The quintessential NAFTA negotiation guide

The quintessential NAFTA negotiation guide
Gary Goodwin
The United States political extravaganza has provided substantial entertainment for the world and Canadians. We have been able to distance ourselves somewhat from the rhetoric.
However, Canada now finds itself within the U.S. President Donald Trump World “Splash Zone.” NAFTA “tweaking” has surfaced and, to paraphrase Trump, we are renegotiating the North American “Stupid Trade” Agreement.

NAFTA has provided great benefits to all three countries involved and created an economic juggernaut of more than $20 trillion GDP. But the U.S. appears to be following a new policy that not only must it succeed but all others must fail. The recent U.S. Trade Representative NAFTA aspirational paper, “Summary of Objectives for the NAFTA Renegotiation”, states that “since the deal came into force in 1994, trade deficits have exploded, thousands of factories have closed, and millions of Americans have found themselves stranded, no longer able to utilize the skills for which they had been trained.” This sounds similar to your spouse of 23 years getting up from bed, padding over to the bathroom and announcing that they want to renegotiate the prenuptial agreement so lawyer up. This does not bode well.

These U.S. factories have shuttered and laid people off mainly due to automation and increased efficiencies. Unfortunately, Americans have not applied this business model to the U.S. government, which appears to be somewhat mired in its buggy whip approach to governing.

The USTR’s main contention appears to the unbiased and objective dispute resolution tribunals set up within the NAFTA agreement. The Canadian government wants to retain these tribunals. However, we should consider that the tribunals have found for Canada so often that, to use Trump’s wording, perhaps Canadians are growing tired of winning. Mandating the use of the U.S. court system does not appear to be a positive negotiating position. However, having Canadians use more U.S. lawyers may resolve part of the service trade deficit.

The USTR argues that having a trade deficit is a terrible thing. Trump did attempt unsuccessfully to equate the trade deficit and the budget deficit. Saying something again and again does not make it true, however, especially for economics where the truth does not depend upon whether the president likes the numbers or not. At this time, Canada actually has a small trade deficit with the U.S., but no one appears to be saying that we are helping alleviate the U.S. budgetary deficit.

The USTR proudly proclaims that Trump became the first American president to begin renegotiating a comprehensive free trade agreement such as NAFTA. Mind you, in 1987, Canada and the United States agreed to the Free Trade Agreement, placing them at the forefront of trade liberalization. U.S. President George Bush, Prime Minister Brian Mulroney and Mexican President Carlos Salinas signed NATFA in 1993 and it came into effect in 1994.These three individuals negotiated NAFTA and renegotiated the FTA. So, truly, Trump became the first president to renegotiate NAFTA, and we have to grudgingly admire someone who can take a kernel of truth and manage to plant an acre out of it.

The USTR would like better access to the Canadian financial system. This is not surprising considering three former Goldman Sachs individuals sit at the president’s advisory table. Even more importantly, we must be aware of what sits on the president’s advisory table. Trump’s favourite foods include deep fried macaroni and cheese to go along with his cheeseburger. This shows a disposition toward dairy. These foods appear to be close to his heart, and they must be close to clogging his heart. We should anticipate further analysis on the impact on Canada’s dairy supply management system to U.S. trade — and, perhaps, a further updated medical report on the “healthiest individual ever elected to the presidency.”

The apparent timing, or lack thereof, can impact the negotiations. The time frame has been compressed to renegotiate the 17 pages of aspirational requests. Whenever someone arbitrarily imposes a tight time frame after 23 years, their motivation has to be questioned. This approach can wear down an opponent to concede some items just to get things done. During his campaign, Trump promised NAFTA changes, but apparently he doesn’t want NAFTA change discussion to impact the 2018 campaigns. Trump must have realized that you really can’t continue fooling some of the people all of the time.

We should be thankful for what the USTR aspirational list does not include. The Trump Marketing Machine had us galvanized for a blue whale breach-sized agreement change such as a border tax on goods entering the U.S. Being in that splash zone, we are relieved that we are facing a smaller series of requests — more of an “orca whale coming up to smile at the crowd” series of requests. It may be less stressful, but you still want to stay wary.  

Negotiating six agreements in the past seven years has prepared the Canadian negotiating team. We all hope that the discussions are based on Harry Truman’s assessment that “Canadian-American relations . . . is compounded of one part proximity and nine parts good will and common sense.” The first part remains fixed, and the parties should aspire to include the other nine.  

Gary Goodwin received his LLM from the University of London, England, emphasizing natural resources and world trade law. In addition, he has received his MBA, LLB and a BSc. majoring in marine biology and he works for a conservation organization and is a contributing author to the upcoming textbook North American Wildlife Policy and Law.

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