NAFTA by any other name could be the acceptable solution
When the US and Mexico announced a trade agreement signed without Canadian involvement in late August, many observers were wondering if it marked the end of the North American Free Trade Agreement (NAFTA). Adding fuel to that speculation was President Trump’s declaration that he would prefer to hit Canada with more tariffs if we were not prepared to sign on to the conditions of the new US/Mexico deal. Despite the bravado, the stakes are high for politicians on both sides of the border and after a summer of erratic American trade policy and tariffs many Canadians are concerned about how this will impact our economy. Looming in the background are elections on both sides of the border.
Canadian officials rushed to Washington for negotiations just days after the deal with Mexico was announced. Despite a sense that progress was made, negotiators were unable to meet the end-of-week deadline imposed by the American President. That was followed by a weekend during which the climate in the United States shifted somewhat. Concern crept into the administration that not all of their perceived allies appreciated the way Canada is being treated. Most notably, Richard Trumka, the head of the American Federation of Labour and Congress of Industrial organizations (AFL-CIO), stated that any agreement should include Canada.
Predictably, President Trump lashed out at the union leader, claiming he was poorly representing the rank and file members he leads. What is not lost on other politicians is that the AFL-CIO is made up of 12.5 million workers who are also voters. With mid-term elections looming, there is more pressure on Congress, which must ultimately sign off on any agreement, to deliver for these workers. In stark contrast to those concerns, the president says there is no political pressure to make a deal with Canada. He campaigned on NAFTA reform and seems determined to deliver on that front. How far Congress will go along with him remains unknown.
Currently negotiations are focusing on a number of issues. Supply management, the dispute settlement mechanism, protection for cultural industries, and intellectual property rights are among the most prominent. The good news is that Congress has provided more time for a deal to be struck. At the same time, some Republican Senators are claiming the President cannot unilaterally cancel NAFTA. Many of those Senators are voicing a preference for a modernized deal instead.
While it’s troubling that the US president continues to double down with threats of auto tariffs and aggression toward Canada’s dairy industry, perhaps there is a way forward that will allow him to claim some victory as well. Among the many comments the President made when the Mexico-US deal was announced was his preference that any new deal would not continue under the NAFTA banner. That opens the door for an updated agreement with a new name that could reflect the way business has changed in the quarter century since the original agreement was signed, without abandoning the principles of free trade.
As it stands, the uncertainty and tariffs are not good for business and that in turn threatens employment. If jobs are lost due to the dispute, it could be bad news for Congressional representatives seeking re-election in November. The same could be said for politicians in Canada. That should be motivation for both sides to come to an agreement that protects our integrated economies.