairly with Canada and not seek his maximalist objectives. With the November mid-term elections in the U.S. looming, and the potential threat to jobs in the U.S. among voters who form Trump’s political core (not to mention the possibility of the Republicans losing control of one or both Houses), the President could well be cajoled into accepting a tacit victory without it costing Canada too much.

To date, Prime Minister Trudeau and Foreign Minister Freeland have played it well. They have avoided falling into the tit for tat trap of negotiating with Trump publicly or engaging in Twitter diplomacy, preferring to keep their powder dry and work with U.S. Trade Negotiator Lighthizer with quiet diplomacy. Trudeau has resisted travelling to Washington and creating an image of being a supplicant. As well, he has given Foreign Minister Freeland the space in which to negotiate with the U.S. behind closed doors, leaving it to U.S. negotiators to bring Trump on board with any potential deal.

How this will turn out is anybody’s guess. Trump is a volatile leader. Capricious and egocentric, it takes little to put him off. Yet he is conscious that the November elections can be a game changer, and that Congress may well not allow him to implement his threat to pull the U.S. out of NAFTA.

If the Canadians can give Trump the illusion of a victory without losing their own bottom line, then both leaders can emerge winners in the eyes of their respective constituencies, and Canada, the United States, and Mexico can once again become the “Three Amigos”.

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