NAFTA – This could get Ugly

“Just like a Canadian to bring a knife to a gun fight”  – with apologies to Malone (Sean Connery) in the Untouchables film


This week the three partners of NAFTA held their first meeting to negotiate revisions to the agreement. The US has led with a salvo of 17 pages of requirements. Some were cleaning up the dust bunnies of the 22 year old agreement. Others were meant to tilt the playing field in the US favour.

Robert Lighthizer, the US trade Czar kicked of the meeting with a ringing condemnation of the deal and let Canada know that this wasn’t a “tweaking exercise”!

In response to the US salvo, Canada released its own list of 10 priorities. They are listed at the end of this post.

The Americans response is likely to be “good luck with that” for some of Canada’s idealistic demands.

Severely Normal Albertans will find that there isn’t much on Canada’s list that defends our economic interests. One of Canada’s main global competitive strengths is its natural resources – yet nothing in Canada’s list defends them.

  • Nothing in response to the vague US commentary on energy.
  • Or defending unlimited duty free beef exports (Canada export $3.0 billion and imports $1.0 billion).
  • Nothing on ‘country of origin’ labeling that costs Canadian beef industry $600 million annually and has been ruled “unfair” by the World Trade Organization.
  • Nothing on the softwood lumber issue (presumably the parties want to solve it outside NAFTA negotiations).

A Political Perspective

Some observers with a political perspective think that the US will mainly focus on Mexico’s cheap labor advantage and an aggressive “Buy America” agenda. There is a line of thinking that the Trump administration, in need of a political win, will play hardball with its smaller neighbours.

  • Canada can expect to have it borders pried open for internet retail sales, grains, and the banking and communication industries.

  • Canada’s supply managed sectors like milk, poultry and wine are going to be challenged.

  • The US will also want trade disputes settled in a way that tilts the table in favours of the US.

A Trade Perspective

The veterans in the trade negotiation business are somewhat more optimistic about Canada’s interests:

  • They note that Canada and the US are each others biggest trading partners and the economies are integrated in many ways so radical changes will harm both countries and consumers.

  • There have been not major job shifts to Canada from the US thus Canada is less a target than Mexico.

  • Some language in the US documents mirrors the language from the defunct Trans Pacific Partnership (which Canada liked).

  • The updating of NAFTA to the digital age will increase efficiencies in logistics.

  • Easier movement of professionals between countries will be a win for everyone.

Canada’s Wish List

  1. A new chapter on labour standards. (Increase Mexican wages, so auto plants in the other countries more competitive).
  2. A new chapter on environmental standards. A reference to climate change and to ensure no country weakens environmental protection to attract investment. climate change.
  3. A new chapter on gender rights.
  4. A new chapter on Indigenous rights.
  5. Reforms to the investor-state dispute settlement process. (so Canada can nix investments it judges are not in the national interest).
  6. Expand procurement opportunities of government contracts. Canada wants access to construction projects at the state and local level.
  7. Update the list of professions that can move freely between countries for work.
  8. Protect Canada’s supply-management system for dairy and poultry.
  9. Protect cultural exemptions including broadcasting and publishing.
  10. Maintain an indepentant process to deal with anti-dumping and countervailing disputes.