When Jack Layton first asked Stephen Harper in the House of Commons why Canada had leaked confidential briefing notes on a discussion held by Chicago consular officials with the chief economic adviser to the Obama campaign, the prime minister acted bemused. How could an internal Canadian memo influence the campaign for the Democratic leadership? The PM’s reply implied that Canada was too small, and too unimportant, to play any role in a major league political event like a U.S. presidential campaign.

A day later, when Layton came back on the same subject, he got a different response. A startled prime minister offered his deepest apologies, saying any damages done to the Illinois Senator’s campaign were unintended, and told Layton he would spare no effort to trace the leak, so the guilty party could be punished.

Both Hillary Clinton and Barack Obama have pledged to re-negotiate NAFTA if they are elected. In order to get the necessary trade negotiating authority from Congress, an American President would give the NAFTA countries six months notice of intent to abrogate the existing agreement, and lay out re-negotiation proposals. It can be safely asserted, the idea is to make the treaty work better for the U.S., not for Canadians or Mexicans.

Faced with no NAFTA thanks to American presidential politics, Canada could protest, as the Canadian embassy in Washington decided to do by leaking the memo, play along in hopes of improving the deal, or look upon this as a gift, an invitation to reverse 20 years of wrong-headed policies. Here is why we no longer “hafta” NAFTA.

NAFTA, like its predecessor the 1988 bilateral trade deal, sets out a “new economic constitution for North America,” to quote U.S. President Ronald Reagan, who initiated the process in his inaugural address.

The so-called trade treaty overrides the Canadian constitution, taking away the power to tax resource exports, secure oil and gas supplies for the domestic market, or promote made-in-Canada economic policies. Despite side-agreements added to NAFTA by Democratic President Clinton to the pact negotiated by George Bush père, NAFTA rules are poisonous for the environment and labour rights.

Worse, for Canada, the problem is that so long as we have NAFTA, our ability to devise and design an economic strategy to benefit Canadians, labour and the environment is severely limited. Most importantly, should we bring in a needed universal drug plan, dental care for children, child-care for all, or any other extension of public sector activity that imperiled a potential American private sector benefit, Canada would first have to compensate all the U.S. providers before launching the plan. In effect Canadians would pay twice, once to the Americans for not doing it, and then in taxes for doing it. Naturally, the public sector has been deactivated âe” good- bye public auto insurance âe” while super costly and inefficient private-public partnerships have replaced even normal public works such as bridges, hospitals, roads, and transit.

Without NAFTA, Canada’s trade with the U.S. would be governed by WTO rules. And in the WTO, Canada would be free to join, and lead, gang-ups to change currently unjust trade rules, unlike under NAFTA where Canada bound itself to consult closely with the U.S. in international economic policy.

The U.S. is heading straight into a serious recession, which economists such as Dean Baker suggest could be long, as well as deep. Lower American interest rates are going to push the U.S. dollar down even further, and Canada will be expected to allow the Canadian dollar to remain near par or rise above par, while we continue to lose market share in the U.S.

In this the Americans are only practicing the Canadian strategy of the mid-1990s, a competitive devaluation of their currency to protect domestic producers, and promote exports. It worked for Canada, but at a steep price: we gave away our low cost oil and gas reserves at bargain prices, and encouraged a further sell-off of our manufacturing and resource companies. Now Ontario and Quebec are undergoing a severe round of de-industrialization as companies have been sold, plants closed, and jobs lost. Conservatives, federal Liberals, and even the PQ under Pauline Marois are calling for corporate tax cuts as a solution.

There is a better idea. Canada needs to adopt an aggressive economic strategy based around a public sector investment bank, or sovereign wealth fund if you prefer, funded by serious taxation of resource depletion. Foreign-owned corporations must be subject to performance requirements of the type routinely applied in China, India, and elsewhere.

Canada should ready itself for the abrogation of NAFTA by the U.S. through ingenuity in policy-making. If we sit around and wait for the outcome of a re-negotiation, we will certainly become what Stephen Harper thinks we already are: an unimportant, inconsequential player, with no economic interests of our own, other than making nice with the U.S.

Duncan Cameron

Duncan Cameron

Born in Victoria B.C. in 1944, Duncan now lives in Vancouver. Following graduation from the University of Alberta he joined the Department of Finance (Ottawa) in 1966 and was financial advisor to the...