Recommendation #1: Adopt an Inclusive,
Participatory, and Trilateral Approach
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The perception that free trade agreements are negotiated in secret for
the benefit of business and the political elite has contributed to a
backlash against existing and future trade pacts. To guard against
this perception, Canada must maintain and enhance the communication
and transparency with key stakeholders and the public before, during,
and after the negotiations.
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The federal government should continue to ensure that the provinces
are consulted when objectives are defined and when matters under
provincial jurisdiction are on the bargaining table.
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Canada’s best interests would be served by a trilateral negotiation in
which it deals with both the United States and Mexico, rather than
through separate bilateral discussions.
Canadians have generally accepted the importance of international trade
to their economic well-being. Free trade agreements, although often the
subject of contentious debate, are viewed as crucial enablers of
prosperity because they open larger markets to Canadian goods and
services. Public support for trade agreements, however, should not be
taken for granted. Canadian negotiators can contribute to the trust and
support by reducing the perception that negotiations are being conducted
in secret.
Similarly, Canada also needs to maintain trust with its trade partners
in NAFTA. While the United States is still the dominant market for
Canadian trade, our commercial relationships with Mexico have expanded
greatly since NAFTA took effect. As much as possible, those links with
Mexico need to be maintained or even enhanced under a renegotiated
NAFTA, ideally through the continuation of a trilateral agreement.
Increasing the Transparency of Trade Negotiations
Free trade agreements have implications for the broad Canadian economy
and society. They are also extremely complicated and detailed. Yet,
trade negotiations take place largely in private. The perceived secrecy
of the negotiating process can contribute to a sense that agreements are
crafted in the interests of a privileged few and that the benefits of
these deals are not widely shared among middle-class and working-class
workers.
However, support among Canadians for trade deals has remained relatively
strong, as shown by an Angus Reid survey in February, which found that
support for NAFTA had increased since a similar question was asked just
eight months earlier.11Angus Reid Institute, Facing Tough
Talk Over NAFTA Renegotiations . Nonetheless, the question of who
wins and who loses in trade agreements is one that Canadian
decision-makers cannot ignore.
In a report released this past February, the Senate Standing Committee
on Foreign Affairs and International Trade devoted significant attention
to the issue of transparency. The report made several recommendations to
increase public awareness of and consultation for trade
agreements.22Standing Senate Committee on Foreign Affairs and
International Trade, Free Trade Agreements . In particular, the
committee called on the government to:
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report quarterly to relevant House and Senate committees during free
trade negotiations;
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report on expected economic, labour, environmental, social, and other
outcomes prior to the ratification of a free trade agreement;
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develop a “free trade agreement implementation strategy” and create
a task force to coordinate federal measures that would help Canadian
businesses to benefit from the deal and would mitigate any adverse
impacts on workers, sectors, and businesses;
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commission independent evaluation of the effectiveness of federal
measures that are put in place to mitigate adverse impacts;
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commission an independent review of trade agreements after five years.
Trade agreements have long been conducted in private. However, secretive
trade negotiations make an agreement prone to greater opposition during
the ratification stage when citizens learn the contents of the
deal.33Kucik and Pelc, ”Measuring the Cost of Privacy”; Kucik
and Pelc, ”Secret Negotiations.” Therefore, the federal government
should commit to a comprehensive consultation and engagement strategy to
keep Canadians regularly informed about the progress of NAFTA
renegotiations, the changes being considered, and their implications.
Provincial governments have an especially important role before, during,
and after the negotiations. The federal government should ensure that
the provinces continue to be consulted when objectives are defined and
when matters under provincial jurisdiction are on the bargaining table.
A majority of Canadians supports trade agreements, especially
NAFTA.44Angus Reid Institute, Canadians See More Benefits
From NAFTA Than Americans ; Angus Reid Institute, CETA: As
Support Softens, Canadians Still Back Trade Deal ; Angus Reid
Institute, Trans-Pacific Partnership: Canadians Say Trade Deal
Is Good for Consumers . Moreover, Canadians’ support for NAFTA
increased as the future of the agreement became uncertain following the
2016 U.S. election.55Angus Reid Institute, Facing Tough
Talk Over NAFTA Renegotiations . Therefore, Canadians are unlikely to
advocate for a withdrawal from NAFTA unless terms become egregious.
Canadian negotiators thus have little reason to hide the progress in
negotiations from stakeholders or the public.
In fact, an open and transparent negotiation process could bolster
Canada’s deal-making strength if the positions being presented at the
bargaining table have broad public support. Moreover, it would also be
in the best interest of all negotiating parties, especially in an era in
which “alternative facts” and “fake news” can get in the way of
evidence-based dialogue. In other words, there is no reason for Canada
to conduct these talks in secret.
Maintaining a Trilateral Agreement
Canada–U.S. relations have always been a key focus of Canada’s
diplomatic and trade efforts. However, NAFTA is a trilateral agreement,
and businesses have been leveraging the strength of all three partners
along their supply chains for over two decades. Given the close
integration of the three economies, efforts should be made to ensure the
agreement is renegotiated with all three member countries at the table.
Mexico is already the fifth-largest destination for Canadian goods
exports (after the U.S., China, the United Kingdom, and Japan). Exports
to Mexico grew 30 per cent between 2010 and 2015. Automobiles,
agriculture, primary metal manufacturing, chemical manufacturing, food
manufacturing, and machinery manufacturing accounted for more than
75 per cent of Canadian goods exports to Mexico in 2015. Led by
commercial services, Canada’s services exports to Mexico grew 37 per
cent compared with 2010.66Audet, Reaching out for Business
Opportunities in Mexico . The advanced state of North American
supply-chain integration means that isolating Mexico to focus on
strictly bilateral issues would be costly to Canadian firms.
Many Canadian firms, such as Bombardier and Magna International, have
significant investments in Mexico, and disrupting NAFTA would have
implications for these and other firms making or considering plans in
Mexico. The Canadian government has thus far called on negotiations to
be trilateral, as has Mexico. And both countries have influential allies
within the U.S. business community. For example, U.S. Chamber of
Commerce President Tom Donohue said the termination of NAFTA would be
“devastating” for workers and businesses and emphasized how critical
it is to maintain a single agreement.77Donohue, ”The U.S. and
Canada: An Indispensable Trade Relationship.” This kind of broad
support among U.S. interests will be crucial in maintaining a trilateral
trade agreement.
Conference Board research has also identified opportunities for Canadian
companies in Mexico that could disappear should NAFTA be replaced by
bilateral agreements. Opportunities were found in sectors such as auto
parts, machinery, fabricated metal manufacturing, and food
manufacturing, as well as commercial services and transportation
services.88Audet, Reaching out for Business Opportunities
in Mexico . Despite Mexico’s lower manufacturing wage costs, most of
the opportunities for Canadian companies are in the manufacturing
sector, particularly in value-added niche segments that can leverage the
global manufacturing hub Mexico has become.99Ibid.