This week, former Foreign Minister Lloyd Axworthy called for Canada to redefine its relationship with the U.S. by seriously considering an end to NAFTA and rely instead upon the World Trade Organization to regulate the terms and provisions of free trade. His Toronto Star piece is important news: the most successful foreign minister since Lester Pearson wants Canada to consider leaving NAFTA.
Though it would have been interesting to hear what John Turner, Bob White, Mel Hurtig, Maude Barlow and Marjorie Cohen had to say about U.S. reluctance to implement a NAFTA panel softwood lumber decision favouring Canada, The Globe and Mail, carrying on its tradition of unbalanced coverage of free trade dating back to the 1980s debate, chose to ignore what the leading critics had to say. Instead, it decided only to interview some of the architects of the original 1988 treaty. Ex-ambassadors Allan Gottlieb, Derek Burney and Gordon Ritchie, and former Trade Minister Pat Carney want Canada to retaliate against its trading partner. Feigning simultaneous outrage and astonishment they expect Canada to carry on a trade war to have their free trade agreement respected.
In fact, Canada does not have a free trade treaty with the U.S. World trade rules allow for free trade areas to be negotiated in which national trade legislation does not apply. Under the terms of the 1988 Canada-U.S. trade agreement, national trade rules apply. In the 1988 negotiations Canada did not get the exemption from U.S. projectionist law it was entitled to under the GATT world trade rules which prevailed at the time. That is why Liberal leader John Turner opposed the 1988 deal. NAFTA was no better, and in fact introduced new areas such as intellectual property rights to be covered by American protectionism laws.
While Canada treats NAFTA as an international treaty which overrides domestic legislation, neither NAFTA nor the 1988 FTA were treated as international treaties by the U.S. where an international treaty must be adopted by a two-thirds majority vote of the U.S. Senate.The FTAs were executive agreements adopted by Congress and liable to be superseded by subsequent legislation, as has proven to be the case.
To their everlasting discredit, Prime Minister Brian Mulroney, his principal advisers and his cabinet accepted a trade treaty which provided for a face-saving mechanism of bi-national panels to review domestic trade rulings, and claimed this was free trade. While Mulroney and his people claimed they had a free trade deal it was nothing of the sort. Free trade would bind the U.S. government to respect the free movement of Canadian goods into the U.S. Under NAFTA, like the FTA, the U.S. Congress is free to legislate trade restrictions, and U.S. trade tribunals are bound to respect the U.S. laws.
The NAFTA panels can review U.S. trade tribunal decisions. If the panel disagrees with the interpretation of U.S. law given by the U.S. trade tribunal, the NAFTA panel can send it back to the tribunal for review. That's it. The U.S. government can then change its laws to make them conform, not to the NAFTA panel decision, but to its original intent: i.e. to protect the U.S. producer from Canadian competition. That is what it has done in the past.
So when a NAFTA panel rules in favour of Canada, it means what the American authorities decide it means, since it is commenting on U.S. law, not enforcing a bilateral treaty.Since there is no enforcement mechanism in NAFTA, the alternative being touted by the Mulroney people is retaliation. Great. When Canada has an important share of the U.S. market we could be shipping 50 per cent or more of Canadian production to their market. They hit us, the industry suffers, it loses half or more of its production.
When the U.S. dominates our market, it is shipping about five per cent of its production. We hit them, they carry on as usual.
Retaliation does not have equal effects when the partners are unequal; that is why the bilateral route was a mistake in the first place, unless it precluded the use of protection/retaliation.Where retaliation works is when the whole world retaliates against the U.S. That is why Axworthy is calling for Canada to look at moving back to multilateral trade agreements in dealing with the U.S. and dropping the bilateral (trilateral under NAFTA) approach.
The U.S. acts to protect its interests, always. Canada should be lining up with Brazil, India, China, South Africa and others countries bent on changing the world trading system. The best way for Canada to protect its citizens is through joint action internationally with other countries.Sadly, under Mulroney, Jean ChrÃ©tien and Paul Martin, Canada has instead been the helpful fixer for the U.S. corporate friendly trade agenda. This has rightly been interpreted in Washington as weakness by Canada.
Rather than being boxed in by NAFTA, it's time to move on. In language they can understand, we should make it clear to the Americans, we do not hafta NAFTA.
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