Recommendation #1: Adopt an Inclusive, Participatory, and Trilateral Approach

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:
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.