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Program
 

72nd Annual Summer Conference, August 7–10, 2003


Is there a NAFTA plus?

Photo
Left to right: Michael Wilson, Maria de Lourdes Dieck-Assad, Stephen Kelly

Summary by Rachael Ziemba

Michael Wilson

Wilson began by arguing that trade has been good to Canada and that Canadians are fairly receptive to free trade and changes in the NAFTA. The conservatives have remained fully committed to NAFTA and exploring opportunities to broaden the trade agreements. The liberal party, which opposed FTA and NAFTA while in opposition, insist that it has been an unqualified success in which all three countries have benefited. But extending it must be a priority for the Canadian government.

He went on to say that trade policy must be seen in the context of increased national security concerns. It is in Canadian interest to work with the US on a number of issues, not just trade. Security institutions, including NATO, NORAD and the G7 link Canada and the US, differentiating it from US-Mexican bilateral relations. Economically, Canada and the US have many similarities, with large service sectors, resource producers, though Canada exports substantially more resources. They are becoming increasingly interlinked, especially as intra-company trade increases.

Wilson outlined several ways in which Canada could make the most of this changing context. Firstly, Canada must engage US in broader security dialogue, as the US is more driven by security issues, Canada by economic ones. Secondly, it is more effective to begin with bilateral agreements rather than trilateral, though moving forward on a bilateral basis would not preclude trilateral agreements. Wilson argued that resolving the unfinished business of NAFTA is likely to be difficult, although there are some opportunities. These include sectoral customs unions that would provide sufficient benefits to justify the effort, yet avoid politically unfeasible areas.

In conclusion, Wilson argued that the Canadian environment is reasonably favorable for more liberalization. With transparency and consultation, such extension might be possible. However, it is critical for the politicians to know what they want to achieve to take advantage of shifts in political climate in all three countries. .

Stephen Kelly

Kelly began by agreeing with everything said by Wilson and Dodge. He argued that there are opportunities for Canada and US to deepen NAFTA, to create a NAFTA plus, but obstacles remain. While there has been discussion of a grand bargain, incremental change is probably best, to minimize sovereignty issues.

Political will is necessary for such integration. All the issues were problems prior to September 11, such as the lack of intelligence sharing, however, September 11 provided the political will to deal with and bring high-level attention to issues, which had resisted resolution such as border security as exemplified by the ridge-Manley process. NAFTA plus does not have this sort of political will; there has not been a cataclysmic event to garner high-level attention. Leadership in all three countries is in transition, likely postponing any further integration process. Thus, the countries should focus on below the radar issues, which avoid difficult political issues. Harmonization of certain regulatory structures or of similar external tariffs should be possible without threatening sovereignty. Kelly argued that there is now an opportunity to create a North American energy policy, especially as many of the barriers are internal.

In conclusion, he argued that integration is happening without government involvement. Next step will involve more direct government involvement when it is politically feasible.

Maria de Lourdes Dieck-Assad

Dr. Dieck began by saying that the 10th anniversary of NAFTA next year is a time of celebration for all three countries as trade and investment between all three countries has increased. In particular, Mexicans have derived a number of benefits from NAFTA. Companies have benefited from access to better technology and the constraints of NAFTA have helped stabilize Mexican macroeconomic variables. Consumers have access to a wider variety of goods and lower prices.

NAFTA forms a blueprint for international organizations, providing an example for other agreements on labour rights, dispute settlement mechanism, environment among others. In Mexico, it created a space for society to work with the government in such negotiations. In Mexico, such interaction has improved the working relationship, between government and civil society. Yet, NAFTA remains alive, it has been possible to make some changes and additions without renegotiating to respond to the changing global environment.

Mexico and Canada have many similarities, sharing large borders with the US, needing to ensure some form of smart border. They should find ways to take advantage of their complementarity. Some benefits are still pending and it is important to help those who benefited the least, by generating jobs and opportunities.

Dr Dieck listed several ways one might make the most out of NAFTA. These include more infrastructures to increase safety and efficiency, innovative financing, human capital development, common platforms on e-trade, full implementation of agreements. Other changes might include harmonization of regulatory regimes, limited mutual recognition agreements, updated customs procedures; single sector customs unions as mentioned by the previous speakers. She emphasized that these additions would not require changing the text of NAFTA.

In conclusion she insisted that Mexico and Canada should work together as team to find new ways to communicate and cooperate. It is said that a chain is only as strong as its weakest link. While Mexico might be weakest link, the US and Canada should support it since all will gain in the long run. With political will, imagination and perseverance we can obtain benefits for whole population.

Questions

A question was raised about the competitiveness of the Mexican economy and whether productivity has really increased or whether the lazy producer hypothesis applies. Dr Dieck responded by saying that Mexico is already had substantial gains from NAFTA. In addition, there has been successful partnership with prosperity meetings between US and Mexico, which should be trilateral. Mexico also needs fiscal reform to increase government revenue so that it is no longer so dependent upon energy.

A question was raised about the appropriate forum for addressing local and provincial adjustment issues. Wilson responded that the primary response should be a federal one, based on consultations with the provinces and municipalities.

A question was raised about Canada as an east-west generator of trade and why there has been a reluctance to break down inter-provincial barriers. Wilson responded that governments have made an effort but there are problems with free movement of people etc. but there has not been sufficient interest and there are local pressures against making changes. Needs to be more pressure from business community to push this agenda.

A question was asked about the nature of energy agreements and whether they would be under the radar. Kelly responded that the energy market needs government involvement, as there is lack of infrastructure. Political will is needed to overcome local resistance.

Wilson added that Canadians have a great interest in negotiating energy agreement with US. In fact, it might be useful to move it “above the radar”, making a broader agreement, such as linking to other resource products like softwood lumber.

A question was raised relating the policy of sectoral customs unions to the policies proposed in 1983 and asking whether a customs union would be in Canada’s interest. Previously there was resistance since such limited free trade or customs unions were perceived as picking off the easy fruit, rather than using it as leverage in a broader agreement.