NAFTA 2.0 – A Glimpse of the Detail

  • National Newswatch

Day 2, Sunday – was a beautiful sunny day for the NAFTA re-negotiators. Not much happening so far. Indeed, little can happen before Ministers arrive to give their blessing to the “warp speed” efforts of the professionals labouring on the floor above us.The press corps is anxiously hoping for nuggets from the smiling, tight-lipped negotiators who are reluctant to admit even the blindingly obvious. We had a slightly better chance of success panning for gold at the base of the Rideau Falls – after all, it is down river from the Mint.Canada's chief negotiator, Steve Verheul, in an impromptu scrum outside the media centre saved the day for many. Nothing has been tabled by the US on sensitive issues so far. Mr. Verheul sounded upbeat and his tone was positive. Confirmation that Canada had filed its own proposals on improving Chapter 19 puts a different dimension on that crucial Canadian issue.It is a mystery how negotiators working at faster than the speed of light have progressed at a snail's pace to date.I don't pay much attention to the negotiating group (NG) agenda. In a fast tracked negotiation like this, nearly every NG must meet at every round, until particular issues are closed. More important is what is not being addressed – like Trade and Indigenous Peoples. Mexico clearly has different concerns and priorities on this Canadian proposal.But Canada's NAFTA modernization initiatives are not totally ignored. Washington is prepared to consider adding trade and gender issues to the Agreement as long as it does not go beyond the rather underwhelming provisions in the Canada – Chile FTA. And if there is any substance, heaven forbid it should be subject to dispute settlement. Lack of teeth and discipline would make a gender chapter meaningless. Expect Minster Freeland to be pushing this with all of her boundless energy.The US will give Canada the sleeves off its vest on its special issues. Optics are cheap. But optics will not compensate for the very real and unbalanced concessions Washington is demanding.Leaving aside the fate of Chapter 19, the big issue will be Trade Remedies. Normally these disciplines on injurious dumping and subsidies are not negotiated in FTAs. The Trump Administration has notified Congress of negotiating objectives addressing transparency and due process in anti-dumping and countervailing duty proceedings.Much attention has been focussed on demands for changes in the definition of industry to facilitate access to AD/CVD against seasonal fruit and vegetable exports from Mexico into Florida. Canada too could use such a revision to challenge seasonal imports of fruits and vegetables from the US. This risk that Canada would use this change is recognized by US fruit and vegetable exporters.It seems that the nine changes Washington wants to become NAFTA obligations are aimed at targets other than its NAFTA partners. I am not clear how the obligations would work but they appear to be designed to ensure harmonized trade remedy systems within NAFTA.The US would require no changes in law or practice to implement the “obligations”. Canada is virtually onside. Indeed, the Canadian International Trade Tribunal (CITT) is far more open, fair and transparent than the US International Trade Commission.The proposed “new” trade remedy obligations are:
  • establishment and maintenance of a system for the electronic filing of submissions;
Both Canada and the US have electronic record keeping. The CITT is expected to go live early next year. The Canada Border Services Agency (CBSA) filing system is not fully computerized. The record is available on electronic media but cannot be accessed online. Computerization will benefit Canada.
  • maintenance of an electronic file system;
This is a logical step following establishment of the system.
  • making electronically available laws, regulations, and other key documents;
The Department of Justice, CBSA and the CITT are already offering online access. Retention of decisions leaves something to be desired at CBSA.
  • notification of the receipt of a petition;
CBSA does not provide public notice until the investigation is initiated, normally 51 days after the complaint is filed. The US provides more timely notice than CBSA. There are legislative differences.
  • verification conduct and reporting;
CBSA would need to change its practices to increase transparency to the much superior standards of the US Department of Commerce. This would be a change for the better.
  • disclosure to interested parties of calculations that were used to calculate anti-dumping and countervailing duty margins in a proceeding;
CBSA normally but not always provides such information to investigated parties but not necessarily to petitioners. Counsel to Canadian steel producers will be dancing in the streets in Hamilton, Sault Ste. Marie and Regina if Canada buys into this system
  • the consideration of information and data in AD and CVD “petitions filed in another NAFTA Party for purposes of self-initiation” of an AD and CVD proceeding “or other relevant action”;
This approach is commonly used by Canadian petitioners in trade remedies complaints and does not require legislative change. Self-initiation is less expensive for petitioners. It will dilute respondents' rights. This will be consistent with the “toughening it up” trend of Canadian trade remedies law. No one loses except tens of millions of Canadian consumers, as our system is Americanized.
  • and the “exchange of third party subsidy information for purposes of self-initiation” of an AD and CVD proceeding or other relevant action,
There is no reason Canada or the US cannot use such information for self-initiation. If self-initiation is not used sparingly it will gut the protections of Article 11 of the WTO Agreement on Subsidies and Countervailing Measures. One experienced practitioner suggested that with the Canadian International Trade Tribunal's record of one negative preliminary injury determination in more than 55 inquiries, there is not much real protection of respondents and Canadian users to dilute.
  • “and ,maintenance of an early-warning system to collect and publish data of sensitive imports into each NAFTA Party's territory.”
Both Canada and the United States have early warning systems for imports of steel. What is a sensitive import? Is it whatever the US says is sensitive. Should Canadians be at the mercy of the best Government money can buy?Washington is moving to eliminate the NAFTA exemption provisions from US Safeguards legislation. WTO dispute settlement has made it more difficult to exclude individual trading partners from global safeguards action. Further, global safeguards actions are relatively rare. This would be a relatively benign change, if POTUS was not writing the scripts.These initiatives appear to be consistent with US Trade Promotion Authority. Any initiatives which improve discipline so-called unfair trade will be popular with Congress.Anti-dumping and Countervailing Duties are derogations from normal WTO rules. The hole should be a small one and difficult to navigate.The trade remedies system has become captive of a small number of firms and industries who have turned it into an offensive, anti-competitive weapon, instead of the shield it was originally intended to be.The battles are between domestic industries and their foreign competitors. While it is relatively expensive to prepare and file a complaint and to follow the necessary procedures, the rewards of success are much more than proportional. The usually silent majority, more than 35 million of us, pay the price. And the price is often developed in an Alice in Wonderland farce.These trade remedy obligations are essentially harmless. The US beefed up the operative rules last year. Canada is in the process of harmonizing its own rules.Possible termination of NAFTA Chapter 19 is by far the most important trade remedies issue. It is not yet ripe for discussion, but it could become a deal breaker.Peter Clark, president of Grey, Clark, Shih and Associates, is one of Canada's leading international trade strategists. His clients in Canada and around the world include governments, corporations and trade associations. He is a frequent media commentator and columnist.  Follow him on Twitter at @jpclark14