The Power of Perspectives

The Canadian Bar Association

Kim Covert

How to align new NAFTA with more modern trade deals

August 31 2017 31 August 2017

Time passes, the world moves on, and today’s new kid in town is tomorrow’s been there, done that.

And so it is with the North American Free Trade Agreement, which came into effect 23 years ago. At the time it was hailed as a state-of-the-art trade agreement between Canada, the United States and Mexico. Over the last two decades it has accomplished what it was supposed to accomplish: it currently links 459 million people producing more than $19 trillion worth of goods and services; it has increased trade between the member states; it has created more integrated supply chains between the member states.

That was then. The agreement might have been cutting-edge in 1994, but it’s starting to show its age, especially when lined up against newer-model international agreements such as the Trans-Pacific Partnership and the Comprehensive Economic and Trade Agreement between Canada and the EU. Parts of NAFTA informed parts of those agreements, but TPP and CETA also moved far beyond that document.

So when U.S. President Donald Trump says it’s time to renegotiate NAFTA, we may not agree with his stated reasons for doing so, but we don’t think it’s a bad idea either.

“Canada’s participation in (agreements such as TPP and CETA) will need to be appreciated by the other NAFTA parties,” advise several CBA groups in a joint submission. “As a general principle, Canada should take this opportunity to align a revised NAFTA with these new developments.”

The groups made a total of 32 recommendations, a number of which advise aligning the new NAFTA with more modern or favourable aspects of more recent trade deals. For example, when NAFTA was written most households didn’t have a computer. Now there’s the internet and a smart phone in every pocket facilitating the instantaneous transfer of information and giving rise to $1.92 trillion US in e-commerce in 2016 – expected to rise to $4.06 trillion in 2020.

“Technology should be a focal point of any renegotiation, both in terms of e-commerce and to reduce delays and duplication of work,” the groups say. “Using technological advances to streamline the border-crossing process should be top of mind.”

Hand in hand with technology goes increased concerns about security that wouldn’t have been a factor in 1994, and the groups recommend a privacy-shield arrangement. “Privacy is a key concern for Canadians. Beyond the concern for individuals, Canada’s position as a key trading partner with the EU could be threatened if Canada does not maintain a rigorous personal data protection regime.”

Canada’s federal carbon pricing plan is also a new factor, and especially with the decision to withdraw the U.S. from the Paris Climate Accord.

NAFTA has been beneficial to Canadians in terms of national treatment and market access, and temporary entry into the U.S. for business persons. Potential trade irritants include telecommunication and cultural carve-outs, and the number of Canadians going to work in the U.S.

Side agreements to NAFTA on labour and the environment should be incorporated directly into a renegotiated deal, the groups say.

“A key element of modernization is the cross-border mobility of human talent, capitalizing on technological advances and strengthening anti-corruption and transparency measures,” the groups conclude. “As Canada prepares to engage in the renegotiation of NAFTA, a key focus should be on promoting efficiency, clarity and reliability.”

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