Bill Owens: What Is Next With NAFTA?

Apr 10, 2018

In a recent trip to Ottawa with Representative Elise Stefanik, along with Gary Douglas of the North Country Chamber of Commerce, Paul Grasso of The Development Corporation of Clinton County, Ron Kissen of the Franklin County Development Corporation, Jeremy Miller of the Franklin County IDA, Dave Zembeck of the Jefferson County Development Corporation, and Pat Kelly of the St. Lawrence County Development Corporation, we learned in a series of meetings the Canadian perspective on NAFTA. 

The lead Canadian negotiator described for us the process over the next several months including the opportunity for continued negotiations through the end of March which may be extended into the end of April, after which negotiations would likely fall into limbo pending the Mexican Presidential election on July 1, 2018.  As of April 9, 2018 there is no word as to whether negotiations will continue.  The results of the Mexican election will take approximately 5½ months before the inauguration of the new President leaving the resumption of NAFTA negotiations until early 2019, at best.  The primary areas of concern for Canada are related to Article 11 and Article 19 which are the dispute resolution mechanisms for investors (Article 11) and countervailing duties and anti-dumping (Article 19) which have not been resolved, nor have realistic proposals made by either side that could lead to a resolution.  Some might describe these as arcane but to Canada they represent protection which might be compared to a minority shareholder’s position in a closely held business. My analysis is that Canada fears the absence of these provisions would allow the U.S. to bully our colleagues- what would possess them to think that.  They can’t go forward without these protections in place.

We gathered much information from the Canadian Chamber of Commerce, the Parliamentary Conservative Caucus, the Honorable Andrew Leslie (Lieutenant General Ret’) who is the Parliamentary Secretary (Canada/US relations), and other representatives of Global Affairs Canada. 

We attended a pleasant luncheon at the US Embassy in Ottawa, with Ambassador Kelly Craft and several members of her staff. 

Another issue that arose during those conversations was, of course, the tariffs that have been proposed against steel and aluminum on the basis that importing those products creates national security risks.  The primary exporter of steel and aluminum to the United States is Canada.  Canada is simply put our strongest national security partner as evidenced by Canada’s extensive participation in NORAD (North American Aerospace Defense Command), Canada’s participation in Afghanistan, both at the command and troop levels, the significant interconnection between the United States and Canada on many other fronts including training exercises and the Joint Board for Defense created in the late 1940s.  Canada is not just an ally, but a significant participant in our North American Defense scheme, so how the administration could conclude that importing steel and aluminum from Canada represents a national security threat belies rational thought. 

The failure on the part of the Trump administration to analyze the broader trade picture, and to believe that imposing tariffs would likely result in an increase in manufacturing jobs in the United States that would create the good-paying jobs that we lost over the last thirty years, simply does not hold up under any economic analysis nor historical precedent due to the fact that the world has changed, automation has increased, supply chains have been established,  so that products are comprised of multiple nation’s output.

Where does the Trump administration go from here?  My great concern is that if we go into limbo at the end of April of this year, and new indictments are handed down in the Russia probe that we could see a tweet tearing up NAFTA.  It is fairly clear after fifteen (15) months in office, that President Trump when he feels pressure, acts by trying to focus the news elsewhere, which actions he believes will satisfy his base and distract the news media from whatever stormy problem he may be facing a good example.  On April 13, 2018, the President said he wants a NAFTA overhaul done within two weeks.     I have previously written about our highly successful trade block which exists in North America, and represents a vehicle with which to compete with the EU, Southeast Asia and China.  The destruction of the NAFTA trading block would significantly limit our ability to economically confront and defeat, particularly China, as it marches forward.  

Mr. Owens is a former member of Congress representing the New York 21st, a partner in Stafford Owens in Plattsburgh, NY and a Senior Advisor to Dentons to Washington, DC.

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