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Letter to the Prime Minister of Canada regarding NAFTA

Date: May 4, 2017

Publication Type: Letters

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Dear Prime Minister,

As an association representing leading enterprises in every region of the country and every major sector, the Business Council of Canada is deeply concerned about the future of Canada’s trade partnership with the United States and Mexico.  We would therefore like to take this opportunity to offer our perspective on the current push to reopen and amend the North American Free Trade Agreement (NAFTA).

The prospect of a new round of NAFTA negotiations represents both a risk and an opportunity for Canada. Our country’s economic health depends heavily upon the ease with which goods, people and investment move back and forth across the Canada-U.S. border.  In the words of Stephen Schwarzman, Chairman of President Donald Trump’s Strategic and Policy Forum, the current Canada-U.S. trade relationship “is really very much in balance and is a model for the way that trade relations should be.”

At a minimum, therefore, Canada’s objective must be to protect the framework of rights, benefits and privileges that our companies and citizens currently enjoy under NAFTA.  Going further, we believe your government can and should seek to modernize and improve the agreement in ways that will create new opportunities and enhanced prosperity for citizens across the continent.

Do no harm

In working to ensure – through whatever means you deem necessary – that Canadian businesses and investors retain their existing access to markets and commercial opportunities in the United States and Mexico, our one caveat is that any agreement must be based upon reciprocal access and treatment.

There is speculation that U.S. negotiators will attempt to rewrite NAFTA’s rules of origin for goods.  While it is still not clear what the Administration will propose in this regard, the unintended consequences of any such change could be dire.  We support the modernization of outdated NAFTA tracing systems.  We support the application of dispute-settlement provisions.  We do not support country-specific rules of origin.

With respect to dispute settlement, the Trans-Pacific Partnership offers a useful model for improving NAFTA.  However, disputes related to NAFTA provisions must not be decided by domestic courts.  This was a deal breaker for Canada in the original NAFTA negotiations and it should remain so.

In addition, we are concerned that the United States may seek to revive or develop new trade enforcement tools that would authorize the unilateral imposition of duties or other trade remedies without resorting to dispute settlement under NAFTA or through the World Trade Organization (WTO).  Any new trade enforcement measures being contemplated by a NAFTA country should be discussed during the negotiations and a mechanism established that ensures coordination, consultation, and resolution prior to the imposition of unilateral remedies.

A 21st century opportunity

While doing no harm is our first priority, achieving only this would be a missed opportunity.  NAFTA and its predecessor, the Canada-U.S. Free Trade Agreement, were negotiated in a different era.  Canada’s negotiators should take this opportunity to modernize our country’s trade and investment relationships with Mexico and the United States.  Opportunities exist in areas such as intellectual property, e-commerce, the treatment of state-owned enterprises, competition rules, sanitary and phytosanitary measures, telecommunications, customs procedures, labour, environment, procurement and regulatory cooperation.

Labour mobility and customs procedures are two areas in which NAFTA’s provisions are clearly outdated.  For example, the list of eligible positions that was negotiated under NAFTA almost a quarter century ago did not contemplate today’s digital economy; similarly, our customs processes continue to be paper-based. Modernizing these areas so as to reflect current business practices – and anticipate future needs – would be to the benefit of each of our three countries.

Go Further

Together, the Canada-U.S. Free Trade Agreement and NAFTA laid the groundwork for a mutually beneficial energy relationship that takes advantage of the continent’s abundant and diverse energy resources.  This is an opportune moment to strengthen that relationship.  The Trump Administration’s recent move to approve the long-delayed Keystone XL pipeline serves as a reminder that our governments still have work to do to streamline the permitting process for cross-border energy infrastructure.  In renewing NAFTA, the three countries should strive to improve energy security, promote greater cooperation on innovative energy technologies, and expand access to lower-carbon energy sources.  Doing so would significantly bolster the competitive position of North American industry.

Infrastructure and government procurement are important areas in which Canada and the United States can work together.  Each country has pressing domestic demands and limited public resources.  A U.S.-Canada Infrastructure Pact could generate a common template for structuring P3 projects, including a recommitment to the principle of nondiscrimination against U.S. content in Canadian projects and Canadian content in U.S. projects.  To the extent possible, such a pact should extend to state and provincial governments.

Regulatory cooperation is an area where progress could mean substantive savings for Canadian and U.S. consumers. We recommend that the two governments establish, as a permanent entity, the existing Regulatory Cooperation Council, or a version thereof. The Council should work closely with industry with a clear mandate to identify opportunities for harmonization.  The approach should be to harmonize regulations except in cases where regulatory authorities demonstrate convincingly that doing so would pose a risk to health and safety.

Conclusion

Prime Minister, in approaching these negotiations you and your government can count on our full support.  The Business Council of Canada stands ready to work with your officials and would be pleased to discuss in greater detail each of the above recommendations.

Sincerely,

The Honourable John Manley