This week in the House of Commons we are debating the new NAFTA agreement between Canada, the United States and Mexico, known by the acronym CUSMA.
The original NAFTA was negotiated by Conservatives and signed by Liberals in 1994 with promises of more jobs and secure access to the largest market in the world.
Supporters of NAFTA point out that Canada’s GDP and cross-border trade have grown since then, however, those benefits have bypassed many Canadian workers. Canada lost over 400,000 manufacturing jobs, and its textile industry was devastated as jobs migrated to areas with lower labour costs and standards, such as the southern United States and Mexico. Wealth inequality grew as most of the GDP benefits went to corporations and shareholders instead of workers.
The NDP has always supported fair trade, but many of our free trade agreements, including NAFTA, contained significant provisions that were unfair. The proportionality clause in the original NAFTA challenged Canada's energy sovereignty, allowing the United States to require that a significant share of Canada's oil and gas production be sold to our southern neighbours, whether it was in Canada's national interest or not.
Another flaw in many of our trade agreements is the investor-state dispute settlement (ISDS) system, which allow private corporations to sue our government when regulations are changed to protect our environment or other public benefits. ISDS provisions significantly undermine our sovereignty, and the NDP has always voted against trade agreements that had ISDS clauses, while the other parties have enthusiastically supported them. The good news from the new CUSMA is that both the ISDS chapter and the proportionality provision are gone, and Canadians can be very happy about that.
So are there any down sides to CUSMA? Well for one, it extends drug patent protection from 8 to 10 years, adding about $169 million to the cost of prescription drugs in Canada. The agreement also gives away more of our dairy market to foreign suppliers, a factor exacerbated by similar concessions in recent agreements with the European Union and Pacific Rim countries. And the US now demands that we notify the United States when we are negotiating trade deals with “non-market” countries, such as China. Interestingly, the US has no obligation to return the favour with Canada when they negotiate with China.
Two major irritants to trade within this region are not covered in CUSMA—the softwood lumber dispute and tariffs and taxes on wine. Our forest sector is in crisis and needs a resolution to the seemingly never-ending illegal lumber tariffs imposed by the United States. American and Australian wine producers complain that the tiny Canadian wine industry is threatening them with regulations that reduce or eliminate the excise taxes paid by small Canadian wine producers, and also by laws that allow Canadian-only sales of wine in grocery stores. I’ve talked to Finance Minister Bill Morneau on a couple of occasions about negotiations around the excise tax situation, but his replies have been discouraging.
Finally, I think Canada would be well-served if we had a negotiation process similar to that of the United States and the European Union, where national trade priorities are openly debated before entering formal negotiations, and governments must provide an economic impact analysis of the trade agreement at an early date. Neither process is followed in Canada, and we end up forcing our parliament to rubber-stamp agreements after Congress has had a full debate on the matter.
The question remains—is CUSMA better than the old NAFTA? On balance it may well be, and last week the NDP voted with the Liberals and Conservatives to continue debate the agreement in the House and in committee.