NAFTA's Unfinished Business Study Notes

NAFTA's Unfinished Business: The View From Canada

Introduction

  • Author: Michael Wilson

  • Positions: Chair of Barclays Capital Canada, Former Canadian Minister of International Trade (1991-1993), Former Canadian Ambassador to the United States (2006-2009).

  • Context: The article reflects on the implications and results of the North American Free Trade Agreement (NAFTA) from a Canadian perspective, highlighting both achievements and areas for improvement in economic integration among Canada, the United States, and Mexico.

Historical Background

  • 1992 NAFTA Signing:

    • Participants: Canadian Prime Minister Brian Mulroney, Mexican President Carlos Salinas, U.S. President George H. W. Bush.

    • NAFTA builds on an earlier U.S.-Canadian free trade agreement from 1988, which had significant political consequences.

  • Political Controversy:

    • The signing of NAFTA was politically contentious in Canada, costing Mulroney's party 34 parliamentary seats in subsequent elections focused on free trade debate.

Economic Outcomes of NAFTA

  • Trade Growth:

    • Trade within North America has increased from approximately $290 billion in 1993 to over $1.1 trillion in 2012, nearly a fourfold increase.

  • Job Creation:

    • Canada created 4.7 million net new jobs since 1993.

  • GDP Growth:

    • The combined GDP of the North American economies rose from $8 trillion in 1993 to $19 trillion in 2012.

  • Shift in Perception:

    • Canadians have shifted towards a more positive perception of their role in the global economy, gaining confidence in competing internationally.

NAFTA's Integration Ambitions

  • Initial Hopes vs. Reality:

    • Although NAFTA succeeded in liberalizing trade, it has not fully realized deeper economic integration among the three countries.

    • Current barriers remain that inhibit complete economic collaboration.

  • Collaborative Production:

    • Notable industries utilizing collaborative boundaries in production include the automotive sector, with parts crossing borders multiple times, and the beef industry with cross-border practices.

Barriers to Deeper Integration

  • Skepticism and Security Concerns:

    • A prevailing skepticism about free trade exists among the American public which U.S. policymakers have struggled to address.

    • Post-9/11 border security measures have hindered the ease of cross-border movements, with same-day crossings from the U.S. to Canada dropping from 25.3 million in 2001 to less than 7.7 million in 2012, marking a significant decline in cross-border traffic.

  • Political Challenges:

    • Efforts for deeper economic integration face political complexities and resistance within the U.S., particularly regarding national sentiment towards protectionist policies.

    • The Office of the U.S. Trade Representative remains hesitant to take a collaborative approach in trade negotiations, often negotiating bilaterally.

Enhanced Cooperation Opportunities

  • Rethinking Border Management:

    • Efforts are underway to manage the 5,500-mile Canada-U.S. border more effectively with cooperation on securing ports and sharing intelligence.

    • The principle of "cleared once, accepted twice" is being implemented for customs processes.

  • Regulatory Reforms:

    • Established cooperation councils are working towards harmonizing regulations to reduce inefficiencies in following regulatory discrepancies.

    • Example: Health Canada and U.S. Food and Drug Administration's joint review of veterinary drugs as part of regulation alignment initiatives.

  • Common Standards:

    • The potential for creating a joint "trusted traveler" program to expedite cross-border travel has been identified.

Addressing Broader Issues

  • Investment in Energy Cooperation:

    • Canada is the leading exporter of oil to the U.S., providing 2.3 million barrels per day, which is critical for U.S. energy security.

    • Initiatives like the clean energy dialogue formed in 2009 between Canada and the U.S. focus on enhancing energy efficiency and developing renewable resources.

  • Collaborations on Climate Change and Health:

    • Canada, the U.S., and Mexico share interests in addressing climate change and pandemic responses, as exhibited by their joint efforts to combat influenza outbreaks and their inclusion in the Climate and Clean Air Coalition.

Security Concerns and Future Directions

  • Military Cooperation:

    • Ongoing partnerships through the North American Aerospace Defense Command (NORAD) focus on transnational crime and border security.

    • Joint criminal justice initiatives are being supported, particularly addressing drug trafficking through Mexico and improving police training.

  • Conclusion:

    • Future economic integration is facing challenges against a backdrop of political reluctance within the U.S. Nonetheless, the article posits that new leadership could revitalize the North American economic approach and encourage collaboration across various sectors. The implementation of joint programs and regulatory reforms can lead to sustainable economic growth.