Opinion

New NAFTA

President Donald Trump has been talking tough about the North American Free Trade Agreement, threatening recently to withdraw the United States from the pact outright, then walking back that threat after phone calls from the leaders of Mexico and Canada, who were undoubtedly alarmed.

But even with the expected confirmation this month of Robert Lighthizer, an expert on international trade law and the president’s pick for U.S. trade representative, it’s far too soon to assume NAFTA’s out of the woods. The 45th president of the United States has demonstrated repeatedly that he’s nothing if not unpredictable.

For now, the United States is not pulling out of NAFTA. It is, however, planning significant renegotiation. And that’s no cause for alarm – NAFTA truly is in legitimate need of an update.

The deal is, after all, 23 years old, and negotiated in an entirely different era. It was enacted when a lot of people had yet to log onto the internet, and the iPhone was more than a decade away. Some of the biggest and most robust sectors of the North American economy did not exist when NAFTA was enacted.

Now that the conditions seem right for a new NAFTA, the Canadian American Business Council has come up with a list of Top Ten suggestions on how to grow the Canada-U.S. economy by giving NAFTA a shot in the arm. We refer here strictly to the bilateral Canada-U.S. relationship, although there is something to be said for keeping the agreement trilateral with Mexico if possible. The recommendations represent diverse sectors from both sides of the 49th parallel and include some of the most iconic brands in the world, as well as innovative startups and entrepreneurs.

The first recommendation is simple. Create a chapter in NAFTA on regulatory cooperation that codifies and strengthens the Canada-U.S. Regulatory Cooperation Council as a permanent entity.

The fruits of that bilateral labor are frustratingly slow at the moment. Yet they’re integral to the health of both economies since they’ll eliminate costly red tape by harmonizing regulations on both sides of the border. Formally recognizing the RCC in a new NAFTA would ensure governments work in tandem on new regulations and that they align existing regulations. There’s also an argument to be made in favor of a “negative list” approach to new regulations. Such an approach would deem that all new regulations must be harmonized, unless they are specifically excluded from harmonization.

Our second recommendation is to mutually recognize voluntary product standards, testing and certification and implement zero tariffs on all products so that we truly have a free-trade agreement. It’s probably too much to hope that dairy and lumber would be included in the zero-tariff regime, so for those sectors we encourage new arrangements that are mutually acceptable. The swift resolution of the dairy and lumber disputes, indeed, constitute our third recommendation.

Fourth, we advocate revamping Buy American provisions into one Buy American/Canadian requirement, or consider Canada “domestic” for all official procurement at the federal and state levels. That’s currently the case in the defense sector. The reciprocity would need to be genuine, with a level playing ground for both Canadian and American companies on each side of the border.

Our fifth recommendation is to support further integration of our North American energy markets by building robust and interconnected infrastructure systems to connect supply and demand. That will require a push for predictable, efficient and expedited regulatory regimes to ensure cross-border infrastructure that’s up and running in a timely fashion. This one seems self-evident, but increased coordination can bolster energy security and enhance the sector’s ability to address cyber and other physical security threats.

The sixth recommendation is to enhance protection of intellectual property including, but not limited to, exploring policy options in Canada to counteract judicial interpretations of IP rules, which serve to invalidate longstanding pharmaceutical patents. It is time for Canada’s Parliament to fully explore legal options that in recent years have been left solely to Canadian courts, to the serious detriment of innovation and American investment. We explore this issue more fully in a deep dive discussion on innovation policy that can be found on the CABC’s website.

No. 7 involves the establishment of rules to promote and govern digital trade, including provisions prohibiting data localization and digital customs duties, enabling cross-border data and securing basic non-discrimination principles for digital products.

Eighth on our list is updating the rules governing the movement of people across our common border to reflect modern categories of employment, including those who work in the digital economy.

The ninth recommendation calls for the enhancement and modernization of joint security arrangements to foster faster, freer cross-border movement of goods and services and more reliable and predictable border processing.

Finally, since the new NAFTA will potentially serve as a model for future agreements the way its predecessor was, we suggest taking a stand against currency manipulation. It’s not an issue here in North America, but can pose a problem with other economies, even if Trump isn’t willing at the moment to take it on.

These 10 recommendations aren’t easy, but they are possible, and if achieved could provide a meaningful boost to the flow of commerce, the pace of trade and the health of the economies of both Canada and the United States.

They’d lead to minimal disruption, and in fact would ease regulatory burdens on countless businesses and industries on both sides of the border. They’d cut costs and red tape. And they’d open up lucrative new markets for those sectors that have existed under protectionist regimes for too long.

We’re heading into a dynamic new age of technological advances that are demanding the United States and Canada come together as partners like never before. These new advances are almost as unpredictable as the next 100 days of the Trump administration. In both instances, though, it is worth focusing on what needs updating in NAFTA and to create a blueprint for how our countries can do business together for generations to come.

 

Maryscott Greenwood is CEO of the Canadian American Business Council.

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