An Angus Reid Institute poll conducted this past February found that 35 per cent of Canadians think Canada will be worse off after the North American Free Trade Agreement (NAFTA) is renegotiated, with only 10 per cent saying they believe the country will be better off afterwards.
This view could be informed by many factors including U.S. President Donald Trump’s aggressive ‘America First’ posturing and his stated willingness to rip up the agreement, while, in stark contrast, Prime Minister Justin Trudeau has attempted to placate the president and emphasized the importance of keeping NAFTA.
The Toronto Star’s national affairs columnist Thomas Walkom has warned, “Is the Liberal government willing to walk away from free trade with the U.S. if Trump’s demands prove too much to bear? It had better be. Otherwise, Trudeau enters these talks not as a partner but as a supplicant.” And Canadian Centre for Policy Alternatives analyst Scott Sinclair has noted, “If things get really ugly—and they could—Canada needs to have an exit strategy. That means being prepared to let the Trump administration make good on its threat of NAFTA termination. This outcome would be preferable to giving in to all U.S. demands, however extreme or unreasonable.”
In March, The Globe and Mail reported, “Trump’s administration wants across-the-board changes to the North American free-trade agreement that would tilt the rules of cross-border commerce more clearly in favour of U.S. business. A draft eight-page letter to Congress … outlines more than 40 negotiating objectives the White House is seeking as the U.S. prepares to reopen NAFTA in talks with Canada and Mexico. The revisions sought go far beyond the modest ‘tweak’ for Canada that Mr. Trump promised when he received Prime Minister Trudeau in Washington.”
That article highlighted, “The Trump administration says it wants to eliminate from NAFTA the Chapter 19 dispute settlement system, which grants Canadian companies a means of directly appealing decisions by the U.S. government where Washington has slapped duties on their products.”
University of Prince Edward Island political science professor Peter McKenna argues, “The Canadian government simply cannot afford to have Chapter 19 administrative panels eliminated or substantially defanged. It would severely undermine our trade interests and leave us with no safety valve or protection from U.S. trade remedy laws. Canada would thus be extremely vulnerable to a protectionist Trump White House, industry-beholden Congress and a highly politicized U.S. International Trade Commission. It goes without saying that Canadian trade negotiators – working closely with their Mexican counterparts – have to ensure the survival of Chapter 19.”
He adds, “Abolition of the NAFTA panels, then, has to be a non-starter and clearly non-negotiable for the Trudeau government. It’s a deal-breaker for us. Without the right to appeal, we may as well pick up our trade marbles and walk away from the bargaining table. Otherwise, Ottawa would be playing into Trump’s hands and recklessly jeopardizing billions of dollars in Canadian exports to the U.S. marketplace.”
The CCPA takes a slightly different view: “A 2005 House of Commons report identified major problems with the Chapter 19 process. Because of U.S. obstructionism, these reviews are arguably more time consuming, costly and unfair than appeals through U.S. domestic courts. Moreover, if you win in the U.S. courts you can get your money back. Under Chapter 19 the process just starts over again. Even if the review process were abolished completely, Canadian exporters will still be able to have a final determination reviewed in the U.S. courts. The Article 1904 review process has been used 21 times by Canadian exporters since 1995. Its loss would be felt, but its benefits should not be exaggerated.”
Late last month, the U.S. Department of Commerce imposed countervailing duties averaging at about 20 per cent of Canadian softwood lumber exports into the United States. Following this announcement, a second ruling by the U.S. Commerce Department on anti-dumping duties is expected in the coming months.
How does this specifically relate to Chapter 19? After the countervailing duties were announced, Natural Resources minister Jim Carr stated, “Independent trade panels have repeatedly found these claims to be baseless. We have prevailed in the past and we will do so again.” The CBC further explains, “Dispute settlement provisions included in NAFTA’s Chapter 19 allow Canada to appeal U.S. lumber duties to both a NAFTA review panel and the World Trade Organization. Appeal panels frequently rule against U.S. interests (and may do so again, should this dispute reach that stage.)”
The Globe and Mail’s Barrie McKenna argues, “If the Trump administration pushes to neuter the state-to-state dispute-settlement regime (Chapter 19), Canada should insist on limiting the ability of investors to directly sue governments via Chapter 11. Canada has been sued more often [37 times] and hit with more penalties [$170 million] than either of its NAFTA partners under the so-called investor-state rules.”
Council of Canadians chairperson Maude Barlow says, “We will push the Trudeau government not just to sit at the table and react as Trump swings, but to come to the table with its own demands.” Even The Globe’s McKenna says, “Canada would be wise to draft an equally bold list of its own demands.”
To call on Trudeau to stand up to Trump during the NAFTA talks, please click here. This is an urgent concern – the renegotiation of NAFTA is expected to begin this August and conclude by April 2018.
