September 16, 2019

What Next for Canada’s TRADE POLICY? (Jerry Dias)

By Jerry Dias

The Pearson Centre has invited various leading thinkers to contribute their ideas towards the Progressive Platform to generate good ideas for debate in this general election. The views expressed here are those of the writer. We thank the writers for putting forward their ideas for this important project.
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Two years ago, I took to the Pearson Centre’s Progressive Podium to articulate a new vision for trade policy in Canada.

I argued that, on the cusp of NAFTA’s renegotiation and in the midst of a major shake-up of global trade relations, the moment was ripe for a major rethink on trade – how it might work better for workers, and how it might contribute to a fairer, more sustainable economy. I urged the Trudeau government, eager to burnish its progressive cred, to lead in a meaningful way.

On the trade front, the past two years have been eventful for Canada, to say the least.

It is hard to believe that already rocky trade relations between Canada and the U.S. could have grown even more unstable than they were in September 2017 – but they have.

After the U.S. Department of Commerce slapped import duties on Canada’s softwood lumber, they turned their fire on Bombardier’s C-series airplanes and Canadian newsprint (both since removed).

Shortly after, in an extraordinary turn of events, President Trump invoked rarely used national security measures to slap tariffs on Canadian steel and aluminum imports. This sparked a needless 12-month trade war that ultimately cost Canada hundreds of metals sector jobs, before a ceasefire deal was struck in May of this year.

Canada has so far averted similar tariffs to the auto (both cars and parts) and uranium sector, despite similar U.S. threats.

Outside of the U.S., trade disputes have intensified in agriculture products, most notably with China. Import restrictions on Canadian canola, beef and pork, continues to cause major grief for grain-growers, livestock farmers and processors.

Without a doubt, for governments, business and civil society groups alike, much of the past two years has been spent defending Canada’s economic interests in the face of unprecedented trade turmoil. Concern for the well-being of Canada’s workers stretched across party lines. Unions and employer groups found common cause. I saw this play out, first hand, in my role as advisor to Canada’s NAFTA negotiating team.

However, there is a distinction between defending Canada’s interests in tough times, and defending the status quo on trade.

We may have seen uncharacteristic glimpses of the former these past years, but as inequality widens in Canada, wages stagnate, industrial capacity shrinks and export performance declines, there is still a desperate need for deeper, critical reflection on Canada’s current trade policy and the rules governing free trade.

NAFTA’s renegotiation was a unique opportunity for such reflection. To its credit, the Canadian government used these talks to table unconventional trade proposals, identifying things like gender pay discrimination, low-wages in the auto sector, and restrictions on collective bargaining, as trade-distorting practices.

Despite protests from the opposition Conservatives who chastised these and other proposals as “virtue signaling” (an outrageous claim), the Liberals made incremental progress in key areas of a deal that has hurt workers for decades.

The new pact strikes down extraordinary rights granted to private investors, allowing them to sue governments in private tribunals, over domestic laws they claim hurt profits. The new pact also restores Canada’s sovereignty over oil and gas production and, demands stronger protections of independent trade unions and collective bargaining in Mexico – all of which are long-standing civil society demands.

These and other changes signal important – although slight – shifts in the terms of trade in North America.

However, in many other key areas, the new NAFTA (now referred to as the Canada-United States-Mexico Agreement, or CUSMA) remains as troubling as other modern trade deals – those designed to restrict the policy space governments have to manage economic affairs (like infrastructure spending), promote sustainable economic development (like supply-managed resources) and trade on terms that advance workers’ rights.

At best, the new continental trade pact is a partial victory for those of us who have long advocated a better, more progressive form of trade. It was the first indication that with sustained grassroots activism, deeper working relations with global allies and well-articulated, policy alternatives, trade laws can be reformed.

But so much more work needs doing. And for change to happen in a meaningful way, Canadians need their federal government to move this ball further afield.

That means ensuring Canada has a well-developed, clearly defined fair trade mandate – not a hodgepodge of disconnected and, sometimes, contradictory trade policies.

If removing investor-state dispute settlement in CUSMA helps strengthen Canada’s “right to regulate in the public interest, to protect public health and the environment” as Minister Freeland has rightly said, then it stands to reason it be removed in all existing trade and investment pacts. This includes in ill-advised trade pacts such as the Canada-EU CETA and CPTPP (both signed into law by the Trudeau government over the past four years) and other foreign investment agreements.

Secondly, establishing a strong floor of fundamental labour, gender, Indigenous and environmental rights between Canada and its trading partners is vitally important to ensure trade is taking place on comparable and fair terms. Compliance with these standards is critical and must be a strict precondition of cross-border trade – with robust and independent enforceability measures in place.

At the very least, Canada’s incoming government should express a willingness to work with the U.S. Congress on needed enhancements to CUSMA on the labour and environmental enforceability model along with consumer-friendly drug patent terms, prior to ratification.

Thirdly, Canada’s incoming government must continue to put pressure on the U.S. Department of Commerce to settle the ongoing softwood lumber dispute as soon as possible. As negotiations continue, federal officials must carefully review its existing Softwood Lumber Action Plan, and consider expanding these supports to workers and workplaces as necessary.

Lastly, Canada’s incoming government must be prepared to flex its legislative muscle to synchronize major infrastructure spending commitments with meaningful local economic development and job creation. International trade obligations cannot be a barrier. If they are, then those barriers need to be removed – even if that requires Canada’s withdrawal from restrictive trade treaties.

Our next government must maximize the value of new public transit projects to keep important facilities, including Thunder Bay’s railcar plant, operating a full capacity.

Trade matters to Canada. It always has. But trade rules should work for, not against, working people. Canada’s next government must continue to make progressive trade reform a priority.