Canada will be better off if Trump dumps NAFTA

Many commentators appear worried that US President Trump will end up sabotaging any new NAFTA deal by insisting on new provisions that Mexico and Canada cannot accept.

 

An article by Thomas Walkom suggests what Canada can do if Trump kills NAFTA. If U.S. President Donald Trump rejects the North American Free Trade Agreement, there are essentially three things that Canada can do. One reaction would be to try and keep what remains of NAFTA with Mexico and hope that Trump's presidency wont last too long. Negotiations could resume with a new US president more amenable to a free trade deal that all three nations could accept. However, there may be a deep-seated negative attitude towards globalism in the US that could continue even if Trump's presidency ends. A second reaction would be to try to negotiate a bilateral deal with the US. That is not likely to be successful as Trump will insist on terms unacceptable to Canada. If NAFTA is ended then the 1989 US-Canada Free Trade Agreement would automatically come into force. Trump might very well demand it be renegotiated and end up rejecting it as well.

A final reaction would be to accept that the goal of continental economic integration is dead and pursue other economic aims. The US would still be a main trading partner of the US if it rejected NAFTA and as a recent study by the Canadian Centre for Policy Alternatives shows 41 percent of Canadian exports to the US would still face no tariffs without NAFTA. However, this may be because of the 1989 Canada-US Free Trade Agreement. US business reaction might be so negative at this point towards Trump that he might find it difficult to reject it as well as NAFTA.

Walkom suggests that the demise of NAFTA would force Canada to search for other markets for its goods and for other trading partners. This would lessen our dependence on the US which Walkom considers would not be such a terrible fate. While Walkom's view may be correct there are strong reasons why NAFTA should be rejected. Canada is not even attempting to remove some of the key provisions in NAFTA that are very much against the interests of Canadians.

Three provisions were set out in a recent Digital Journal article. In order to protect our crucial water supplies from becoming a commodity the provisions must make it clear that water is not a good, service, or investment. Otherwise Canada would be forced to export bulk water and increase privatization. The US no doubt could see Canadian water as a means of re-hydrating some US states that are very short of water.

Canada also needs to do away with the investor-state settlement provisions (SDS) in Chapter 11 of the treaty. This allows corporations to sue governments if they adopt policies restricting corporate profits. The sections have been used to challenge governments when they pass laws intended to protect people's health or protect the environment but have negative effects on corporate profits.

Finally there is the absolutely unfathomable proportionality clause. There is not a mention of this in Canada's list of priorities. The clause requires that if the government of any member of the agreement cuts energy available for export to another country it must cut the supply to the same extent domestically. Canada gave up its right to give priority to Canadians when it comes to access to scarce energy supplies. An expert on energy notes: ."Proportionality is "unique in all of the world's treaties," writes Richard Heinberg, a noted California energy expert... It's unclear how many other countries the U.S. has tried to impose an energy proportional sharing chapter on, but it is clear none has bitten. Heinberg concludes that "Canada has every reason to repudiate the proportionality clause, and to do so unilaterally and immediately."Mexico is not subject to the proportionality clause. Some of the new demands the US has made that may scuttle the negotiations are mentioned in the appended videos. One demand, the sunset clause seems quite reasonable to me, although both Mexico and Canada as well as many business leaders are strongly against it. The problem is that Trump's ideology of America First places US and not global corporations interest first, as well as attempting to get them to produce in the United States. Global business wants agreements favorable to them to last indefinitely without being subject to the threat of a sunset clause or any nationalist demands akin to those of Trump.