CUSMA – The “new” NAFTA
Since its inception, the new North American Free Trade Agreement – or the Canada-United States-Mexico Agreement (CUSMA) as it is known here – was doomed to be a corporate-first agreement.
With U.S. President Donald Trump in the Whitehouse, the old NAFTA as a template, media hysteria around the possible loss of NAFTA, and corporations being granted preferential access to the negotiations, the new agreement was designed to follow the same template as the previous NAFTA and benefit corporations above all else.
Along with labour, citizen’s groups, environmental and faith groups in the three countries, the Council of Canadians successfully campaigned to get rid of some of NAFTA’s most destructive provisions. We were successful in removing certain provisions like Chapter 11 and the energy proportionality clause – harmful provisions that we have fought against for decades. But at the same time, new ones were added that will hurt Canadian farmers and create new corporate-friendly forums that can remove regulations designed to keep us safe and healthy.
With so much at stake, it isn’t just industries that are affected. Our health and our planet are at risk. Trade agreements rule how our globalized planet is run, and there is much to be concerned about.
Corporate rights and corporate courts
The most important victory in the new deal, at least for the U.S. and Canada, was the removal of Chapter 11. For decades, Chapter 11 investor-state dispute settlement (ISDS) provisions that allow corporations to sue governments over public policy and environmental decisions had been especially problematic for Canada. With ISDS in place, Canada became the most sued country in the developed world. Canadian taxpayers have paid out more than $300 million for decisions such as not authorizing neurotoxins, putting a moratorium on fracking, and not renewing a pharmaceutical patent.
This provision isn’t completely removed in the new NAFTA deal. Mexico is subject to ISDS particularly for its energy and telecommunications industries. As Mexico attempts to reign in dubious private contracts with U.S. companies for Pemex, its national energy company, it could face ISDS challenges.
Canadian mining and oil companies can also count on ISDS provisions with Mexico in another agreement, the so-called Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
Existing ISDS provisions are now being challenged internationally. We must ensure that other trade agreements our government negotiates do not contain ISDS provisions.
See our video and factsheet about ISDS.
The Council of Canadians opposed energy proportionality provisions in NAFTA that mandated Canada to export quotas of energy to the United States. They have been removed from the recent agreement.
Contained in the original U.S.-Canada Free Trade agreement, these provisions were grandfathered into the new NAFTA. However, as the old U.S.-Canada Free Trade agreement is only suspended, not removed, these provisions could come back when the U.S. reviews the agreement under the “sunset clause” six years after it is ratified. We must cancel the U.S.-Canada free trade agreement completely.
See our video and factsheet about energy proportionality.
Cultural exemption strengthened
CUSMA’s cultural exemption section, which allows Canada to protect its cultural policies such as Canadian content rules from NAFTA’s market disciplines, has been strengthened. The Council of Canadians joined with more than 100 prominent Canadian, Québécois and Indigenous authors, publishers and artists, including Susan Swan, Margaret Atwood and Michel Tremblay, in asking for the protection not only to remain, but 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. The new NAFTA maintains the U.S.’s right to retaliate, though, like in the original NAFTA.
The Council of Canadians and U.S. allies were successful in removing costly provisions that would have raised the price of vital drugs. Originally, the Trump-negotiated NAFTA contained provisions that would give market protections to biologics, a class of drugs made with human or animal tissues. These drugs, which cost thousands of dollars, are used to treat arthritis, ulcerative colitis and other conditions. Biologics have the fastest rising costs for public and private drug plans. The new NAFTA’s original provisions would have increased the price tag even further potentially jeopardizing a future universal, public pharmacare plan.
The Council of Canadians worked with trade and health coalitions and Canadian MPs to challenge these provisions and U.S. Democrats successfully removed them from the agreement.
While NAFTA’s renegotiation was far from a nation-to-nation relationship where Indigenous Peoples have the right to participate in any treaty that Canada enters into, and the government’s attempt to have an Indigenous Chapter in the deal fell apart, Canada’s commitment to Indigenous rights is exempt from being challenged in the new NAFTA.
However, Canada’s duty is to respect Indigenous Peoples’ self-governance agreements is included in a footnote. The United Nations Declaration on the Rights of Indigenous Peoples is not in the agreement.
CUSMA does include protections for Indigenous fishing rights, trade, and allows Crown Corporations to hire Indigenous Peoples through preferential hiring programs. The environment chapter recognizes the importance of Indigenous knowledge in environmental stewardship.
With the new NAFTA, small farmers and consumers suffered major losses as their interests were sacrificed to big American agricultural interests. While Prime Minister Justin Trudeau vowed to protect the sector, in the end, Canada gave in to pressure from President Trump who repeatedly targeted Canada’s supply management system.
These changes in the new NAFTA will lead to an influx of agricultural products from the U.S., including U.S. dairy that may come from cows that have been injected with genetically engineered bovine growth hormones to increase their milk production. There are no labelling requirements for milk that comes from rBGH cows, so consumers will not know what they are drinking.
Canada has already surrendered market access in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) negotiations.
In NAFTA 2.0 regulatory cooperation is no longer voluntary. It is has become a permanent, binding process that all NAFTA countries must follow. Unelected “stakeholders” now have a back room to shape regulations not in their favour, with no public participation or oversight.
In a recent report, the Council of Canadians and foodwatch Netherlands revealed how a similar regulatory cooperation committee was being used to undermine EU food safety regulations on pesticides and herbicides. Canadian regulators were using the committee to challenge regulations and to advocate for lower standards and the removal of the precautionary principle.
In regulatory cooperation, corporations are given advance notice of new regulations. So-called “interested” persons are notified ahead of time about planned government regulations and are allowed a consultation process before any regulation goes through a legislative process.
The chapter requires that regulations be “science-based.” In other words, regulations cannot be prescribed for ethical or social reasons. The emphasis is on the regulator to prove that a regulation is backed by science, and not on the corporation to prove that their product does no harm. The latter, known as the precautionary principle, is precluded by this approach.
Regulators have to vigorously defend proposed regulations and are even required to suggest alternatives that don’t involve regulating. They have to provide extensive analysis, including cost-benefits to industry. Regulatory cooperation is subject to dispute resolution. This means corporations can directly challenge government actions.
The new NAFTA encourages the three countries to harmonize or have similar regulations. This is not about raising standards, but rather bringing standards down to the lowest common denominator. As corporations push for GMOs, glyphosate, and against health labelling, cigarette labelling, rules on food inspections, and many public safety rules, under the new NAFTA they now have a new forum to not only be heard, but to contest regulations behind closed doors.
Since the original NAFTA was signed, we are much more aware of the gravity of the climate crisis. According to recent statements from the Intergovernmental Panel on Climate Change, we have only 10 years to make drastic changes if we want to keep global warming under the critical threshold of global temperature rise of 1.5 degrees.
As trade and globalization contribute to the climate crisis, it is vital to have a new NAFTA agreement that not only doesn’t worsen the crisis, but contributes to addressing it. While some of the worst aspects of NAFTA are gone in its new iteration, it is still an agreement with no teeth to tackle the climate crisis – in fact, it exacerbates it.
The removal of ISDS mechanisms and energy proportionality from the agreement are important gains for the environment. The problem is what is not included in the new NAFTA’s environment chapter, specifically that it does not mention climate change at all. It doesn’t mention pollution much either. And it certainly doesn’t mention the Paris Climate Change Accord. While the agreement is more enforceable, it barely addresses the most dangerous issues of our time.
NAFTA puts water at even more risk by defining it as a commodity that can be bought and sold.
In the original NAFTA agreement, water is defined as a “tradable good.” In CUSMA a side letter claims to protect water, but it only mentions water in its “natural state.” Once water is bought or sold it is no longer protected and must be subject to the deal.
However, there have been some marked improvements in the new agreement. The original NAFTA’s proportionality clause prevented Canada from limiting or decreasing water exports once they start. That would mean if a province started sending water to the U.S., it couldn’t cut back on the amount of water it was sending even in times of drought. The new deal doesn’t require this. It also does not protect water services from being privatized.
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 they are essentially chosen by the employer and represent 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.
Labour provisions are also not in a side agreement, but in the main text with dispute mechanisms to enforce the text.
Quebec aluminum unions still have concerns about how North American content is determined. They worry that it gives a loophole for foreign companies to qualify under NAFTA. The Bloc Québécois are raising these concerns.
Public services are also affected by NAFTA’s original ratchet and standstill clauses that prevent states from bringing back entities into public hands after they have been privatized. It also puts constraints on Crown Corporations, forcing them to be straightjacketed by the market.
Going forward? Hopes for Canada’s next trade agreement
The next negotiation of a trade agreement must be different. From the beginning, social actors must be able to change the entire frame of the deal.
Many of our trade agreements, such as CETA and the South Korea agreement, have not even resulted in increasing Canadian exports. We should ensure all proposed trade agreements have independent evaluations of their economic, environmental and social impacts.
We should copy the processes of other countries. In the E.U. and the U.S., there is much more public and parliamentary involvement in the trade negotiation of the agreement right from the start. In these countries – by law and design – the processes are more open. Negotiation objectives are debated in legislatures and in committees, public consultation is mandated, and economic analysis is part of the process.
More than 2,000 Council of Canadians supporters recently wrote to the Trudeau government asking for these important oversights and Deputy Prime Minister Chrystia Freeland recently announced some of these measures would be put in place.
More public transparency and accountability will help shift the balance of trade agreement from being in the interest of corporations to being in the interest of people and the planet, which is a positive step forward for us all.