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NAFTA 3.0: Better, but still leaving much to be desired

Before Parliament adjourned for the summer, the race to ratify the new NAFTA was on.

At the time, then Foreign Affairs Minister and now Deputy Prime Minister Chrystia Freeland advocated swift passage of the new NAFTA’s implementing bill and warned against reopening the agreement. Industry groups chimed in that only high-speed adoption of the new NAFTA would ensure economic stability.

Back then, many of us at the Council of Canadians were naysayers. We argued in a parliamentary commission that we should press pause on ratification and wait for key changes proposed by Democrats in the U.S. House of Representatives, newly in the majority. Many of you sent letters urging to the government not to rush the agreement.

We knew that these Democrats had the votes to jettison the agreement. Instead of rushing the agreement through and thereby empowering U.S. President Trump and the status quo, we were better off aligning with their demands and improving the deal.

Yesterday, we were proven right. There were significant, positive changes to the agreement, including some of those you and I fought for.

Important protections for Big Pharma have been removed

Biologics are an increasingly vital class of drugs. They can treat conditions like arthritis or ulcerative colitis but are also a drag on our pocketbooks. Already, biologic treatments can cost upwards of $20,000 to $30,000 a year. In some cases, the cost can go as high as $100,000.

In the first draft of the Canada-U.S.-Mexico agreement (CUSMA), pharmaceutical companies would enjoy ten years of marketing exclusivity for these drugs. A report from the Parliamentary Budget Office estimated that this would cost $169 million in higher drug costs in the first year alone. It would be a severe blow to those already struggling to pay for these meds. And these costs would surely straitjacket any future publicly funded Pharmacare program.

So many of you wrote Minister Freeland asking her to side with U.S. Democrats by removing these provisions. Alongside the Council of Canadians, support for removing these provisions came from the Canadian Health Coalition, the Trade Justice Network, the Union des consommateurs du Québec, the Réseau québécois sur l’intégration continentale and many Canadian MPs.

These provisions are now out of the agreement. Gone too are provisions that allow evergreening, or extending patents to allow for new uses for drugs, and mechanisms enabling pharmaceutical companies to challenge regulatory delays.

Labour chapter has been strengthened

During talks on the first CUSMA, Mexico agreed to strengthen enforcement and protection of labour laws and collective bargaining. In this version, there are two important changes. Human rights and labour organizations have documented many cases in Mexico of unions claiming to represent workers but essentially chosen by the employer and representing the employer’s interests.

Now, once the new agreement goes into effect, there are mechanisms to determine whether Mexican employers are truly allowing free democratic union organizing. Canada or the U.S. can enact a rapid response mechanism. A panel of independent labour inspectors would investigate potential violators, with the potential for tariffs or trade sanctions.

As well, the agreement eliminates many hurdles to getting a labour violation case heard. In the past, the burden was on the complainant to prove that the violation affected trade. Now, it is assumed that the violations meet those criteria unless it is shown otherwise.

Given that similar mechanisms have not existed in other trade agreements, it remains to be seen if they can truly protect workers. And while these mechanisms mark an improvement, they do not fundamentally shape situations where corporations shift to operate under situations where labour laws are lax and salaries are low. It will not challenge U.S. right-to-work laws or Canadian labour violations. It will not fundamentally set what a decent wage is or what minimum labour standards are. It will not undo the downward spiral of precarious work and lower labour standards caused by unregulated corporate globalization.

Workers will not have a North American continental labour code or any other North American charter. But workers’ rights loom larger than in previous trade agreements, testimony to the work of the labour movement in all three countries.

Environment chapter somewhat better

The environment chapter will be subject to a dispute resolution process. In the event of an environmental violation, a country can have the violation adjudicated by a panel. If the panel agrees, the country can then apply tariffs or other barriers. As with the labour chapter, it also removes administrative hurdles to having the case heard and assumes that certain criteria as to whether the case affects trade or investment are met.

The problem, though, is what is not included in the environment chapter. Time magazine has astutely named Greta Thurnburg as person of the year for her demand that the world take climate change seriously so that people of her generation can simply exist, the new NAFTA doesn’t mention climate change at all. It doesn’t mention pollution much either. And it certainly doesn’t mention the dreaded words that U.S. President Trump doesn’t want to hear: Paris climate change accord!

The agreement mentions trade in endangered animals, the ozone layer, marine pollution and certain multilateral agreements, but when it comes to greenhouse gases or pollution, the very real issues, there is very little in the text.

As we head towards catastrophic climate change and the point of no return, a problem exacerbated by international trade and by corporations leaving for jurisdictions with weaker environmental regulations, this is much too little, much too late. Again, there are no continental environmental rights, only continental multinational trade.

Gains, but new problems

As you may recall, we in the Council had our own demands. Some of them were met, but new irritants were added. In Getting It Right : A People’s Guide To Renegotiating NAFTA, Council of Canadians Honorary Chairperson Maude Barlow outlined the principles we believed were vital to a fair deal

Removal of ISDS

Our most important victory was the removal of Chapter 11, at least for the U.S. and Canada. For decades, getting rid of Chapter 11, the provisions that allow corporations to sue governments over public policy and environmental decisions, had been especially problematic for Canada. With over $300 million paid by Canadian taxpayers for decisions such as not authorizing neurotoxins, putting a moratorium on fracking or not renewing a pharmaceutical patent, Canada was the most sued country in the developed world because of these provisions. These provisions will not exist for Canada and the U.S. but will remain for Mexico although in more limited form. As Maude Barlow says, our movement should stand up and take credit for this. Existing investor state dispute settlement provisions are on the way out. They are no longer acceptable internationally.

Energy proportionality

We also succeeded in getting energy proportionality removed from the text. NAFTA’s proportionality clause requires Canada to allocate a fixed share of energy exports to the U.S. The more Canada exports, the more it is obliged to export. This has led to a dramatic rise in energy exports to the U.S., accelerating the depletion of Canada’s conventional oil. It has meant exponential growth in the water-destructive tar sands and has facilitated the trade in environmentally dangerous fossil fuels. This NAFTA rule has compromised Canada’s energy security by restricting Canada’s legal capacity to regulate the extraction and trade in tar sands oil. It has also made it harder for Canada to protect water. This is no longer in the new text.

Water protections: not quite there yet

On water, we asked that water be protected from NAFTA and excluded as a tradable good. In response, a side letter protecting water was added, but only in its natural state. Water that is bottled or commodified is subject to market disciplines in NAFTA. Water services and encouragement to keep water services private are also maintained in the agreement through ratchet and standstill clauses.

However, water, in the old text would have been subject to proportionality and mandatory exports in the event that Canada allowed water exports. That has been removed.

Cultural exemption strengthened

The cultural exemption section, which allows Canada to protect its cultural policies such as Canadian content rules from NAFTA’s market disciplines, has been strengthened. We and several prominant authors, publishers and artists, includingas Susan Swan, Margaret Atwood and Michel Tremblay, asked for the protection to remain and to be expanded. These protections have been kept and now include digital cultural works such as Netflix productions, video games and online culture that were not protected under the original NAFTA.

Farmers weakened

But there arecourse new problems. Farmers in the supply-managed egg, poultry and dairy sectors will be hit by a triple whammy: successive trade agreements – CETA covering trade between the EU and Canada, the Tso called Compehensive and Progressive Trans-Pacific Partnership Agreement and now NAFTA – will have major chunks of their market carved out to foreign competition. This will undermine the ability to maintain stable market prices and to guarantee farmers of an adequate living. And milk produced with bovine growth hormones, prohibited in Canada, can enter from the United States under the new NAFTA.

As well, the new agreement has terrible news for grain farmers, whose grading system will no longer distinguish between inferior U.S. grain. Exporters of protein milk concentrates will also be hit, as their exports to the rest of the world will be monitored by the U.S.

Corporate-friendly regulations

We have written extensively on the regulatory cooperation chapter in the new NAFTA, which ensures corporations of a privileged seat at the table to nix regulations before they are hatched and to challenge regulators when they try to act in the public interest. We may have got rid of corporations’ ability to sue us over regulations, but they have invented other ways of undoing our attempts to control their behaviours in the new NAFTA.

This still the same NAFTA, with integration between corporations but no integration in social and political development for the rest of us. It is not an antidote to global problems such as climate change or to democracy or inequality, but rather an improved agreement in response to the efforts of labour, environmental, social and faith groups and of politicians in all three countries. It is still miles away from involving Indigenous peoples in free and informed consent before signing and ratifying treaties. We can do a lot when we work together, but with powerful corporations empowered internationally, we have a long way to go before NAFTA is a truly fair and balanced agreement.

The Near Future

With the U.S. House of Representatives probably ratifying before year’s end, and by the U.S. Senate in the new year, the Canadian Parliament will start its process after it reconvenes on January 27.

So far, the Bloc Québécois and the Conservatives have vowed to delay the deal in a minority parliament, but not for the same reasons as the rest of us. We hope that, in a minority parliament, this process will produce robust public debate not only about this agreement but also about how future trade agreements must be conducted.