Abstract: The Trump trade team has listed higher U.S.
automotive content, Buy America on infrastructure such as pipelines and an end
to trilateral trade-dispute mechanisms as top objectives in the talks aimed at
reducing its trade deficit, largely with Mexico. Canada’s trade surplus in
goods with the U.S. has narrowed considerably in recent years, and when
services are included, the Canadian surplus becomes a small deficit. Also, Freeland
pushed back at Trump’s so-called “Buy-American-Hire-American” agenda on
government pro- curement contracts, saying “mutual access” was achieved in the
Canada-European Union trade deal, and should be achievable within the NAFTA
re-negotiation talks. Trump would like to eliminate the third-party
arbitrators, but Canada and Mexico may not like the referee picked
by the US side, nor will the US like him to be picked by Canada or Mexico. As
long as the third-party arbitration system is kept and the trade between the
borders are reasonable and mutually beneficial, NAFTA should be kept, as trade
has increased significantly, and all parties have enjoy the comparative
advantage of international trade, which is not only an exchange of different
items, and also a scale of economy. It may need to be modernized and updated to
solve the problems of labor standards, environmental pollution, customs clear- ance
and limitation in the occupations for talent exchanges. Without NAFTA, Canada
may have to take some time to readjust to the new structure and the rules in
the game. Moreover, the original Canada-US pact doesn’t allow foreign
corporations to challenge Canadian laws. Actually, almost half of Canadian
exporters no longer use the NAFTA preference in their trade arrangements, which
means NAFTA has to be modernized and made more efficient. Also, in May 2017,
the 11 remaining members of the TPP, including Canada and Mexico, agreed to
proceed with the trade deal without U.S. participation. Due to the sunken cost, opportunity cost, comparative advantage, scale of economy and the repetitive win-win situation, the author recommends
Canada to stay in NAFTA although separation may be put as a second option.
Keywords: NAFTA, trade
deficit, dispute resolution, win-win or zero-sum
I.
Introduction
Trade
experts warn that the industrial chain of the three countries in NAFTA has a
high degree of integration with huge mutual investment, and any attempt to
change or undermine the existing supply chain and production network will have
a great impact on the production and employment of the three countries, therefore,
dissolution of the North American FTA will eventually cause serious injuries to
the three economies. Mr. Ritchie predicts that ultimately the Americans will
walk away from the NAFTA negotiations, and that Canada will end up in bilateral
talks with the U.S. alone. The problem, he says, is that "the American
demands would remain the same and those demands are outlandish. They're
designed to blow up talks, instead of reach agreement." Canadian Foreign
Minister Christie Freeland agrees with Mr. Ritchie's view that the U.S. has
been imposing unfair and punitive tariffs on Canadian industry, notably on
softwood lumber and Bombardier planes. But she argues that NAFTA offers Canada
an opportunity to push back on those measures, and says she refuses to give up
on the possibility of reaching an agreement. Upholding a position pragmatic,
well reasoned and with goodwill, in an attempt for a win-win other than a
zero-sum result, she emphasizes that our focus right now is, and needs to be,
on getting an improved, modernized NAFTA out of these negotiations. Meanwhile,
she mentions that only 42% Canadian exporters surveyed use NAFTA preference due
to either the red tape or long delay in the processing time or the narrower
margin between NAFTA and WTO rates[i].
The
fourth round of negotiations made some progress in the field of intellectual
property, digital trade and some other areas. However, the United States
proposed to increase a clause stipulating in the agreement automatic failure of
the agreement after 5 years, also called the "sunset clause", to modify
the rules of origin of cars, to levy new tariffs to imported cars to the United
States, and to abolish the dispute settlement mechanism, which have caused
great controversy. Freeland said at a joint press conference after the talks
that the United States had proposed a series of “unconventional requirements” that
would disallow the North American FTA to be predictable, open and cooperative
for the 23-year period. “In some cases, these proposals are contrary to the
rules of the WTO, which is disturbing.”[ii] Mexico
will continue to seek constructive and creative solutions and welcome dialogue,
but in order to bring these efforts to success for Mexico, the United States
and Canada," said Ildefonso Guajardo, Minister of Economy of Mexico, “we
must understand that we all have limitations.” The US trade negotiator felt "surprised
and disappointed "on refusal to change the attitude from the two sides, and
he accused them not to want to give up the unfair advantage. He once again
stressed that the United States hoped to change the US trade deficit status through
negotiations. On the day the negotiations began, US President Trump once again
threatened to terminate the North American FTA, and said it would not rule out
the possibility of a bilateral trade agreement with the two countries
respectively.
II.
Achievements
Made
NAFTA
does ease the flow of labour between Canada, the U.S. and Mexico but only for
workers in some 60 occupations, including doctor, dentist, lawyer, accountant,
hotel manager, economist, engineer and scientist. NAFTA does ease the flow of
labour between Canada, the U.S. and Mexico but only for workers in some 60
occupations, including doctor, dentist, lawyer, accountant, hotel manager,
economist, engineer and scientist. Trilateral trade in real terms has more than
doubled. As far as direct investment is concerned, Canada did enjoy a 243% real
increase in FDI from the U.S. between 1993 and 2013, and real GDP per head grew
faster – just barely – than its neighbor's from 1993 to 2015, though
it remains about 3.2% lower. Mexico enjoyed a 4 fold increase in direct
investment during the same period to about US$100,000 million[iii].
According
to Ms. Freeland, the negotiations taking place in Ottawa since Sept. 23, 2017
made solid progress on “bread and butter” issues that matter to Canadian businesses,
such as electronic forms at the border, automatic declaration of origin and
regulatory harmonization. According to negotiators, a chapter on small and
medium-sized enterprise was completed in Ottawa[iv]. In the
fourth round, there was also progress on intellectual property rights.
III.
Challenges
1.
Deficit
The
Trump trade team, led by U.S. Trade Representative Robert Lighthizer and
Commerce Secretary Wilbur Ross, has listed higher U.S. automotive content, Buy
America on infrastructure such as pipelines and an end to trilateral
trade-dispute mechanisms as top objectives in the talks aimed at reducing its
trade deficit, largely with Mexico.
Over
the last decade, the U.S. deficit with Canada exceeds US$365 billion. Canada’s
trade surplus in goods with the U.S. has narrowed considerably in recent years,
and when services are included, the Canadian surplus becomes a small deficit.
Freeland likes to say that these numbers suggest trade between Canada and the
U.S. is “balanced”. However, Canada’s trade surplus with the US is still
smaller than Mexico’s[v].
Nevertheless, a big deficit of the US with the two brothers does not mean it
should block trade with them as this is determined by supply and demand, and
actually the people in the US can gain more with imports from other countries.
The
report which came out in July 2017 reminded us what life in Canada would be
without NAFTA. Exports to the US and Mexico suffered significantly as auto
makers took a summer break.
Dan Ujczo, an Ohio-based
international trade lawyer, said, most people were on a different page than
Trump and saw NAFTA as essential. According to him, everything the U.S. is
adding are those types of measures that will restrict trade, and stakeholders
are already preparing for the demise of NAFTA, with some who made investment
decisions based on the pact even getting ready to launch litigation against the
U.S[vi].
2.
Dumping
U.S.-based Boeing Corporation initiated the
complaint that Bombardier’s export sales to Delta were priced below cost in the
U.S. market and that Bombardier benefited from unfair government financial
subsidies. In particular, Boeing highlighted direct financial aid from the
governments of Canada and Britain, as well as a C$2.5 billion investment in the
company from the Province of Quebec and its largest pension fund as the main
sources of unfair government subsidies.
Boeing argued, somewhat confusingly, that the
subsidies made it possible for Bombardier to price below cost or, equivalently,
to engage in dumping, although one would think that the subsidies effectively
lowered Bombardier’s costs so that it would not incur sustained financial
losses on its airplane sales by selling at prices below its long-run
incremental costs. The confusion about the linkage between government subsidies
and dumping was not relieved by the Commerce Department’s ruling, since the
department’s preliminary duty order provided no rationale or methodology for
how it calculated the 219 per cent duty.
But what makes the latest U.S. initiative
particularly troublesome is that Boeing did not compete for the Delta order.
Rather, Boeing’s motive appears to be to delay or prevent the entry of a
competitor into a segment of the civilian airliner market in which it currently
does not successfully compete. While Canada might ultimately challenge any
final U.S. tariff decision, in part on grounds that Bombardier is expected to
repay the government financial assistance, and hence, the assistance does not
qualify as a subsidy. Furthermore, in this specific case, U.S. airline
passengers will ultimately face higher ticket prices as airplane costs increase
for airline service providers such as Delta with the imposed import duties[vii].
3.
Labor
Standard
Since
NAFTA, Canada’s auto trade deficit with Mexico has quadrupled to $12 billion,
and the U.S. deficit has grown a stunning 18-fold. Half
our Detroit Three members are lost, and Canada has shed one in four auto jobs
in the last decade alone. Although there are four million more vehicles being
built in North America today than when NAFTA was signed, two thirds of the
added production went to Mexico, one-third to the U.S., and Canada has seen no
growth. With only 8 per cent of the auto market, Mexico now has nearly half the
auto jobs in North America. Moreover, wages in Mexico are lower today in real
terms than before NAFTA. Sources said that the US is demanding an eight-fold
increase in Mexico’s minimum wages, which is now less than $1 per hour[viii], yet
the Mexican delegation flatly rejected that idea of raising the wages
eight-fold. Canada has
tabled labour standards at the negotiations along the lines of the
Canada-European Union free-trade deal to ensure that Mexico can’t take
advantage of its lower wages to steal jobs away from Canada and the United
States, focusing more generally on the principles of
improved working conditions, fair compensation, gender equality and the right
to collective bargaining. Mexico has said it too wants to improve labor
standards, but Mexican officials are concerned that small businesses, which
employ the vast majority of the country's workers, can't afford to pay
dramatically higher wages. However, Mexico signed TPP, and it is more willing
to accept the terms of TPP. Therefore, what Canada can look for is a TPP-light
kind of agreement. Also, America’s more recent trade agreements with, for
instance, South Korea and Colombia include binding safeguards against the use
of child or forced labor. Such structures could be wired into a revised
agreement in order to address concerns about a race to the bottom in labor and
environmental standards[ix].
As far as the labor union is concerned, the
Canadian delegation wants the U.S. government to pass legislation that would
impose on the constitutional ability of states to extend federal labour laws,
which currently allow state governments to pass “right-to-work” laws. These
laws actually empower workers
by allowing them to choose whether or not to join or financially support labour
unions. The minimum standard in the U.S. is that workers are not required to
join a union and can only be forced to pay dues related to representation with
their employer. Indeed, unionized U.S. workers can opt-out of dues allocated to
political activities including donations to political parties and causes.
Missouri recently became the 28th state to pass a right-to-work law. It is
found union workers in right-to-work states pay fewer dues, and union
executives get lower salaries. However the satisfaction of the unionized
workers is the same, and employment levels are higher. In fact, rather than
pushing the Americans to limit worker choice, Canada should emulate our
southern neighbour because worker choice laws encourage unions to be more
accountable to their members; these laws also contribute to a stronger economy
and labour market[x].
4.
Rules
of Origin
As
far as the rules of origin are concerned, both Canada and Mexico would like to
maintain the current 62.5 per-cent requirement for North American sourced
content, while the US wants to require a higher American-made content for
duty-free movement of auto vehicles and parts[xi]. Canada
and Mexico don’t like the idea to set a bar for domestic content from any NAFTA
country.
The
proposed changes from the Trump administration to “rules of origin” would have
a big impact on auto manufacturers by redefining which products can be shipped
duty-free across borders, based on where their component parts come from.
5.
Supply
Management System
President
Donald Trump demands for an end to Canada’s supply management system as well as
reducing or eliminating remaining tariffs that keep US agricultural goods from
reaching Canadian shelves during the renegotiation of the NAFTA treaty due to
many lost jobs on Midwestern farms[xii]. U.S. Trade Representative Bob Lighthizer said "some very
difficult and contentious issues" lie ahead, including the inevitable
showdown on Canadian dairy practices. Canada's dairy, egg and poultry industries are governed by a
supply-management system that dates back to the 1970s. It has three parts, The
Globe's Barrie McKenna explains: Fixed prices, production quotas and tariffs to
protect Canadian producers from foreign competition. The dairy tariffs – which run up to 270 per cent, and which Canada
tightened last year to include unfiltered milk products used to make cheese and
yogurt[xiii] – have been a thorn in the side of other
dairy-producing nations like the United States, Australia and New Zealand.
Anyone
in Canada who wants to produce or import dairy products, poultry and eggs and
sell them must buy a quota from other farmers or face prosecution resulting in
fines or jail. With the ownership of the quota comes the right to sell a
specified amount of these products at prices fixed by a government-sanctioned
association of producers. Recently, according to a non-profit organization that
represents Alberta’s dairy producers, the cost of a quota in Alberta came to
$36,000 per cow or $3.9 million for an average-sized dairy herd of 108 cows.
According to one recent peer-reviewed publication, the average family in Canada
would save $444 annually. This burden is greater for the poor and families with
children, and smaller for the rich and childless. As a result, Prime Minister
Justin Trudeau’s Liberal government faces a problem. If it insists on
maintaining the system, U.S. negotiators will demand reciprocal concessions on
trade such as in automobiles or government procurement that decrease Canadian
exports, the exchange rate, employment and economic growth. The
government can deal with this problem by creating a financial adjustment
program, the basic features of which are found in Australia’s recent
experience. That country in 2000 had ended supply management and assisted
farmers through quarterly payments over eight years. Farmers leaving the
industry were paid a lump sum[xiv].
Some economists believe, if
the Liberal government agrees to abolish supply management, with economic and
personal freedom, free market forces will be allowed to improve through time
the quality, variety and costs of all agricultural products. Consumer prices
will fall and the present level of U.S. restrictions on Canadian exports will
be maintained or even lowered and bring other benefits to the middle class the
Liberals have promised to help.
6.
Reciprocal
Market Access
Freeland pushed back at
Trump’s “Buy-American-Hire-American” agenda on government procurement
contracts, saying “mutual access” was achieved in the Canada-European Union
trade deal, and should be achievable within the NAFTA re-negotiation talks. She
wants Canadian companies to be able to bid on sub-national procurement
contracts at the state and municipal level.
Robert
Lighthizer reiterated that measures should be taken to ensure “reciprocal market access for American farmers, ranchers and
businesses.”[xv]
The
United States is threatening to impose trade barriers against other countries
to protect such industries as steel. For Canada, there are telecoms and
financial services (and, less explicitly, dairy and poultry farming) they want
open. The United States’ partners are preparing defences and counter-demands.
Mexico’s businesses are thinking about how to change their supply chains in
case the deal blows up. Canada is pushing for access to contracts awarded by
American states and cities, which Mr Lighthizer wants to keep out of NAFTA 2.
Reforms
now allow greater foreign investment in its oil and gas industry. NAFTA opened
up trade between America and Canada but exempted Mexico from some of its
obligations. America now does ten times as much trade in electricity with Canada
as with Mexico[xvi].
An upgraded NAFTA could bring about an integrated North American energy market.
That will require a streamlining of the process by which America grants permits
for cross-border grids and pipelines.
7.
Dispute
Resolution Mechanism
This
can be the most important part of the negotiations as no game will be fair with
an unfair referee. Things like illegal subsidies, dumping, countervailing
duties and so on need to have an independent panel of judges to evaluate and
decide who will be penalized and how. Presently there is Chapter 19 to deal
with the arbitration on trade disputes and Chapter 11 to deal with the
arbitration on interest infringement of international investors initiated by local
authorities. The countervailing duties proposed by US International Trade
Commission has hardened Canada’s stance on keeping a key dispute-resolution mechanism.
The Americans don’t like many rulings on softwood; therefore they want to get
them removed, which will happen in US courts. However, who would like to watch
a sport when one team gets to pick the referees or kick them out?
On August 23rd the chief executives of the three largest American business
associations wrote a public letter to Robert Lighthizer, the United States
Trade Representative, warning him against attempts to eliminate or weaken
NAFTA’s investor-state dispute settlement (ISDS) provisions. These allow
investors to sue foreign governments, and have been invoked 59 times under
NAFTA. They offend those who see international arbitration panels as undermining
American sovereignty.
Mr
Lighthizer has not yet settled on a proposal for a new ISDS system. One option
floated would allow countries to opt in. In theory, this could give American
investors protection in Mexican markets yet retain the supremacy of American
courts at home. It seems inconceivable the Mexicans could accept such asymmetry[xvii].
ISDS
provisions require governments to pay compensation for expropriated property,
and provide the "fair and equitable treatment" to foreign firms. Suits
are heard by an arbitration panel made up of private-sector lawyers, and
proceedings can be held in secret, with no clear appeal provision.
Opponents
see NAFTA's ISDS mechanism as an unwarranted intrusion on sovereignty which
benefits powerful, multinational corporations at the expense of ordinary
citizens. Defenders argue investor-state chapters are necessary to prevent
protectionist governments from running roughshod over foreign investors for the
sake of political expediency.
Canada
has been particularly vulnerable to NAFTA arbitration suits. Since the treaty
came into force some 25 years ago, U.S. companies have filed 39 claims against
Canadian governments, winning or settling in eight cases that have cost
taxpayers $215-million. (The federal government is responsible for paying
claims, even when the company was challenging a provincial action.) Mexico has
paid out more than $200-million (U.S.), while the United States has not lost a
NAFTA Chapter 11 case[xviii].
Foreign
Affairs Minister Chrystia Freeland has indicated she wants to update the accord
in order to increase the legal rigour of the arbitration process and to assert
governments' right to regulate in the public interest, such as on environment
and labour. Such changes – along with a new appeal process – were incorporated
into the Comprehensive Economic and Trade Agreement (CETA) that Ottawa
concluded recently with the European Union. In its
objectives for NAFTA renegotiation published last week, the Office of the
United States Trade Representative proposed minor tweaking of the Chapter 11
provisions to ensure more openness in the process. It would also strengthen
"national treatment" provisions. And it proposed to include a
"general exception" to allow for protection of legitimate domestic objectives,
including protection of health, safety and security, "among others."[xix]
Canada
should ensure investor protections remain in NAFTA, given that American federal
and state governments – led by the Trump administration – are increasingly
willing to discriminate against Canadian companies. A country like Canada that
is so trade reliant and so investment reliant would need to have the strongest
protection possible in its treaties. Furthermore, under NAFTA, Mexico and
Canada get special treatment. The United States has to cross a higher legal
threshold to apply defensive safeguards on their exports than it does on those
of other countries. In addition, under chapter 19 of the agreement, disputes
between NAFTA partners over other remedies go to a NAFTA court[xx].
The writer believes that national security, environmental protection, social and community development should not be infringed upon or sacrificed to compensate some big corporations under a Chapter 11 dispute, and clauses regarding this need to be stipulated.
IV.
Possible
Outcomes
1.
Minor
Changes
Trade talks tend to trip and fall on the details, which is why they often take years to conclude. The
negotiations for NAFTA should
have proceeded much faster and be close to the completion phase, before campaigning starts for Mexico’s presidential election in
2018. A deal could
be possible if all the parties can hold onto their common ground and take efforts
to reconcile the differences, even through some trade-offs, for example, by picking a fight with China over one side’s lax
observance of intellectual-property rights, or by working towards a common labor standard
structure in NAFTA.
2.
Dissolution
or Walk away
Dissolution
is the most unfavorable option, but countries like the US and Canada should be
able to sustain and find some new ways to deal with each other, for example,
under a new bilateral trade agreement or under the WTO framework. Actually
almost half of Canadian exporters no longer use the NAFTA preference in their
trade arrangements, which means the differences between NAFTA and WTO and
between NAFTA and FTA are negligible, or, NAFTA has be modernized and made more
efficient. Also, in May 2017, the 11 remaining members of the TPP, including
Canada and Mexico, agreed to proceed with the trade deal without U.S.
participation[xxi].
3.
Constructive
Major Changes
The
negotiators should not dwell on the volume of deficits as that means the higher
the volume, the more advantage the importing country has acquired. Nor should
they argue whether to keep the third party arbitration panels, as they serve as
a guarantee for a fair not a foul game. What changes, then, should there be?
The constructive changes would be: more streamlined custom passing procedures,
lower tariffs, fewer subsidies for domestic industries and less other
non-tariff barriers, and more areas open for professional people to work freely
among the three countries.
V.
Suggested
Solutions
1.
Focus
on Size of the Pie instead of Its Share
From the map, one can see that more
than 70% of American states rely on trade with Canada as the top partner. For
years, the Canadian government has repeated its claim that Canada is the most
important foreign market for 35 U.S. states. This map is posted on a government
website that promotes trade ((SOURCE: STATSCAN). In some earlier months, Mr.
Trump's inner circle strongly disagreed about what demands to make in NAFTA
renegotiations. Treasury Secretary Steve Mnuchin and Mr. Trump's son-in-law
Jared Kushner wanted to enhance NAFTA and make cross-border business easier for
corporations. The Canadian negotiators are not clear what the mercurial Mr.
Trump actually wants, whether he will sign a deal or whether the U.S. demands
are meant to provoke Canada or Mexico to abandon the deal first. However, the
real situation is that Canada, Mexico and the US are in a team to play the game
of international trade, and each party is entitled to its own gear. Dissolution
of the agreement will mean they will separate and look for new teammates. There
will be sunken investment, opportunity cost lost as well as time, money and
efforts to look for new partners. No matter which plays better, they are still
bonded together if they remain in the same team. Trilateral trade has increased
by 258.5% since 1993 in nominal terms. The real – that is, inflation-adjusted –
increase was 125.2%. From 1993 to 2015, the US, Canada and Mexico had a per
capita GDP growth rate of 39.3%, 40.3% and 24.1% respectively[xxii].
Actually, 54% of U.S. businesses
(except for those in the Midwest) say free trade with Canada has made the U.S.
economy better off, according to a new poll by Nanos Research[xxiii].
According to the author’s calculation, although imports seem to rise faster,
the overall trade has increased, and the deficit is within control, about one
fifth of the export. Also, after 1994, increase in net trade value has
significantly increased, and rate of increase in exports is much faster than
the one before NAFTA was signed (please see the table and chart below). Some
have compared data of real personal disposable income for the period of
1985-1994 and that of 1994-2017 and got the conclusion that the trend of
increase is quite consistent[xxiv]. A
range of trade experts have said that pulling out of NAFTA as Trump proposed
would have a range of unintended consequences for the U.S., including reduced
access to the U.S.'s biggest export markets, a reduction in economic growth,
and increased prices for gasoline, cars, fruits, and vegetables. The worst
affected sectors would be textiles, agriculture and automobiles. Meanwhile,
US-Mexico relations would worsen, with adverse implications for cooperation on
border security, counter-terrorism, drug-war cooperation, deportations and
managing Central American migration. The repeal of NAFTA would not increase car
production in the United States, nor increase jobs in manufacturing[xxv].
US
Trade with North America
|
||||
Year
|
Export
|
Trade
|
||
Value
|
Percentage
Change |
Value
|
Percentage
Change |
|
1985
|
60885.70
|
-27252.40
|
||
1986
|
57724.20
|
-5.19%
|
-27830.20
|
2.12%
|
1987
|
74396.60
|
28.88%
|
-16959.10
|
-39.06%
|
1988
|
92250.50
|
24.00%
|
-12407.30
|
-26.84%
|
1989
|
103790.90
|
12.51%
|
-11324.20
|
-8.73%
|
1990
|
111952.80
|
7.86%
|
-9584.10
|
-15.37%
|
1991
|
118427.00
|
5.78%
|
-3766.50
|
-60.70%
|
1992
|
131186.60
|
10.77%
|
-2654.30
|
-29.53%
|
1993
|
142025.00
|
8.26%
|
-9108.90
|
243.18%
|
1994
|
165282.10
|
16.38%
|
-12617.50
|
38.52%
|
1995
|
173518.10
|
4.98%
|
-32952.20
|
161.16%
|
1996
|
191001.80
|
10.08%
|
-39188.00
|
18.92%
|
1997
|
223155.20
|
16.83%
|
-30016.50
|
-23.40%
|
1998
|
235376.10
|
5.48%
|
-32508.90
|
8.30%
|
1999
|
253508.90
|
7.70%
|
-54922.70
|
68.95%
|
2000
|
290289.90
|
14.51%
|
-76474.80
|
39.24%
|
2001
|
264720.50
|
-8.81%
|
-82885.30
|
8.38%
|
2002
|
258393.00
|
-2.39%
|
-85310.40
|
2.93%
|
Median
|
153653.55
|
8.26%
|
-27541.30
|
2.93%
|
Median
1985-1993 |
103790.90
|
9.52%
|
-11324.20
|
-15.37%
|
Median
1994-2002 |
235376.10
|
6.59%
|
-39188.00
|
13.65%
|
Data Source: US Census Bureau: Trade in Goods in North America, Oct 5, 2017.
Furthermore, the increase of the pie
should be the most important, as the bigger the pie, the more each can be
assigned. The notion of a fair distribution when everyone is poor is even more
dangerous than the notion of an uneven distribution when everyone is getting
better off. Negotiators should look at the aggregate number of employment
rather than just the employment in manufacturing; they should look at the total
increase of welfare including the volume and variety of products exchanged
rather than just the figures in some special industries; we should look at both
products and services rather than just products; they should look at both
economic factors and political and cultural factors rather than just economic
factors.
Even without NAFTA, goods could
continue to flow tariff-free back and forth across the Canada-US border. That’s
because the original Canada-U.S. Free Trade Agreement of 1989, which eliminated
most of these tariffs, has never been repealed. Moreover, unlike NAFTA, the
original Canada-US pact doesn’t allow foreign corporations to challenge
Canadian laws, which rules out the challenge of big US corporations[xxvi].
2.
Focus
on General Welfare instead of Specific Welfare
People who go to a potluck may have
to contribute a dish. However, they will get way more things in a potluck than
if they are going to cook for themselves. They may sacrifice some fish or
chickens, but they get more fish and chickens and they get beef and shrimps as
well, let alone fruits and desserts. Therefore, focusing on the wood instead of
the tree will be wiser and more beneficial.
3.
Make
Progresses Based on Previous Progresses instead of Taking a New Way
People may still remember the story
of the turtle-an-rabbit contest. The point is that it is not bad to take small
steps but keep on continuously. It is even better than the efforts of doing
something and giving it up and starting all over again. The fourth round
reminded people of the fable, and it is not wise to repeat the failure like
that of the rabbit.
4.
Ensure
a Fair Game with a Third Party as the Referee
At the beginning, the author has
touched on the idea of bringing a referee picked by only one team, which may
very likely lead to a foul game. Canada and Mexico may not like the referee
picked by the US side, nor will the US like him to be picked by Canada or
Mexico. Thus, all parties should emphasize the importance of a third-party
arbitration panel. Members sitting on the panel may rotate for each
arbitration, and the panel members will have to meet a certain standard and
approved by all the three countries.
5.
Re-Learning
David Ricardo
International trade is not only to
exchange different items. It is also to make a full use of comparative
advantage, which may increase the total welfare. If all the three parties take
the time to review David Ricardo’s theory, they will realize how stupid it will
be to focus on the deficit, which is called mercantilism.
VI.
Conclusion
It would be good to stay within
NAFTA though efforts have to be made to successfully complete the fifth and
maybe some more negotiations. As Steven Leacock put, the achievers
may be those who do the most and dream the most[xxvii].
(Prepared by Daniel Huang)
北美自由贸易协定重开谈判：留下还是离开（摘要）
丹尼尔·黄
作为旨在减少贸易赤字的谈判的主要目标，特朗普的贸易团队已经列出了美国货在汽车行业的更高比例，在管道等基础设施上购买美国货，结束三边贸易争端解决机制。加拿大与美国的货物贸易顺差在近几年大幅度下降，当服务包括在内时，加拿大的盈余就会出现小的赤字。此外，加拿大外长傅里兰还强调了特朗普在政府采购合同中所谓的“美国聘请美国、雇佣美国人”的议程，他说在加拿大 - 欧盟贸易协定中实现了“对等进入”，并且应该在北美自由贸易协定重开谈判的磋商中实现。特朗普想要取消第三方仲裁员，但加拿大和墨西哥可能不喜欢裁判由美方挑选，美国也不喜欢裁判由加拿大或墨西哥挑选。只要保持第三方仲裁制度，边界之间的贸易合理和互利，那么因为贸易大幅增加，各方都享有国际贸易的比较优势（不仅仅是不同物品的交换），以及规模经济优势，所以北美自由贸易协定应该保持，虽然它可能需要现代化和更新，以解决行业劳动标准、环境污染、清关和人才流动的限制问题。没有北美自由贸易协定，加拿大可能需要花一些时间来适应新的结构和游戏规则。不过，原来的加美条约不允许外国公司对加拿大法律提出异议。实际上，几乎一半的加拿大出口商在其贸易安排中不再使用北美自由贸易协定优惠，这意味着北美自由贸易协定必须进行现代化改造并提高效率。此外，2017年5月，TPP的其余11名成员，包括加拿大和墨西哥，同意在没有美国参与的情况下实施贸易协议。由于沉淀成本、机会成本、比较利益、规模经济和重复博弈的多赢态势，作者建议加拿大留在北美自由贸易协定内，尽管分离也可以作为第二候选方案。
关键词：北美自由贸易协定，贸易赤字，争端解决，多赢或者零和
[ii] North
American FTA ended in the fourth round of negotiations (in Chinese), Voice of
America, October 18, 2017.
[iv] Robert Fife
and Steven Chase: Freeland vows Canada will stand up to
U.S. on autos, dairy in NAFTA talks, Globe and Mail, Sept. 25, 2017; Sean Kilpatrick: NAFTA negotiators
make some progress amid strains in US-Canada relations, National Post, Sept.
27, 2017.
[v] Mike Blanchfield: Trump threat hovers over NAFTA as Ottawa talks
end with no major progress, Metro News, Sept 27, 2017.
[vi] Sean Kilpatrick: NAFTA negotiators make some progress amid strains
in U.S.-Canada relations, National Post, Sept 27, 2017; Redesigning the North
American home - the outlines of NAFTA 2 emerge, the Economist, July 20, 2017.
[vii] Steven
Globerman: American firms smell blood in the trade waters, Fraser Institute,
Sept 25, 2017.
[viii] Jerry Dias: The truth is NAFTA has damaged Canada’s auto industry,
Toronto Star, Sept 28, 2017; please also refer to Note ii.
[ix] How to improve NAFTA, the Economist, Aug 17, 2017.
[x] Charles
Lammam and Hugh MacIntyre: NAFTA negotiations—Canada has it backwards on worker
choice, Fraser Institute, Sept 16, 2017.
[xi] Tonda Macharrles, etc:
Contentious issues lie ahead as Ottawa NAFTA talks end, Toronto Star, Sept 27,
2017.
[xiii] Judy Bottoni: NAFTA, Trump and Canada: A guide to the trade file
and what it could mean for you, Globe and Mail, Oct 24, 2017.
[xiv] Herbert
Grubel: Ending supply management will greatly benefit Canadian consumers,
Fraser Institute, Aug 23, 2017.
[xvii] Have a
domestic: on NAFTA, Donald Trump’s most dangerous
opponents are at home, the Economist, Aug 31, 2017.
[xxi] Shaffer, Sri Jegarajah, Craig Dale, and Leslie: TPP
nations agree to pursue trade deal without US, CNBC, rretrieved
July 4, 2017.
[xxiii] Erica Alini:
Most U.S. businesses positive about trade with Canada – but not Midwest, key Trump
stronghold: poll,
Global News, July 17, 2017.
[xxiv] Tom
Armistead: Disposable Personal Income: Are We Better Off Or Worse Off Since
NAFTA? Seeking Alpha, April 2, 2017.
[xxv] The missing dimension in the NAFTA debate, Washington Post, retrieved February 12, 2017; Driving Home the
Importance of NAFTA, Econofact, retrieved February 15, 2017.
[xxvi] Thomas
Walkom: If Donald Trump kills NAFTA, Canada could benefit, the Star, November
11, 2016.
[xxvii] STEPHEN LEACOCK QUOTES II, http://www.notable-quotes.com/l/leacock_stephen_ii.html.
[xxvii] STEPHEN LEACOCK QUOTES II, http://www.notable-quotes.com/l/leacock_stephen_ii.html.
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