June 2006: It's Broke and It Can't Be Fixed

Renegotiating NAFTA won’t solve Canada’s trade problems
June 1, 2006

Several prominent critics of the North American Free Trade Agreement (NAFTA), including NDP leader Jack Layton, have proposed that its defects—including repeated U.S. refusals to honour its terms—can be corrected by renegotiating this treaty.

Before examining this proposal, it should first be kept in mind that the central problem caused by NAFTA—and by the previous Canada-U.S. Free trade Agreement—is the loss of Canadian autonomy. The FTA and NAFTA ceded to the United States major federal and provincial powers that our governments had exercised to build an independent country with a distinctive culture and way of life—powers that were also sometimes used to curb or moderate market forces inimical to Canadian interests.

With our federal and provincial governments hobbled by NAFTA, their laws, programs, and policies have now been reshaped to serve American interests. Our independence is being steadily eroded. Maintained much longer, NAFTA—with the help of our political, business and media proponents of even “deeper integration” with the U.S.--will eventually transform Canada into a de facto American vassal-state.

Consider the specific powers that the free trade agreements have transferred from Canada to the U.S.: control over our oil and gas, control of our water, the right to obstruct Canadian exports with countervailing and anti-dumping duties; the power to force us to sell them our forests, abolish the Canadian Wheat Board, and privatize Medicare; the right to demand that our cultural policy (publishing, broadcasting, films and recordings) be consistent with American interests; national treatment and proportional sharing terms that lock us into supplying the U.S. with most of our oil and gas resources; and the right of U.S. corporations to directly sue our federal government for non-compliance with these trade concessions or for laws or policies that threaten their profits. (Some of these powers have not yet been fully deployed by the U.S., but let’s be under no illusion that they will be activated whenever it seems to the U.S. to be strategically advantageous.)

Given these hard realities about the effects of NAFTA, here are five reasons why the problems it is causing for Canadians can never be remedied through renegotiation:

1. What would be the object of such a renegotiation? Repatriation of the powers that have been ceded to the U.S. would require major amendments to almost every chapter of NAFTA—amendments that the United States will never willingly accept, since they would eliminate the one-sided benefits that the U.S. now enjoys. Would our negotiators be willing to let the U.S. retain some or most of these powers? If so, the negotiations would be futile. If not, the U.S. will never agree to reopen the agreement.

2. Even if the U.S. were to agree to relinquish some of the rights and powers conferred on it by NAFTA, would it not demand some further quid-for-quo concessions from Canada? Its negotiators would argue that negotiations, by their very nature, require compromises on both sides. Our negotiators might well be faced with U.S. counterproposals that we give them other and equally damaging rights and powers in return for the ones they might yield.

3. The U.S. has an economy that is 10 times the size of Canada’s, and so can argue—as it did in the original negotiations—that NAFTA cannot be an agreement between equals since Canada potentially stands to gain more for access to its much larger market than the U.S. can from access to our much smaller one. Hence its demands for even further concessions will be difficult to resist.

4. Any substantive renegotiation of NAFTA would produce an amended treaty that would have to be approved by the U.S. Senate and House of Representatives, as well as by the President. Any changes favourable to Canada would inevitably be opposed by the powerful American industries that now benefit from NAFTA’s pro-U.S. bias, and the resulting tidal wave of protectionist pressures would make the chances of Congressional approval remote, to say the least—assuming that a renegotiated NAFTA would even get as far as Congress in the first place.

5. What could Canada’s negotiators conceivably offer the U.S. as an inducement to reopen NAFTA? Remove all barriers to the American privatization of Medicare? Accelerate the sale of Canadian forests to U.S. lumber companies? Privatize and sell the CBC to a U.S. network? Scrap the Canadian Wheat Board? Adding these few scraps of independence we have left to the concessions already made to the Americans might get them back to the table, but at what price? And would any Canadian government making such unpopular bargaining concessions ever stand a chance of getting re-elected?

The upshot is that there is no conceivable way that Canada could persuade or recompense the U.S. for surrendering the powers it has gained from NAFTA. The most that any attempt at renegotiate this deal could accomplish would be a few minor cosmetic changes that might then be presented as a “victory,” but which any close analysis would expose as a sham.

There is, of course, a clear alternative to renegotiation, and that is abrogation. Why maintain a trade deal that is so detrimental to Canadian interests and independence? We would lose little or nothing by way of tariff-and-duty-free access to the U.S. market that we didn’t enjoy from the General Agreement on Trade and Tariffs that NAFTA replaced.

Article 210-6 of NAFTA states that the agreement may be “terminated by either Party upon six months’ notice to the other Party”—and without paying compensation or meeting any other condition except giving the six months’ notice. Trade with the United States would then take place under the World Trade Organization (WTO), and be conducted by a Canada re-armed with all the powers it had ceded to the U.S. under NAFTA fully restored.

Canada has much to win and nothing to lose by withdrawing from this terribly one-sided trade agreement.

(Mel Clark, now retired, served for many years as a senior Canadian trade negotiator.)