By understanding that free-trade agreements benefit consumers, businesses and governments, this deal can be saved
Rumours about the imminent demise of the North American Free Trade Agreement (NAFTA) are both premature and exaggerated.
This week marks the start of another round of trade talks between the United States, Canada and Mexico.
Trade negotiations are a long, painstaking, cumbersome and arduous process. It’s not uncommon for such talks to go through many lows and a few highs.
The process requires focus, patience, resolve, diplomacy and integrity. It must ensure confidentiality and be conducted without grandstanding. It involves many hours of genuine negotiation and then even more hours of renegotiation.
At the end of the journey, all the participants should have a sense that they’ve achieved their primary objectives, compromised on their secondary objectives and overall concluded a mutually advantageous agreement that has the makings of a win-win for all.
A golden rule of trade talks is that all negotiations be conducted behind closed doors. Negotiating in public venues is a bad idea. And there’s absolutely no room for trade negotiations to be conducted on the front page of the newspaper or as the lead item on the evening television news.
There’s a déjà vu about the current state of discontent in negotiations between Canada, Mexico and the U.S. for a renewed NAFTA.
A few years ago, I had a conversation with former prime minister Brian Mulroney. I asked him about his role 30 years ago in salvaging the free-trade agreement between Canada and U.S. when the negotiations with the Americans were going badly.
Mulroney was very forthcoming about what happened on that fateful day of Oct. 3, 1987, when the negotiations between Canada and the U.S. were about to expire. He received a telephone call from Jim Baker, the then-U.S. Treasury secretary.
Baker had bad news for our prime minister. He told Mulroney that earlier that evening he’d met with the U.S. congressional leadership, who told him very bluntly that they were prepared to support the free-trade deal with Canada, but not the part that created an independent dispute settlement mechanism.
All along, Mulroney had insisted that the deal should contain an impartial and neutral dispute settlement mechanism.
Baker’s call to Mulroney was succinct: “Look, we’re very close to an agreement, but I have to tell you, I don’t think this is doable with the independent dispute settlement mechanism.”
Mulroney replied, “Well, okay Jim, I’m now going to call President Reagan at Camp David and I’m going to ask him one question.”
Baker asked Mulroney what he was going to ask Ronald Reagan.
Mulroney replied: “I’m going to ask him, ‘Ron, I want you to tell me how the United States of America can sign a nuclear reduction treaty with its worst enemy, the Soviet Union, but cannot sign a free-trade agreement with its best friend, Canada.’ “
There was dead silence, then Baker said, “Can you give me 20 minutes?”
Later that evening, Baker charged into the boardroom of the Treasury Department in Washington, where the Canadian trade delegation was waiting, threw a signed document on the table and said, “There’s your goddamn dispute settlement resolution.”
The free-trade agreement between Canada and the U.S. came into force on Jan. 1, 1989. In 1994, it was expanded as NAFTA to include Mexico.
U.S. President Donald Trump has made it very clear that he’s unhappy with the trade agreements he’s inherited. He’s withdrawn from the Trans-Pacific Partnership (TPP) and has fast-tracked NAFTA renegotiations, amid a variety of threats.
I’m not prepared to call the current negotiations for a renewed NAFTA dead. It’s too early for that.
Negotiations won’t be easy. They’ll require steadfast, purposeful resolve to underline the economic benefits of international trade for consumers, businesses and governments.
Consumers gain by having access to a wider choice of products at lower prices and better quality.
Businesses gain by expanding their market share, achieving economies of scale and improving their profits.
Governments gain public applause for growing the economy, reducing unemployment and improving the standard of living of their citizens.
Free-trade agreements are the modern tool for achieving all of those objectives. It would seem premature to declare dead something so beneficial.
By Dr. Constantine Passaris
Dr. Constantine Passaris is a professor of economics at the University of New Brunswick and a national research affiliate of the Prentice Institute for Global Population and Economy at the University of Lethbridge.