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REWRITING NAFTA

Negotiations Underway to Overhaul Free Trade in North America

The North American Free Trade Agreement (NAFTA), a longstanding trade agreement between Canada, Mexico, and the United States, is being renegotiated. Enacted in 1994, NAFTA was introduced to facilitate greater economic activity between the signatories through the elimination of tariffs on agricultural and manufacturing goods, removal of trade barriers restricting foreign investment, and the codification of procedures to resolve trade disputes and protect businesses from unfair practices. During the U.S. presidential election last year, the topic of free trade was hotly debated. On the campaign trail, Republican candidate Donald Trump referred to NAFTA as “the worst trade deal in American history”, and vowed to renegotiate the agreement or abandon it altogether. Within months of being sworn into office, President Trump made good on his promise and talks were initiated between representatives of the three countries to begin the process of rewriting NAFTA. An ambitious schedule was announced: seven rounds of negotiations would be conducted in order to hash out a new agreement before the end of the year.

In August, the first round of negotiations between the countries took place in Washington, DC. Canadian Foreign Affairs Minister Chrystia Freeland, Mexican Secretary of the Economy Ildefonso Guajardo, and United States Trade Representative Robert Lighthizer convened with policy experts and stakeholders from the private sector to discuss a wide range of topics. Over the course of several days, representatives from each country had the opportunity to deliver a presentation outlining general concerns about the agreement as it currently stands, and offer preliminary suggestions for how to move forward with a new agreement. Topics that were addressed during this first round of negotiations include rules governing automotive parts, labour, and cutting-edge pharmaceuticals. On the subject of automotive parts, U.S. Trade Rep. Lighthizer made it clear that his country would push for a quota on auto parts manufactured in the United States, which would provide a substantial boost to the American auto industry and fulfill an abiding promise made by President Trump. Canada’s Freeland and Mexico’s Guajardo, however, responded with swift opposition to the proposal, citing the adverse effects that such a quota would have on the economies of their respective countries.

In early September, a second round of negotiations were held in Mexico City. The topics that were up for discussion included environmental protection, telecommunications, and anti-corruption measures. Building on the modest consensus that arose out of the first round of negotiations, the countries tabled several chapters that each agreed would form the bedrock of a more refined and modernized NAFTA. However, not everyone was on board with the trade agreement as it currently stands. Union leaders from Canada, Mexico, and the United States staged a rally outside of the hotel where the negotiations were taking place. The crowd demanded improved unionization practices, higher wages, and an international mechanism to ensure stricter compliance with labour laws. Jerry Dias, a leader of one of Canada’s largest private-sector unions, was present among the masses. According to Dias, NAFTA has not been beneficial to workers in the three countries, and Mexico, in particular, has been hit the hardest: “The Mexicans who work in these auto plants can’t afford to buy the cars they build. And that is an absolute disgrace.”

Most recently, a third round of negotiations took place in Ottawa in late September. A few days earlier, Prime Minister Justin Trudeau gave a speech at the United Nations General Assembly where he declared Canada’s commitment to reaching a trade agreement that featured more worker-friendly policies. “This is not the time for retrenchment,” Trudeau said. “It is time for the Atlantic democracies to renew our commitment to universal standards of rights and liberty, enforced through a multilateral, rules-based order that has promoted peace and stability, and stood the test of time.” During the third round of negotiations, Canada’s Freeland echoed Prime Minister Trudeau’s statements and sought to address a few key themes: progressive trade, the promotion of human rights, and the preservation of multilateralism between the three nations that has existed since the end of the Second World War. To achieve these goals, Freeland argued for greater labour regulations, including increased union protections for Mexican workers, and a termination of right-to-work laws that prevent the establishment of unions in the United States.

A fourth round of negotiations is scheduled for early October and will take place back in Washington. While trade experts have cautioned that the issues under negotiation are exceedingly complex and will carry over into next year, a joint statement from the three countries presented a more optimistic tone about the progress that has been made thus far: “While a great deal of effort and negotiation will be required in the coming months, Canada, Mexico, and the United States are committed to an accelerated and comprehensive negotiation process.” Recently, both President Trump and Prime Minister Trudeau affirmed their commitment to reaching a new deal by the end of the year, and for good reason: Mexican politics. As a result of term limits, President Enrique Peña Nieto of Mexico will be out of office for good next summer, at which time, according to Secretary Guajardo, the politics of free trade in Mexico will likely prevent a new deal from being reached for several years. Only time will tell whether the issues at hand will be resolved and a modern version of NAFTA will materialize before politics gets in the way.