An agenda for a progressive Canada-U.S. trade partnership

A couple of months ago, my colleague Hadrian Mertins-Kirkwood considered five ways in which Canada’s climate policy might be affected (hopefully for the better) by the Biden-Harris presidency.

Inauguration day now safely behind us (phew), I thought I would perform a similar thought experiment with Biden’s proposed worker- and climate-centred trade agenda—and how Canada could constructively respond.

1. Cool it on government procurement

The Canadian political and business establishment gets nervous about any change in government south of the border. But they are especially jittery about Biden’s plans for stricter domestic content preferences in federal procurement (Buy American) and state transfers (Buy America).

The typical Canadian response to these popular and longstanding U.S. measures is to climb atop a “rules-based trade” soapbox, cry “protectionism” (see photo above) and demand a waiver for Canadian firms, who might otherwise be locked out of public infrastructure projects. This strategy has never worked and stands even less of a chance now, in the middle of a national economic and health crisis much worse the Great Recession of a decade ago.

The best thing we can do in this situation is to chill, watch, and learn. Canadian business will benefit more, on the whole, from a sustained U.S. recovery than from a temporary, modest and uncertain slice of Biden’s stimulus spending pie.

Federal and provincial governments would do better to adopt their own sustainability criteria and, where possible under global trade rules, put local economic development conditions on public spending that favour local goods, services and employment.

Canadian versions of Buy America and Buy American (e.g., sustainability conditions on federal transfers to the provinces and territories) could spark a conversation between the Trudeau government and Biden administration about the mutual benefits of a potential “Buy North American” strategy, as proposed by the United Steelworkers during the first Obama presidency.

Co-operating with the U.S. on public procurement of regionally produced renewable energy infrastructure, for example, would have the added benefit of more rapidly “greening” the North American grid (another Biden priority) while creating millions of good jobs on both sides of our shared border.

2. Get serious about labour rights and environmental protections

In a speech earlier this month, Katherine Tai, Biden’s pick for United States Trade Representative (USTR), expressed the new administration’s desire to “implement a worker-centered trade policy.” Tai touted the incorporation of enforceable labour and environmental provisions in the NAFTA replacement agreement (USMCA, or CUSMA in Canada) as an example of the kind of reforms she will seek in future trade policy, to “address longstanding wounds and grievances suffered by regular working people.”

Already, Democrats are looking to prioritize U.S. government enforcement of the CUSMA labour protections in disputes that will expose the power and limits of the new NAFTA to stop companies from violating core labour rights (e.g., to bargain freely) and improve working conditions across the continent. This activist agenda is endorsed by powerful U.S. labour voices like AFL-CIO and the autoworkers and, tentatively, by Mexican worker advocates like the Maquila Solidarity Network.

The Trudeau government could complement the Biden administration’s enforcement strategy by setting up an impartial body to hear complaints from the public about international labour violations. As CCPA researcher Scott Sinclair proposed last year, credible complaints should compel the federal government to take up the case, up to and including a state-to-state dispute settlement proceeding to solve the labour violations.

With respect to enforcement of environmental protections, Earl Blumenauer, a Democrat from Oregon who chairs the House Ways & Means trade subcommittee, also said this month that he hopes to add more environmental provisions to CUSMA, a move rejected by the Trump administration. This would be a way “to build momentum, build some trust and get people in the mindset on where we go from here,” he said. If Biden moves in this direction, Trudeau should be willing to come to the table.

On January 19, a group of 122 House lawmakers wrote to Biden urging him to agree with Canada and Mexico to add the Paris climate agreement to a list of multilateral environmental agreements that the parties to CUSMA pledge to adopt and maintain, per Article 24.8. This should be a no-brainer for the Trudeau administration, and a move that may create opportunities for governments, environmental advocates and the public to challenge policies in any North American jurisdiction that run counter to Paris commitments to significantly lower greenhouse gas emissions.

3. Co-operate on protective regulation

Late last year, the Trudeau government announced that it would be adding plastic waste to the list of controlled (toxic) substances under the Canadian Environmental Protection Act, as part of an integrated plastics management plan. The move, which opens up regulatory options now that might otherwise have been difficult, or might have taken too long to establish in law, was immediately challenged by the North American petroleum and chemicals lobbies as a possible violation of the “good regulatory practices” and “technical barriers to trade” chapters in CUSMA.

These business agitators do not have a strong CUSMA case against the Canadian proposal. But they are correct that the new NAFTA enshrines a regulatory mentality and administrative practices under which public and environmental protections should impose as small a “burden” on business as possible and avoid creating new obstacles to trade.

The problem with this mindset is that curbing harmful and unnecessary plastic products and packaging demands the exact opposite approach: we need regulations that create new costs for plastic-polluting companies and that impose new barriers to international trade in plastics.

In December, a prominent group of Senate Democrats sent a letter to Trump’s USTR Robert Lighthizer defending the Canadian plastics management proposal. Under the Biden administration, Canadian and U.S. environmental scientists, municipal and state-level governments and other advocates of environmental protection measures could be enlisted into a coalition for an aligned U.S.-Canadian plan that would also, coincidentally, lower trade costs—albeit not in the way industry groups would like to see.

In the long run, Canada and the U.S. will need to rewind and reform their domestic regulatory policies and bilateral regulatory cooperation activities that currently put business in the driver’s seat. One of Biden’s first executive orders seems to move in this direction, according to Washington, D.C.-based Public Citizen. A win for stronger environmental protections via Canada-U.S. cooperation on plastics would demonstrate what an alternative regulatory mentality and more precautionary international regulatory co-operation can achieve.

4. Jointly back a TRIPS waiver at the WTO

The Biden-Harris administration promises to take the COVID-19 crisis more seriously than Trump did, while Trudeau bragged that his government’s vaccine procurement and rollout strategy is the envy of countries such as Germany. However, both the United States and Canada have opposed a modest proposal at the World Trade Organization (WTO) that would help poorer countries provide for their citizens as well.

Canada, the U.S. and a few other rich countries are blocking a proposal from India and South Africa—backed by over 100 other countries—to temporarily suspend intellectual property rights in the WTO TRIPS agreement for the purpose of speeding up and lowering the cost of responding to the COVID-19 emergency.

Last year, Canada’s own COVID-19 legislation, Bill C-13, authorized the temporary suspension of patents and trade secrets to respond to shortages and protect public health. It is hypocritical and disingenuous for the Trudeau government to be blocking less well-off countries from doing the same.

Given Biden’s need to shore up international allies in the wake of Trump’s foreign policy wrecking ball, the new administration might be open to putting the profits of Big Pharma temporarily aside at the WTO. A Canadian softening on the TRIPS waiver may create room for Biden to do the same.

For any of this to happen, the Canadian government has to want it to, which is an open question. But Canada would be wise to try to work with and amplify the Biden administration’s mildly progressive instincts, rather than spend the next four years fretting about U.S. economic, environmental and trade policy reforms that will more likely than not benefit Canadian workers as well.

Stuart Trew is a senior researcher at the Canadian Centre for Policy Alternatives and incoming Director of the CCPA’s Trade and Investment Research Project.