Earlier this week, I was pleased to participate in an NTU conference call to talk about the pros and cons of the renegotiation of the North American Free Trade Agreement (NAFTA). Joining me on the call were Dr. Marc L Busch, a trade policy expert and Georgetown University Professor, and Matthew Kronby, the former Director General of the Government of Canada’s Trade Law Bureau. The three of us discussed the critical importance of trade to the economy, and also touched on a variety of ongoing trade disputes. If you want to read the entire transcript of the call, you can click here. Or check out some of the highlights below.
Brandon Arnold, Executive Vice President of National Taxpayers Union
“Free international commerce unhindered by government regulations and restrictions whenever possible, leads to more efficient economic output, leads to more job creation, and it leads to a stronger economy for all parties involved. So that’s why we’ve been strong advocates of things like Trade Promotion Authority, of NAFTA, of CAFTA, of even smaller provisions like the Miscellaneous Tariff Bills, which recently passed through Congress and are now poised to cut taxes on thousands of domestic manufacturers here in the United States.”
“What’s been even more troubling I think is the worsening relationship from an economic perspective with Canada. We’ve seen some older trade disputes pop up once again in relatively short order. I would say one of them would be softwood lumber, which was related to dispute over dairy and ultra-filtered milk products which are used in cheese making. The softwood lumber tariffs that we slapped on Canadian imports back in April I think could have a devastating impact on the housebuilding business, the homebuilding industry here in the United States. That’s something of great concern to us.
In addition, more recently, we’ve seen a trade dispute between Boeing and Bombardier over aircrafts that were imported or going to be imported into the United States via Delta in coming months move to the US ITC and that process is going forward as Boeing is petitioning for Countervailing duties and Antidumping action. That’s troubling and we’ve already seen that have a subsequent impact on F18 military acquisition on the Canadian side.”
“I think there’s a bit of a dark cloud over US-Mexican as well as US-Canadian economic relationships and I think that makes it very, very important for trade experts, for free-market groups like National Taxpayers Union, for policymakers here in Washington to make sure it is communicated to the USTR, to the Trump administration broadly just how important free trade is to our economy and just how important it is to enter into the NAFTA renegotiation with an eye on modernization, with an eye toward additional trade liberalization, not to use this as a tool to impose protectionist policies on our economy that would ultimately be shooting ourselves in our foot and doing ourselves a great disservice economically speaking.”
Dr. Marc L. Busch, Global Trade Policy Expert and Georgetown University Professor
“On the one hand, we’ve always known that NAFTA was a little dated. After all, it’s pretty much just the extension of a 1989 free trade deal between Canada to the US to Mexico and up against the architecture of the WTO, it really does show its age and there was a hope that if anything, the Trans-Pacific Partnership was going to be the upgrade that we were all hoping for. It’s important to remember what both Canada and Mexico offered in TPP negotiations because that should be the starting point for NAFTA 2.0. That is assuming, as you pointed out, that this is an honest effort at modernization and not just a disguised way of reintroducing 1980s and 1990s-type protectionism back into some of America’s most important trading relationships.
In my own view, the problem is that we are going back to the 1990s in a lot of awkward ways. There is the aircraft dispute that you mentioned, which was at that time, in 1990, a Boeing Airbus dispute and has now taken on new parameters given the entrance into the regional jet market and their ability now to go above 100 seats and to enter the very lucrative replacement work for the 737 and the A320.”
“The expectation by some analysts that Boeing is looking for 75% on both strikes me as an indication that this is really a side show that if those kinds of numbers were within the realm of feasibility that Boeing would’ve asked the United States to take Canada to the World Trade Organization and pursue litigation under the Subsidies Agreement, but in a bigger way, it is important to revisit this dispute for Boeing, for Bombardier and Embraer and Airbus because in all honesty, since 1992, we’ve needed a better Large Civil Aircraft Agreement to finally bring peace to this very troubled and very subsidized industry.
It is time to reedit the 1992 Large Civil Aircraft Agreement rather than do piecemeal, transactional-based Anti-dump and Countervail, which is not in anyone’s interest least of all in setting the stage for renegotiation of NAFTA.”
Matthew Kronby, Partner at an International Trade and Investment Law
“I think all three parties to the NAFTA are interested in modernizing, updating or would be interested in modernizing and updating the agreement or certainly, at least Canada and Mexico would.
The NAFTA agreement is now almost 25 years old, more than 25 years old from when negotiations really began on it, and there is room to update and improve it. The question is whether the US administration and the administration with the influence of Congress is genuinely interested in modernizing and updating the NAFTA rather than using the renegotiations as a basis for retrenchment and moving backward toward more protectionist policies, the kind of policies we saw in the 1980s and that predated the NAFTA and the Canada-US Free Trade Agreement.”
“Another area that is right for improvement is the energy chapter, not between Canada and the US where the energy trade has operated very smoothly, but in Mexico in particular. Mexico has, in the last few years, undertaken significant liberalization of its energy market particularly in oil and gas, but that liberalization is not locked in under the NAFTA as it now stands and there’s an opportunity to use the renegotiations to lock in that liberalization to provide security and predictability of access for US and Canadian investment and services particularly in the oil and gas sector.”
“The current dispute known as Softwood Lumber V was launched prior to the US election and is not directly reflective of the policies of the Trump administration, but we’ve seen with the Trump administration a propensity towards an extremely aggressive use of trade remedies which will not make it easy to resolve the softwood lumber dispute. The concern here in my view is not so much what might happen in the Court of International Trade, but at a highest level that the aggressive use of trade remedies by the Department of Commerce becomes a model for other countries to emulate and including against US and Canadian exports and further undermines global trade flows and hence serve, in many cases, really protectionist ends.”