The Imminent Text Release is a Major Milestone in NAFTA Renegotiations, but Don’t Bet on It Being the Final Deal
Will Canada agree to a North American Free Trade Agreement (NAFTA) renegotiation deal this week given the high-stakes Quebec election occurring on Oct.1? Our Canadian friends say it’s unlikely given Quebec is ground zero in the dairy trade battle now consuming NAFTA talks. The Liberal Party candidate for premier of Quebec is in a close race, and winning the province is considered vital to Prime Minister Justin Trudeau’s fall 2019 reelection. However, even without a Canada deal now, paths still remain for a three-nation deal to arrive at Congress for a spring 2019 vote. More on that below.
What’s certain is that a revised NAFTA text, likely representing the U.S.-Mexico deal completed in late August, will be posted for all to see imminently. Public Citizen will conduct a speedy review and post an initial analysis on key elements shortly after release. Knowing some important progress has been made, Public Citizen will measure the text against the changes that we and many other progressive organizations have long demanded that are necessary to stop NAFTA’s ongoing damage. Almost one million American jobs have been government-certified as lost to NAFTA, with more outsourced to Mexico every week, including recently by Verizon and Boeing. New NAFTA investor-state dispute settlement (ISDS) attacks on environmental and health policies are being regularly filed after $392 million already has been seized from taxpayers by corporations using NAFTA’s ISDS regime.
While the text release will be an important step in NAFTA renegotiations and invariably launch a flotilla of statements from policymakers and the private sector alike, it is a milestone in a long process, not the end point. And that is not only because Canada may be MIA. What is contained in the published text and how members of Congress and other key constituents react will provide greater insights to NAFTA’s ultimate fate than whether Canada is signed on at this point.
For those who intend to support any deal or oppose any deal, the text release will provide a hook to state a final position. But for most, the text release will provide a long-awaited opportunity to ascertain if there are poison pill provisions or building blocks of an acceptable deal. To date only the 500 cleared trade advisers representing mainly corporate interests and those members of Congress who ventured to the secured Capitol reading room to review the text know any details. And not all elements of the text have even been available to them.
Viewed as a work in progress, the text release likely will raise many intriguing questions:
Congressional Reaction Will Be Telling: U.S. Trade Representative Robert Lighthizer has declared that his goal with NAFTA renegotiation is to replace the old deal with a new approach that can obtain broad bipartisan support and be passed by a wide majority. If the text generates some unhappiness in both parties, but no rebellion in either amid foreseeable consternation about Canada, then that outcome remains possible.
What Does Labor Think: The acknowledgement to date of both progress and shortcomings by powerful players who have been opposed to past deals, namely unions, has been closely watched. The U.S. labor movement has been united in expressing concern about the enforcement of a new pact’s labor provisions that will be essential to raise wages in Mexico and ease the lure to outsource jobs. Progress on eliminating the investor protections that make it easier to outsource jobs and subject domestic policies to attack and addition of stronger rules of origin for the auto sector and related wage standards has been welcomed. But absent swift and certain enforcement of much stronger labor standards, U.S. corporations will continue to outsource jobs to Mexico to pay workers a pittance, dump toxins and import products back for sale here.
If Poison Pills Are Identified, Can They Be Excised?: The administration’s fact sheets on the U.S.-Mexico deal revealed that it included a 10-year exclusivity term for biologic medicines. Most congressional Democrats have strongly opposed these extra monopoly rights that allow pharmaceutical firms to keep prices high by avoiding competition from generic medicines. If Democrats gain control of a chamber of Congress in the midterm elections, could changes to this term or others become necessary to gain their support? President George W. Bush had to alter some terms in free trade agreements he had previously completed but not sent to Congress when Democrats gained a House majority in 2006.
What Is the Road to Trilateralandia?: If the text that is released does not include Canada, then what? To start with, despite the current near-hysteria about Canada’s situation in the NAFTA talks, the notion of countries signing a trade agreement at different times is not new. For instance, most countries signed the Central America Free Trade Agreement on May 28, 2004. But negotiations with the Dominican Republic had not been concluded when the Fast Track notice of intent to sign and enter that deal was sent to Congress. So, a second signing ceremony including the Dominican Republic was held on Aug. 5, 2004. Congress passed the deal in July 2005.
Back to 2018, under Fast Track rules, a text must be posted by Sept. 30 for the deal that Congress was notified of on Aug. 30 to be signed by outgoing Mexican president Enrique Peña Nieto. Although Andrés Manuel López Obrador (AMLO), who enters office on Dec. 1, 2018, had a negotiator at talks since June and has announced he supports the deal, our Mexican allies confirm what was previously reported: AMLO doesn’t want to be the one signing it. Nor does he want NAFTA talks to become a perilous first order of business that could derail the momentum for his domestic economic reforms that his overwhelming electoral win generated. Already, the peasant farmer organizations that were an important part of his base have announced opposition to the U.S.-Mexico deal because it does not alter terms that thwart AMLO’s ability to deliver on his promises to revitalize small-scale farming. Thus, one scenario is that the U.S. and Mexico proceed to sign a deal by Nov. 30. And then a second signing ceremony on a trilateral deal occurs later. A final trilateral deal then is sent to Congress. This is not as improbable as it may seem. Many of the outstanding issues that remain to be resolved with Canada, such as dairy or the “cultural exception,” involve terms that will be memorialized in specific Canadian schedules of commitments or in Canadian lists of “non-conforming measures,” not in rewrites of chapters of the text, although there is that chapter formerly known as “NAFTA Chapter 19” that was, written out of the deal. The trickiest questions may relate to whether the administration must obtain additional authority to continue talks with Canada, and if so, what that means for the timing with Canada. Given Fast Track’s two 90-day notice periods, a new grant of authority would push the signing of a trilateral deal to April at the earliest, which would thrust NAFTA – and Donald Trump – into the middle of Trudeau’s reelection campaign. Oh Canada!