International Economic Law and Policy Blog

Some Canadian Support for NAFTA Changes

It looks like there are at least some people in Canada who support the idea of opening up the NAFTA for re-negotiation:

The NDP is joining U.S. Democratic presidential hopefuls in their promise to change NAFTA, with Leader Jack Layton telling an American audience today the trade agreement needs to better protect workers and the environment.

In an interview, Mr. Layton said the New Democratic Party wants to join forces with the likes of U.S. Senators Hillary Clinton and Barack Obama, who are pledging to change the North American free-trade agreement in the Democratic nomination race.

"There are many Canadians who agree. Certainly the Democratic Party has long advocated that the environmental and labour standards in NAFTA be improved," Mr. Layton said.

More on the Obama Campaign's Contact with Canada

As mentioned yesterday, there have been allegations that the Obama campaign told the Canadian government that the NAFTA threats were just campaign talk.  Initial reports suggested no such communication occurred, but there were new developments today:

Despite repeated requests, Barack Obama's campaign is still neither verifying nor denying a CTV report that a senior member of the team made contact with the Canadian government -- via the Chicago consulate general -- regarding comments Obama made about NAFTA.

...

The Obama campaign told CTV late Thursday night that no message was passed to the Canadian government that suggests that Obama does not mean what he says about opting out of NAFTA if it is not renegotiated.

However, the Obama camp did not respond to repeated questions from CTV on reports that a conversation on this matter was held between Obama's senior economic adviser -- Austan Goolsbee -- and the Canadian Consulate General in Chicago.

Earlier Thursday, the Obama campaign insisted that no conversations have taken place with any of its senior ranks and representatives of the Canadian government on the NAFTA issue. On Thursday night, CTV spoke with Goolsbee, but he refused to say whether he had such a conversation with the Canadian government office in Chicago. He also said he has been told to direct any questions to the campaign headquarters.

More here, here and here.  This explanation of the events makes sense to me:

To the best I can gather, here is what most likely happened to set off CTV's reporting that the Obama campaign is fudging the truth about its NAFTA intentions. Someone from the Canadian consul general's office in Chicago got to talking with Dr. Austan Goolsbee, he the principle economic adviser to Sen. Obama, and NAFTA came up. Mr. Goolsbee may have warned him that the rhetoric about NAFTA might be amped up and that the policy follow through might not be as drastic as the volume of the rhetoric would indicate. By no means, though, does that mean that Obama isn't serious about renegotiating the labor and environmental provisions of NAFTA -- just that, Goolsbee may well have said, Obama recognizes that the normative case for NAFTA is not as one-sided as general campaign trail bromides make it out to be.

I have no idea if this is, in fact, what happened, but it sounds plausible.

UPDATE:

Here is Austan Goolsbee's explanation:  "Barack Obama's senior economic policy adviser said Sunday that Canadian government officials wrote an inaccurate portrayal of his private discussion on the campaign's trade policy in a memo obtained by The Associated Press."

Is the NAFTA Rhetoric Just for the Election?

Yes, according to one report:

Did Sen. Barack Obama say one thing privately to the Canadian government about NAFTA -- and something very different during Tuesday night's debate? The answer is yes, according to CTV, a Canadian television network.

The network reported Wednesday night that a "senior member" of the Obama campaign called Michael Wilson, the Canadian ambassador to the U.S., "within the last month," warning Wilson that Obama would "take some heavy swings" at the North American Free Trade Agreement (NAFTA) as part of his campaign.

The Obama insider reportedly told the ambassador, "Don't worry -- it's just campaign rhetoric, it's not serious," CTV reported.

CTV reported that the Obama campaign's message to Wilson was taken as "completely authentic" by the Canadian government.

What does the Obama campaign have to say about this:

Obama has not directly responded to questions about his differing private and public stands on NAFTA. A spokesperson for the Obama campaign told CTV that the Obama staffer's conversation with Ambassador Wilson sounded implausible. But the spokesperson did not deny that the Obama campaign had contacted Wilson.

"Senator Obama does not make promises he doesn't intend to keep," the spokesperson told CTV.

My sense is that both Obama and Clinton are very serious about opening up NAFTA for re-negotiation.  However, in terms of the changes they hope to make, they are probably willing to settle for something less than the demands they are making now.

UPDATE:

The Canadian Embassy denies the story:

A spokesman for the Canadian Embassy to the United States, Tristan Landry, flatly denied the CTV report that a senior Obama aide had told the Canadian ambassador not to take seriously Obama's denunciations of Nafta.

"None of the presidential campaigns have called either the Ambassador or any of the officials here to raise Nafta," Landry said.

He said there had been no conversations at all on the subject.

"We didn't make any calls, they didn't call us," Landry said.

"There is no story as far as we’re concerned," he said.

Re-negotiating NAFTA: Some Reaction from Canada

In my post yesterday, I asked for some Canadian and Mexican reaction to the Obama/Clinton calls to "re-negotiate" NAFTA.  Debra Steger offered some views in a comment.  Here are some reactions in the press from Canadian government officals:

Trade Minister David Emerson suggested the United States has a sweet deal over access to Canada's oil under the North American Free Trade Agreement, saying the two Democratic presidential candidates calling for renegotiations may not know just how good the U.S. has it under the deal.

http://canadianpress.google.com/article/ALeqM5iAnllHOZKWHSuOSWtGnSfK2lgSGg

``If you reopen Nafta, you re-open it for all three parties,'' Emerson said. ``If you reopen it for one or two issues, you cannot avoid reopening across the range of issues. If Nafta were reopened, we would have our list of priorities.''

http://www.bloomberg.com/apps/news?pid=20601082&sid=aYCVzDarOock&refer=canada

"I've been very concerned for a couple of years now. The rhetoric of protectionism has been creeping, it's been getting more strident, it's permeating Congress, protectionist groups are flexing their muscle," Canadian International Trade Minister David Emerson told a crush of reporters.

"And it's not just the heat of the election campaign that's causing concern."

Emerson said that if the United States left NAFTA, which also includes Mexico, he did not envisage it suddenly erecting large tariff barriers.

...

The Conservative minister, a former lumber company executive, predicted the United States will not pull out of NAFTA.

"I think sound, wise judgment will prevail at the end of the day," he said.

Liberal Member of Parliament John McCallum, a former bank economist, said he was concerned about protectionist sentiment among some Democrats. "If the U.S. were to pull out of NAFTA it would be a catastrophe for Canada," he said.

However, he dismissed the idea that this would actually happen.

"That's the political rhetoric you get in a political race where the stakes are high and it's close. You have to remember that while it would be disastrous to Canada it would also be disastrous to many millions of Americans who trade with Canada," he said.

"So at the end of the day I don't think it will happen."

http://www.reuters.com/article/latestCrisis/idUSN27455425

Federal Finance Minister Jim Flaherty says there needs to be a recognition by Americans that NAFTA benefits the United States tremendously.

http://www.theglobeandmail.com/servlet/story/RTGAM.20080227.wflahertnaft0227/BNStory/International

Obama/Clinton: "Opt Out Of" Or "Re-negotiate" NAFTA

I was just watching the Obama-Clinton debate in Ohio.  Most of the trade stuff was boilerplate, but one point jumped out at me.  Both Obama and Clinton stated explicitly that they will "opt out" of NAFTA unless the governments of Canada and Mexico agree to re-negotiate the agreement.  In particular, they want labor and environmental standards to be a core part of the agreement, enforceable through dispute settlement.  (Senator Clinton also mentioned something about preventing foreign investors from challenging our laws designed to protect workers, but I forget whether that was said in the same context).

Here's my question for any Canadian or Mexican readers (or any others who might have some insights):  What would the reaction of the Canadian and Mexican governments be to this proposal?

UPDATE:  Here's the part where Clinton talks about foreign investors:

But let's talk about what we're going to do. It is not enough just to criticize NAFTA, which I have, and for some years now. I have put forward a very specific plan about what I would do, and it does include telling Canada and Mexico that we will opt out unless we renegotiate the core labor and environmental standards -- not side agreements, but core agreements; that we will enhance the enforcement mechanism; and that we will have a very clear view of how we're going to review NAFTA going forward to make sure it works, and we're going to take out the ability of foreign companies to sue us because of what we do to protect our workers.  (emphasis added)

So I think it's clear that modifying the investment provisions is part of her general re-negotiation plan.  What's not clear to me is whether the investment re-negotiation will be limited to laws "to protect our workers."  That's the only part she mentions, but it seems strange to single that area out.

How Sweet It Is

Sugar is fairly big down here in Palm Beach County.  My local paper just ran a story on the recent lobbying efforts to moderate the effect of free trade in sugar between the U.S. and Mexico pursuant to NAFTA, by putting up various new trade barriers.  The article notes the following concerns expressed by sugar producers:

On one side of the battle are the sugar industries of the U.S. and Mexico. They say that unless the NAFTA provision, which went into effect last month, is modified to sharply limit the sugar trade, there's a prospect of "market chaos" leading to a crash of sugar prices in both countries.

...

Jack Roney, director of economics and policy analysis for the American Sugar Alliance, said implementing NAFTA as written could cause "a downward price spiral" for sugar in both countries.

I couldn't help thinking:  Wasn't a "crash of sugar prices" and "a downward price spiral" the whole point?

Speaking of NAFTA ...

Speaking of NAFTA, as we were yesterday, the Acting U.S. Secretary of Agriculture says that it could be "unraveling," as the U.S. and Mexico want to attach a sugar "side agreement" to the new U.S. farm bill, limiting Mexican exports of sugar to the U.S.  The Secretary says this could result in "Mexico demanding restrictions on U.S. exports of pork, poultry and other commodities."  Here is more.

If they start excluding too many products, they'll have to worry about meeting GATT Article XXIV's "substantially all trade" requirement.

Was NAFTA a Mistake?

According to Barack Obama, in tonight's Presidential debate, it was:

... on trade, John [Edwards] is exactly right that you travel around South Carolina and you see the textile mills that John's father worked in closed, all over the region. And it is absolutely true that NAFTA was a mistake.

I know that Hillary on occasion has said -- just last year said this was a boon to the economy. I think it has been devastating, because our trade agreements did not have labor standards and environmental standards that would assure that workers in the U.S. were getting a square deal.

But, he says, the U.S.-Peru FTA, which he voted for, is good, in part because of the new environment/labor standards:

But the only thing I want to differ on John is this whole notion of Peru. The Peru trade deal had labor and environmental agreements in it. Peru is an economy the size of New Hampshire. Over 90 percent of the goods coming from Peru already come in under various free trade agreements.

Interestingly, he also mentions the size of Peru and the fact that many of its goods already came in duty-free.  It's not clear to me whether these are general factors he would consider in determining whether to support a particular trade agreement, or if it was just an off-hand remark.  These debates are difficult, and some of what is said may not have been thought out precisely.

"Why not a North American Union?"

Will Wilkinson of the Cato Institute asks this question and argues:

There are some who believe a grave threat to American sovereignty looms over the horizon. A shadowy cabal, they say, is planning a massive "NAFTA superhighway," a new North American currency, and a common market in goods and labor. It will all culminate in an E.U.-like North American Union.

It turns out this is mostly fantasy. But the fantasy is more dream than nightmare. Because some aspects of a North American Union would leave Americans and our neighbors both richer and freer.

The population of undocumented migrants in the U.S. has grown rapidly in recent decades -- in part because we have implemented increasingly restrictive border policies. What we've done is make passage riskier. This has slowed in-migration. But those who do come now are more likely to stay. And this has increased the permanent population of undocumented Mexicans.

The best solution to America's immigration problem is not a wall or a new crackdown on the hiring of undocumented workers. It's NAFTA's unfinished business: a common North American labor market. It's illogical and impractical to create a single North American economy that integrates markets for goods, capital, raw materials, services, and information but tries to keep labor markets divided.

Ron Paul is not going to like this.

One More Question from the Republican Debate

One more trade related question from the CNN/YouTube Republican debate:

YouTube question: Good evening, candidates. This is (inaudible) from Arlington, Texas, and this question is for Ron Paul.

I've met a lot of your supporters online, but I've noticed that a good number of them seem to buy into this conspiracy theory regarding the Council of Foreign Relations, and some plan to make a North American union by merging the United States with Canada and Mexico.

These supporters of yours seem to think that you also believe in this theory. So my question to you is: Do you really believe in all this, or are people just putting words in your mouth?

Cooper: Congressman Paul, 90 seconds.

Paul: Well, it all depends on what you mean by "all of this." the CFR exists, the Trilateral Commission exists. And it's a, quote, "conspiracy of ideas." This is an ideological battle. Some people believe in globalism. Others of us believe in national sovereignty.

And there is a move on toward a North American union, just like early on there was a move on for a European Union, and it eventually ended up.

And there is a move on toward a North American Union, just like early on there was a move on for a European Union, and eventually ended up. So we had NAFTA and moving toward a NAFTA highway. These are real things. It's not somebody made these up. It's not a conspiracy. They don't talk about it, and they might not admit about it, but there's been money spent on it. There was legislation passed in the Texas legislature unanimously to put a halt on it. They're planning on millions of acres taken by eminent domain for an international highway from Mexico to Canada, which is going to make the immigration problem that much worse.

So it's not so much a secretive conspiracy, it's a contest between ideologies, whether we believe in our institutions here, our national sovereignty, our Constitution, or are we going to further move into the direction of international government, more U.N.

You know, this country goes to war under U.N. resolutions. I don't like big government in Washington, so I don't like this trend toward international government. We have a WTO that wants to control our drug industry, our nutritional products. So, I'm against all that.

But it's not so much as a sinister conspiracy. It's just knowledge is out there. If we look for it, you'll realize that our national sovereignty is under threat.

I think there are some real issues here, so it's a shame to see them discussed in this way, with references to "a move on toward a North American Union" and "a WTO that wants to control our drug industry, our nutritional products."  What I would like to hear is the candidates' views on how much power should be given to international institutions, in what policy areas, and how these institutions should be run.  I know it's a bit out of the mainstream U.S. public policy debate, but it seems to have resonance with at least some people (e.g., Ron Paul supporters), so it would be great to hear the other candidates' views on this.