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Is there life after NAFTA?

NAFTA Initialing Ceremony, October 1992. Photo: George Bush Presidential Library and Museum/Wikimedia Commons

Like all sensible folk, I was opposed to the original NAFTA deal at the outset, convinced that it did more for corporations than for the rest of us. I'm still of that view.

Is it possible that the biggest change in the new deal is in the name itself, USMCA, so that Trump can boast that he delivered on his promise to get rid of NAFTA? A number of commentators on both sides of the Canada-U.S. border have written -- in the words of John Ibbitson in The Globe and Mail -- that the USMCA is "essentially the old NAFTA tilted more in America's favour." Is that all there is?

Firstly, it's quite a tilt -- like the U.S. keeping a special tariff on aluminum and steel from Canada, on the grounds, believe it or not, of national security. Talk about absurdly fake facts.

Let's go back to the beginning in the late 1980s. The U.S. and Canada had just signed the Free Trade Agreement, or FTA, when, with the ink hardly dry, the U.S. insisted on adding Mexico. We thought we'd made a one-on-one deal, a special arrangement that got us inside what our government thought, wrongly as it turned out, was a rising tide of American protectionism -- which has now happened a quarter of a century later and we waited almost a year to join this new round of negotiations. This initial lack of enthusiasm has not stopped us from peddling the praises of NAFTA and fighting hard to keep it.

If we didn't know it before, we now do: trade agreements go way beyond trade in their breadth of corporate rights, making it hard to judge which side of ordinary people gets the net advantage. And we're also learning, at least in the case of Brexit, that abrogation, untangling it all, is hard, to say the least.

Should Canada at some point -- and not simply as a negotiating position -- have left the table, never to return? To come down to earth, recall that Trump said that without an agreement, he would impose a 25-per-cent tariff on cars made in Canada entering the U.S. The consequences would have been simply devastating for southern Ontario, for Canada's industrial base. Significantly, Jerry Dias, president of Unifor, thinks the deal is good enough. It will push up car prices, but that will lessen carbon emissions.

Ibbitson goes on to write that the message from all this is "the mother of all wake-up calls for Canada to diversify." We've got too many eggs in the American basket and have to diversity our trade beyond the American market. That may strike you as a no-brainer. But what is being said is that, one trade agreement having failed us, we should sign on to more. Which is what we are already doing.

Methinks that is the wrong lesson. The whole vast apparatus that passes under the name of globalization has gone too far. We need less reliance on trade, not more. We need to strengthen our domestic economy so it plays a bigger role in generating jobs and incomes.

Lest that sounds like whistling in the dark, it isn't. Most economists admit that globalization has increased inequality within economies. In this regard, less globalization is of itself a good thing. What is likewise in order is active policies, like real rather than fake American-style tax reform, to increase equality within Canada and thereby the demand for goods and services.

One more point. Too much trade means too many goods being transported too far, which means too much carbon emitted, which means too much climate change that threatens to get us all. I'm too old to do the arithmetic, but diversifying Canadian trade reliance away from the U.S. next door could be a mistake.

Mel Watkins is Professor Emeritus of Economics and Political Science at the University of Toronto. He is Editor Emeritus of This Magazine and a frequent contributor to Peace magazine. This blog was first posted in the Progressive Economcs Forum.

Photo: George Bush Presidential Library and Museum/Wikimedia Commons

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