Laura DawsonThe US NAFTA negotiating mandate is out. Laura Dawson weighs in on what it means for the future of Canadian free trade with the United States.

By Laura Dawson, July 24, 2017

On Monday, the U.S. Trade Representative (USTR) released a North American free-trade agreement negotiating mandate for consideration by Congress. What it reveals gives Canadians a pretty good idea of what to expect from the coming negotiations.

1/ It’s an aspirational document

The negotiating mandate that each country takes to the table is a statement of hopes and dreams. It is soon tempered by the realities of other negotiating parties who come to the table with similar wish lists. The requirement to publish a negotiating mandate is a new obligation imposed on the USTR by Congress. Canada and Mexico are not similarly bound. Normally, the formulation of a state’s negotiating mandate is worked out in closed-door sessions between legislators, negotiators and business stakeholders. The U.S. notification provides a peek behind the curtain of how trade deals get done, but the contents should not be considered a fait accompli. The language offers a lot of wiggle room. This flexibility makes it easier for negotiators to claim a win under a range of different outcomes.

2/ There are many reasons for Canada to like it

The most important thing the mandate reveals is that the United States is prepared to treat proceedings like a trade negotiation. The big fear emerging from the presidential campaign was that anti-trade forces in the Trump administration would abandon traditional trade rules.

Over the past several months, U.S. trading partners have been warned about a border tax applied to goods and energy products, national-security restrictions on steel and undefined mechanisms to reverse the U.S. trade deficit. While some of the language of protectionism and America First is in the mandate’s general principles, the sectoral elements reflect a predictable set of requests, couched in fairly orthodox trade language.

As a medium-sized economy, Canada consistently punches above its weight because of its mastery of global trade rules. But Canadians’ ability to create advantages or win-win outcomes depends on there being a game they can recognize.

Since 2010, Canadian negotiators have concluded six national and multistate free-trade agreements. They are in top form and well equipped to bring the new NAFTA to a successful conclusion.

The sectors and practices covered in the mandate will look familiar to Canadian negotiators. Many of the proposals, such as for digital economy and labour, resemble provisions of the Trans-Pacific Partnership (TPP) that have already been agreed to by Canada, the United States and Mexico, so these elements should be pretty easy to add to a new NAFTA text. And a number of the TPP provisions have the added advantage of truly modernizing NAFTA.

These include new supports for digital trade, stepped up environmental and labour provisions, and fast-track border measures that would allow for greater use of new technologies and data sharing.

3/ But there is at least one big stumbling block

The U.S. mandate paints a big red target on the Chapter 19 dispute-settlement system that is used to resolve dumping and subsidies disputes. This measure has long been a source of bilateral acrimony and nearly caused the Canada-U.S. free-trade agreement negotiations to fail in 1987. Over all, the number of dumping and subsidy disputes between the two countries has fallen sharply since the 1980s as the two economies became more integrated, but one big, continuing dispute – softwood lumber – means that Canada will fight to hold onto Chapter 19.

4/ Some targets are real, some are force of habit

Every year, the United States publishes a list of irritants that hurt the ability of U.S. exporters to access foreign markets. The Canada list always includes supply-managed dairy and investment restrictions in financial services and telecommunications. Since the U.S. mandate does not prioritize which issues are deal breakers and which are merely routine complaints, it is impossible to tell at this point which of Canada’s protected sectors are truly under threat. A better way to figure that out is to watch the USTR’s stakeholder hearings and key Congressional meetings (conveniently webcast online) and look for persistent themes, repeated by individuals capable of mobilizing dollars and influence.

5/ This will be a long negotiation

The scope and complexity suggested by the 17-page mandate indicates we’re in for a long negotiation, not a short tweaking exercise. Some of the TPP additions could be handled swiftly but most of the other negotiating subjects touch on protected sectors or practices that countries will be unwilling to give up without a fight. With the Mexican presidential election coming up in July, 2018, and U.S. Congressional midterms the following November, a deal that emerges nearly any time in 2018 risks being torpedoed by electoral politics. The three countries might be better off taking the time they need to really modernize this complex and important agreement and present a new text in 2019.

Laura Dawson is the director of the Canada Institute at the Wilson Center in Washington

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