Negotiating NAFTA, the first time: from scare to scripture

John Stewart spent 20 years as an economist and manager with the United States Embassy in Ottawa. This is the last of two excerpts from his book Strangers with Memories: The United States and Canada from Free Trade to Baghdad, now available from the fall catalogue of McGill-Queen’s University Press. The top priority of the U.S. Embassy in Ottawa when I arrived there as an economist in mid-1990 was implementing the bilateral free trade agreement (FTA). The agreement was new and controversial and it had to be defended, explained, applied, and interpreted. With free trade’s opponents being active, strident, and loose with the truth, we had plenty of work just to correct distortions, misquotes, or errors of plain fact. Meanwhile, Canada, the United States, and Mexico were consulting each other and their businesses and publics on the idea of a three-way North American free trade agreement modelled on the FTA. Mexico had initiated the idea because its government was interested in market-oriented economic reform, to keep employment growth ahead of the country’s high birth rate. Joining the FTA was a way to do this. Anti-corporate scare campaign John Stewart worked as a local analyst for the U.S. Embassy's trade section in throughout the 1990s and early 2000s. Photograph courtesy of John Stewart The argument for trade liberalization had been consistent for nearly 200 years, and validated by experience. In the debate over the FTA in 1988, the free-trade opposition’s argument to Canadians had essentially been that “big, powerful, efficient American companies will take your jobs”—even though it was Canadian businesses that were pushing for the FTA. Just two and a half years later, it was the Mexicans who wanted to be part of a tariff-free area, and suddenly the opposition’s argument had to become, “Low-wage, environmentally dirty Mexicans will take your jobs.” The opposition’s argument was further complicated by claims that, while poor Mexicans were going to take all the jobs, this was somehow going to be bad for Mexicans. The way for groups like the NDP and the Council of Canadians to square this awkward circle was to argue that when corporations did well in Mexico—creating jobs and building infrastructure—ordinary people somehow lost out, through destruction of their environment, of their traditional cultures, and so on. This was an early rumbling of the anti-corporate, anti-globalization messages that have since been heard much more often in recent years, and continue to be so often misleading. Still, with the media’s help, it remained easy for opponents of the FTA and North American Free Trade Agreement to stir up public anxiety. The Action Canada Network told Parliamentarians in 1992 that the FTA had hurt the economic, social, and political life of Canada, eroded its sovereignty, and transferred powers to transnational corporations and technocratic elites. NAFTA, they said, would further weaken democracy in Canada by replacing legislative decisions with “technocratic committees operating under a North American constitution administered from Washington.” This presumably referred to the dispute-settlement panels and the commissions on environmental and labour cooperation. This was the kind of “information” that leading opponents of trade liberalization contributed to the public discussion. It was so exaggerated as to give the listener no sense at all of the actual terms of the agreements. The distorted language was crafted to exploit Canadian insecurity wherever possible, in this case about constitutional issues. And their economic predictions were wildly wrong. The unique rise of China as an economic power would have warranted more fretting than NAFTA did. Indeed, the FTA and NAFTA went a long way to strengthen North America’s ability to compete with Asian economies. All credible studies later showed that the deals delivered great benefits for Canadians. For all the accusations that free trade would “hollow out corporate Canada,” in 2006 Canada had more than twice as many world-leading companies as in 1985, and their annual revenue had grown by over 80 per cent in real terms. Embracing free trade Strangers with Memories: The United States and Canada from Free Trade to Baghdad,by John Stewart,McGill-Queen’s University Press,September 2017,296 pp.,$39.95 (hardcover). Democrat Bill Clinton and Liberal Jean Chrétien both expressed doubts about the trade agreement with Mexico during their respective successful 1992 and 1993 election campaigns, and vowed to make it “work better.” Both had to be sensitive to the left wings of their parties. But once they were in office, both announced that they could accept NAFTA. Trade experts later concluded that in the NAFTA negotiations, Canada had protected its gains from the FTA and built effective dispute-settlement systems. However, the ongoing failure to eliminate trade-remedy laws within the free trade area was a serious shortfall. These laws were too easy and cheap for companies to wield, and aimed too specifically at individual countries and industries. NAFTA’s labour and environment side agreements were also not helpful; they were essentially meant to force the developed world’s idea of reforms on less developed countries. It is important to note that these were and are criticisms of the NAFTA’s negotiators’ inescapable political compromises, not of their underlying effort to liberalize trade. The FTA and NAFTA were positive lessons for all countries to follow and for the Western Hemisphere to build on. New things were happening in North American trade in the 1990s and early 2000s that made the FTA and NAFTA look like just the beginnings of a collaborative process—not its fulfillment. Many of these changes were driven by the internet and intellectual property; others, by trade with Asia. We in Canada-U.S. policy circles wondered whether there should be a new “big deal” in continental relations to resolve a variety of leftover and/or emerging issues and take the continental economy to the next level. Unfortunately, many of the biggest problems were very politically charged (like softwood lumber and beef trade), or they were old problems that had withstood earlier efforts at repair, suggesting that tackling them meant a lot of hard work without a near prospect of success (such as trying to repeal the trade-remedy laws). Players on the U.S. side were open to ideas, and many were discussed. But after 2001, law enforcement and security questions transformed the agenda. After working at the U.S. Embassy from 1990 to 2010, John Stewart is now director of policy and research at the Canadian Nuclear Association. The Hill Times