The fourth round of the North American Free Trade Agreement (NAFTA) negotiations ended in failure as Canada and Mexico rejected the United States’ latest proposals. The proposals reportedly included drastic changes to auto rules of origin, dispute settlement, supply management, government procurement and the addition of a sunset clause designed to end the agreement after five years (barring a unanimous extension). The three parties had a final chance to break the deadlock in Mexico City, but not with much success.
No matter the outcome of the NAFTA negotiations, there will be significant consequences for Canada’s provinces. A recent study by Statistics Canada showed that in 2016, Ontario exported more to Michigan than Canada did to China, the United Kingdom, Japan and Mexico combined. The majority of this trade comes from the auto sector, with trade in motor vehicles making up roughly 65 per cent of Ontarian exports. John Ries, a business professor at the University of British Columbia, was quick to point out that if Canada bends to Washington’s most recent demand, which requires vehicles to contain 50 per cent American parts, firms may move South to avoid tariffs.
Similarly, almost half of New Brunswick’s gross domestic product relies on exports to the U.S. In fact, according to Joel Richardson, regional vice-president of Canadian Manufacturers and Exporters, New Brunswick has the most extensive trade economy in the country. Thousands of New Brunswick Jobs could depend on the results of the negotiation.
But, aside from contributing soundbites, what role can provincial leaders play in international trade negotiations?
From a constitutional standpoint, Canada does not have any clearly defined guidelines concerning the international activity of municipal and provincial governments. Ottawa has the authority to negotiate treaties but not to implement the requisite laws in areas of provincial jurisdiction. The provinces can therefore generate a certain amount of leverage by threatening not to enact the appropriate legislation.
The federal government’s inability to directly carry out its treaty obligations can be a serious problem, leaving Ottawa liable internationally. To remedy this, a “federal clause” was inserted into the original NAFTA text. NAFTA’s Article 105 states that the “Parties shall ensure that all necessary measures are taken in order to give effect to the provisions of this Agreement, including their observance, except as otherwise provided in this Agreement by state and provincial governments.” Experts suggest that the use of the imperative “shall” indicates Canada is legally obliged to ensure every provision of the treaty is implemented.
That said, any tension during the talks is unlikely to come from within the Canadian camp. Though provincial representatives will not have the “seat at the table” they enjoyed during the CETA negotiations, the federal government is working closely with provincial premiers to coordinate efforts.
While many of the provinces have sent trade teams to Ottawa, the larger ones have appointed chief negotiators, like Quebec’s former finance minister Raymond Bachand. These heavyweights will work alongside David Usher, director general of trade negotiations at Global Affairs Canada, to make the province’s voices heard.
Prime Minister Trudeau is also expecting provincial leaders to use every opportunity to push the merits of the trilateral agreement. For instance, Ontario Premier Kathleen Wynne met with U.S. Secretary of Commerce Wilbur Ross to discuss cross-border trade in mid-September and will take advantage of the Toronto Global Forum to meet with Florida Governor Rick Scott later this month.
This kind of outreach has formed a key pillar of Trudeau’s strategy for managing its relationship with the Trump government since its inception. By building connections at nearly every level of the U.S. system, Trudeau has attempted to circumvent Washington’s new protectionist leaders. The Trudeau government has even created a unit dedicated exclusively to Canada-U.S. crisis management. Led by campaign war-room veteran Brian Clow, the unit directs outreach efforts and information campaigns to support Canada’s positions in ongoing negotiations with the U.S., including NAFTA.
It seems no one is sure if President Trump will actually terminate NAFTA or even what could happen if he tried, but one thing is certain: Canada’s federal and provincial governments are working together, around the clock, to make the most of a difficult situation.
How’s that for a whole-of-government approach?
Kelvin Bunner is a Canadian civil servant and M.A. candidate at the Norman Paterson School of International Affairs, where he specializes in Security and Defence Policy. While his research focuses primarily on the arms industry, he occasionally writes more generally on issues of defence and trade.
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