Volume 2, Issue 1 - Summer 2017

Ten recommendations for a ‘new NAFTA’

By Maryscott Greenwood. 

President Donald Trump has been talking tough about the North American Free Trade Agreement (NAFTA) since the early days of his campaign, threatening repeatedly to withdraw the United States from the pact outright.

After concerned phone calls from the leaders of Canada and Mexico, however, he seemed to walk that threat back, opting instead to push for a more liberal ‘modernization’ of the accord. The selection of international trade law expert Robert Lighthizer as U.S. trade representative gave Canadians another reason to breathe a sigh of relief.

But even with the overwhelmingly-bipartisan confirmation of Lighthizer, it is far too soon to assume NAFTA is out of the woods. America’s 45th president has demonstrated he is nothing if not unpredictable.

For now, the Trump administration does not appear to be on course to scrap NAFTA. It is, though, readying for significant renegotiation.

That alone is no cause for alarm. NAFTA truly is in legitimate need of an update. The deal is, after all, 23 years old, and was negotiated in an entirely different era — one without widespread access to the internet, and a decade before Apple introduced the iPhone. Some of the biggest and most robust sectors of the North American economy did not even exist when NAFTA was first enacted.

Now that the conditions seem right for a ‘new NAFTA,’ it is important that any bilateral changes to the Canada-U.S. relationship (although there is something to be said for keeping the agreement trilateral with Mexico) are structured to facilitate growth on both sides of the 49th Parallel.

At the Canadian American Business Council, we have put together a list of our top 10 suggestions to give NAFTA a shot in the arm:

The first recommendation is straightforward: Create a chapter that codifies and strengthens the Canada-U.S. Regulatory Cooperation Council (RCC) as a permanent entity. The fruits of that labour have been frustratingly slow, yet they play an integral role to the health of both economies by eliminating costly red tape. Formally recognizing the RCC in a new NAFTA would ensure governments work in tandem on the implementation and harmonization of regulations. There is also an argument to be made in favour of a ‘negative list’ approach to new regulations, which would deem that all new regulations must be harmonized unless they are specifically excluded.

Secondly, a new NAFTA should mutually recognize voluntary product standards, testing, and certification, and remove tariffs on all products to guarantee a true free trade agreement. It’s probably too much to hope that dairy and lumber would be included in the zero-tariff regime; so, for those sectors, alternative arrangements would need to be established.

The swift resolution of the dairy and lumber disputes, indeed, constitutes our third recommendation. These are key, job-creating industries throughout both Canada and the U.S. — determining their long-term future in the context of a healthy trade relationship is fundamental to their ability to operate, invest, and grow.

Fourth, we advocate revamping Buy American provisions into one Buy American/Canadian requirement — in other words: Consider Canadian content ‘domestic’ for all official procurement at the federal and state levels. That is currently the case in the defence sector. The reciprocity would need to be genuine, and would go a long way to nurturing our highly complex, interdependent supply chains.

Number five is to support further integration of our North American energy markets by building robust infrastructure systems to connect supply and demand. That will require a push for predictable, efficient, and expedited regulatory frameworks to ensure cross-border infrastructure can be built and operationalized in a timely fashion. This one seems self-evident, but increased coordination can bolster energy security and enhance the sector’s ability to address cyber and other physical security threats — a policy cornerstone of the United States.

The sixth recommendation is to improve protection of intellectual property, including — but not limited to — exploring policy options in Canada to counteract judicial interpretations of IP rules, which serve to invalidate longstanding pharmaceutical patents. It is time for Canada’s parliament to fully explore legal options that, in recent years, have been left solely to Canadian courts, to the serious detriment of innovation and American investment.

Number seven involves the creation of rules to promote and govern digital trade, encompassing provisions that prohibit data localization and digital customs duties, which would enable cross-border data and secure basic non-discrimination principles for digital products.

Eighth on our list is updating the rules governing the movement of people across our shared border to reflect modern categories of employment, such as those who work in the digital economy and those serving companies with operations in both Canada and the U.S.

The ninth recommendation calls for the enhancement and modernization of joint security arrangements to foster faster, freer cross-border movement of goods and services, as well as more reliable and predictable border processing.

Finally, since the new NAFTA will potentially serve as a model for future agreements the way its predecessor did, now is the time to take a firm stand against currency manipulation. It is not an issue here in North America, but can pose a serious problem with other economies, even if Trump isn’t willing to take it on at the moment.

These 10 recommendations aren’t easy, but they are possible; and, if they are achieved, could provide a meaningful boost to the flow of commerce, the pace of trade, and the health of Canadian and American economies. They would lead to minimal disruption and, in fact, would ease regulatory burdens on countless businesses and industries. They’d cut costs and red tape. And they’d open up lucrative new markets for those sectors that have existed under protectionist regimes for too long.

We are heading into a dynamic, new age of technological advances that are demanding the United States and Canada come together as partners like never before. These new advances are almost as unpredictable as the next 100 days of the Trump administration. Almost.

In both instances, though, it is worth focusing on what needs updating in NAFTA and to create a blueprint for how our countries can do business together for generations to come.

Maryscott Greenwood is the CEO of the Canadian American Business Council, which represents member companies totalling more than two million employees and nearly $2 trillion in revenues. Earlier this year, Greenwood was named one of Canada’s top 100 lobbyists by The Hill Times.