NAFTA Again Under Fire

Attacking NAFTA appears to have been a favorite sport among North American exporters and politicians for years. The recent barrage of fire came from Democratic presidential hopefuls Barack Obama and Hillary Clinton. To this, Canada’s three “stooges,” the Prime Minister, the Trade Minister and the Finance Minister, responded with utmost disgust. Well, perhaps not “utmost,” since all three would like to change a thing or two about NAFTA that bothered them as well, but they would not go so far as to bring the whole thing under very public scrutiny.

Since 1994, when Canada, the U.S. and Mexico signed the treaty, there were three distinct areas that never quite worked: the dispute resolution system, investors’ ability to sue governments, and more and more security layering at the countries’ borders.

While the dispute resolution system worked for the most part, Canada and the U.S. have been made painfully aware of its imperfections, to say the least, through the softwood lumber dispute. The dispute lasted for decades and has yet to be resolved through NAFTA. Recently, the softwood lumber issue has been transferred to the London Court of Arbitration, a private court typically used to settle private companies’ disputes, not disputes between countries.

Investors’ ability to sue governments has been a sore point for years, too. It was the U.S. that insisted upon this clause and, as far as anyone knows, only lawyers have received any benefit from it (of the monetary kind, of course). As far as Canada is concerned, it would most likely and enthusiastically vote to have it scrapped once and for all. What’s “wrong” with the clause? Nearly half of the 49 claims filed to date have to do with governments imposing environmental restrictions and meddling with resource management.

And then there are the border issues. Partly, NAFTA is sadly imperfect in this particular area, because it is a trilateral agreement. For example, Canada would like the U.S. to stop treating its northern border the same way it treats its southern border with Mexico. The reasoning is that problems at the north U.S. border are not the same as the problems at its south border, which is certainly the truth, but for the U.S. to actually admit it would most likely not fare well with Hispanic voters.

Imagine this: U.S. Homeland Security is pondering building a fence in the north that would match the one that is being built in the south. Never mind the fact that the Canada-U.S. border is 8,900 kilometers long (versus “only” 3,100 kilometers with Mexico), but just how many Canadians does anyone expect to swim across the Detroit River searching for better jobs in the U.S.?

Through border issues is how we arrive at what is wrong with NAFTA and its potential resolution. As signed in 1994, NAFTA is a trilateral treaty. However, there is no comparison between Canada and Mexico and their respective relationships with the U.S. So, how about going back to pre-NAFTA days and having different bilateral treaties, Canada with the U.S. and Mexico with the U.S., separately, and a number of them, instead of a blanket and a poorly functioning one?