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What is the Trudeau government’s Plan B on NAFTA?

Mark Eyking, the Liberal MP who chairs the House of Commons Standing Committee on International Trade, says it would be prudent for the Trudeau government to consider the alternatives if NAFTA were to fall apart.

On May 19, U.S. Trade Representative Robert Lighthizer wrote to Congress officially triggering the 90-day consultation period required to renegotiate the North American Free Trade Agreement (NAFTA).

His letter mentions a wide range of issues (but without detail), including digital trade, intellectual property rights, regulatory practices, state-owned enterprises, services, customs procedures, sanitary and phytosanitary measures relating to animal and plant safety, labour, environment and small and medium enterprises.

A draft list of U.S. negotiating objectives leaked in March was more specific, suggesting the elimination of the Chapter 19 state-to-state dispute settlement provision, an end to non-tariff barriers in agriculture (supply management), a border adjustment tax on foreign imports from Canada and Mexico, increased duties on imports unless they contain a higher level of U.S. content, a preferential ‘Buy American’ policy for government purchases, and an ability to ‘safeguard’ against a flood of Canadian or Mexican imports.

Bloomberg has reported, “Andres Manuel Lopez Obrador [the front-runner to become the next Mexican president after the July 1, 2018 election] said it makes no sense to insert tariffs into NAFTA as Trump has been threatening to do for months [and doesn’t] appear too concerned about the possibility that the trade pact could break down completely… The current Mexican government has [also] warned that it would walk away from NAFTA talks if the U.S. demands tariffs…”

The Council of Canadians has argued that Prime Minister Justin Trudeau should articulate his red lines (what he will not concede to Trump) and that he should also make a public statement that he is prepared to walk away from NAFTA should Trump’s demands make the terms of an agreement untenable.

The Hill Times now reports, “Liberal MP Mark Eyking … said it would only make sense that officials in the Prime Minister’s Office (PMO) and other departments would be thinking about how to protect the economy should upcoming NAFTA talks fall apart and the Trump administration follows through on its promise to get out the agreement if it can’t extract satisfactory concessions from Canada and Mexico. …Mr. Eyking said he’s optimistic that a revised trade agreement with the U.S. can be reached, but added that it’s prudent to consider the alternatives.”

That article adds, “The PMO deferred questions about whether contingency plans were being considered in the event of failed NAFTA talks to Ms. Freeland’s office.” The response from a spokesperson in Freeland’s office did not directly answer The Hill Times question about contingency plans.

That said, the Trudeau government’s contingency plan for the U.S. withdrawal from the Trans-Pacific Partnership (TPP) increasingly appears to be to incorporate TPP provisions in a renegotiated NAFTA.

The Hill Times notes, “Warren Everson, senior vice-president of policy for the Canadian Chamber of Commerce, [says] Canada would probably like to include in NAFTA some of the provisions regarding intellectual property that were in the Trans-Pacific Partnership, which appears to be dead following Mr. Trump’s revoking of U.S. support for that trade agreement upon taking office earlier this year.”

Furthermore, The Globe and Mail reported yesterday, “Ottawa will attempt to move the talks toward an update of NAFTA that would preserve the existing agreement but enhance it to make it more like the TPP… That deal covered the digital economy, which NAFTA does not, and included stronger labour and environmental provisions.” And the CBC has highlighted, “TPP language could be recycled [in NAFTA], if everyone’s politically savvy enough not to emphasize where it’s from.”

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