About Colin Robertson

A former Canadian diplomat, Colin Robertson is a Senior Advisor to Dentons LLP living in Ottawa, Canada. He is Vice President and Fellow at the Canadian Global Affairs Institute and hosts its regular Global Exchange podcast.  He is an Executive Fellow at the University of Calgary’s School of Public Policy and a Distinguished Senior Fellow at the Norman Paterson School of International Affairs at Carleton University.  Robertson sits on the advisory councils of  the Johnson-Shoyama School of Public PolicyConference of Defence Associations Institute , North  American Research Partnership , the Sir Winston Churchill Society of Ottawa . He is an Honorary Captain (Royal Canadian Navy) assigned to the Strategic Communications Directorate. He is a member of the Deputy Minister of International Trade’s NAFTA Advisory Council.  He writes a regular column  on foreign affairs for  the Globe and Mail and he is a frequent contributor to other media.

Colin can be reached by email at cr@colinrobertson.ca

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BMD and Canada

‘A big joke’: Only imperfect U.S. defences can save Canada from North Korean missiles

Published Tuesday, September 19, 2017 6:26AM EDT

If North Korea launched a dozen nuclear weapons at North America the U.S. missile defences probably would not be able to stop them all, and they wouldn’t be required to defend Canada, either.

Canada currently has no means of defending against an incoming intercontinental ballistic missile, and no formal guarantee that the United States would use its missile defences on Canada’s behalf. In fact, Canada declined to work with the United States on its missile defence program in 2005, and has not reversed course under subsequent Liberal and Conservative governments. And with North Korea now claiming it can strike a target anywhere in the continental U.S., Canada is technically defenceless against such an attack.

“It’s a big joke,” said Christian Leuprecht, a political science professor at the Royal Military College of Canada and senior fellow at the Macdonald Laurier Institute. “Canada is too vulnerable in not buying into ballistic missile defence,” he told CTVNews.ca.

Leuprecht points out that the U.S. and Canada have an information-sharing agreement in place through their participation in the North American Aerospace Defense Command, or NORAD. However, that agreement does not include a specific plan for dealing with a missile headed toward Canada.

In other words, Canadian military personnel at NORAD might be able to spot an incoming missile, but the decision to try and shoot that missile down rests entirely with the Americans.

NORAD’s Canadian deputy commander, Lt.-Gen Pierre St-Amand, echoed that sentiment in September, saying that under the current policy the U.S. would not come to Canada’s defence.

“It’s not that Canada is a target, but the danger  is… if those missiles are coming over the pole, they may be aimed at Chicago but they wind up in Toronto,” Colin Robertson, vice president of the Canadian Global Affairs Institute, said on CTV News Channel Sept. 14.

NORAD

The Charlie crew, made up of U.S. and Canadian military personnel, work the night shift Jan. 18, 2006, at the NORAD command center in Cheyenne Mountain, Colo. (AP / Denver Post, John Epperson)

But arms control expert and UBC political science professor Allen Sens says the direct threat to Canada is a “red herring,” because the Americans would likely shoot down an incoming missile anyway.

“When a missile is in its flightpath, it’s difficult to determine exactly where it’s going to land,” Sens, of the University of British Columbia, told CTVNews.ca. Sens also cast doubt on the notion that the U.S. would back off with its missile defences once it learned that the weapon was headed for Canada.

“The Americans don’t want a missile to hit Canada because the Americans could be impacted,” he said.

The North Korean threat has renewed debate in Ottawa over whether Canada should participate in the U.S. missile defence program. Canada’s recently-released defence policy does not specifically address missile defence, although it does acknowledge the dangers of North Korea’s burgeoning arsenal.

“The number of countries with access to ballistic missile technology, including some with the potential to reach North America or target Canadian and allied deployed forces, has increased and is expected to grow and become more sophisticated,” the policy says.

Minister of National Defence Harjit Sajjan has said the missile defence issue will be revisited as part of efforts to modernize NORAD.

“We’re going to have a much more thorough discussion with the U.S. on this,” Sajjan told CTV’s Question Period in June.

Those who oppose missile defence argue that it can be a cause for escalation, prompting rival countries to build more nukes so they can maintain the ability to overwhelm American defences. Essentially, greater defences call for greater offensive capabilities.

With the political debate only just ramping up, Leuprecht says it’s unclear what it would cost for Canada to buy into missile defence. “Technologically, no additional material would be required,” he said.

However, it is possible that the U.S. would ask Canada to pay for it, Leuprecht said.

And as many experts have pointed out, the primary U.S. missile defence system simply can’t guarantee protection with its success rate of just 55 per cent in controlled tests.

How the U.S. missile defence system works

Although it’s often characterized as a “shield,” the United States isn’t actually protected by some kind of sci-fi force field. Instead, it relies on missiles intended to intercept and destroy incoming intercontinental ballistic missiles before they detonate over a populated area.

The flight of an incoming missile is broken down into three stages.

The first stage is called the boost phase, during which the enemy ICBM takes off from its launch site, shedding its boosters one at a time as their fuel is expended. The missile is particularly vulnerable at this stage, as it spends about four minutes to work itself up to a speed of about 24,000 kilometres per hour. This is the best time to shoot it down, but since these launches usually occur in enemy territory and without warning, it can be difficult to detect it and respond to it in time, Leuprecht says.

Next comes the midcourse phase, which can last up to 20 minutes. During this phase the missile starts coasting up toward the peak of its arc (approximately 1,000 kilometres up).This is when the warhead might also release decoys to confuse any attempt to intercept the real nuke.

The missile’s final descent toward its target is known as the terminal phase, and usually only lasts about two minutes.

How a three-stage ICBM works

The U.S. missile defence system, perhaps best described as trying to stop an enemy bullet by shooting it with another bullet, uses short- and medium-range missiles. Each of these defensive missiles is a single-booster rocket used to deploy a “kill vehicle,” which manoeuvres itself into a collision course with incoming warheads so it can destroy them on impact.

how ballistic missile interceptors work

The system uses radar posts and satellite imagery to constantly update the kill vehicle’s trajectory, despite its travelling at supersonic speeds.

Radar

In this photograph provided by Boeing, the Sea-Based X-Band Radar, a key component of the U.S. Missile Defense Agency’s Ground-based Midcourse Defense system, completes sea trial testing in the Gulf of Mexico July 16, 2005. (AP / Missile Defense Agency)

Most of the Americans’ missile defences are geared toward intercepting missiles in the midcourse or terminal phases, with various weapons systems providing overlapping coverage to defend the North American coast and America’s Asian allies.

Aegis

This file photo from May 10, 2012, shows a test of the Aegis missile defence system aboard the USS Lake Erie. (AP / Missile Defense Agency)

The Ground-based Midcourse Defence (GMD) system based in Alaska and California offers long-range intercept capability during the midcourse and terminal phases, while sea-based Aegis missiles and land-based PAC-3 missiles provide back-up defence during the terminal phase.

The Terminal High Altitude Area Defence (THAAD) system is also designed to take out incoming missiles in the terminal phase, although it’s geared more toward short- and medium-range attacks against Japan, Guam or South Korea.

Leuprecht says this overlapping system might be quite effective at taking down a single incoming missile, because it can make numerous attempts at intercepting an ICBM before it strikes. But if North Korea were to launch a dozen missiles, for instance, there would be no way to ensure they were all shot down.

“The North Koreans are working on the ability to overwhelm those missile defence shields,” he said.

Poking holes in the U.S. defence ‘shield’

The Americans currently have THAAD defences deployed in South Korea and Guam, Aegis missiles on their destroyers in the Pacific, and at least 36 GMD missiles ready to launch from bases in Alaska and California.

However, defence experts don’t agree about the effectiveness of the American missile defence system. Some say the testing process is not scientifically sound, while others stand by the official results released by the U.S. military.

The Americans’ cutting-edge THAAD system is considered the best element of their arsenal, with a perfect 15-15 testing record. However, those trials were conducted under controlled non-combat conditions, and are geared toward shooting down shorter-range missiles that might strike at North Korea’s neighbours.

THAAD

The THAAD missile defence system is seen at a golf course in Seongju, South Korea, Wednesday, Sept. 6, 2017. (Kim Jun-beom/Yonhap via AP)

The U.S. Ground-Based Midcourse Defence system has only taken out 10 of 18 targets in tests since 1999 – a result that leaves much to be desired, especially when imagining a nuclear weapon on the end of an incoming ICBM.

GMD

This image provided by the U.S. Air Force shows the successful launch Friday Sept. 28, 2007 of an intercontinental ballistic missile interceptor at Vandenberg Air Force Base, Calif. (AP / USAF / Joe Davila)

The Pentagon acknowledged this shortcoming in a 2016 report, which concluded that the GMD system “demonstrated a limited capability to defend the U.S. homeland from small numbers of simple intermediate-range or intercontinental ballistic missile threats launched from North Korea or Iran.”

According to the report, the GMD failed its tests for a variety of reasons, while radar availability was also found to be an issue with its effectiveness. “The reliability and availability of the (ground-based interceptors) are low,” the Pentagon said.

Leuprecht says the U.S. system leaves something to be desired, but that’s intentional. He says it must be able to defend against North Korea or Iran, but not against nuclear superpowers such as China or Russia, because peace with those nations is partially built on the awareness that both sides could destroy each other in a nuclear conflict.

“The system can defend against North Korea, but the system can’t defend against the Russians,” Leuprecht said. “It’s mutually assured destruction.”

He added that North Korea is working on the ability to overwhelm the U.S. missile defence shield with sheer numbers, but it remains a long way off from that goal.

However, North Korea’s more immediate neighbours in Japan and South Korea are not so safe.

PAC3

The Japanese Air Self-Defense Force demonstrates the training to utilize the PAC-3 surface-to-air interceptors at the U.S. Yokota Air Base in Fussa, on the outskirts of Tokyo Tuesday, Aug. 29, 2017. (AP / Eugene Hoshiko)

Leuprecht says the North is already fully capable of annihilating the South Korean capital of Seoul, regardless of whether or not it uses nuclear weapons. The North has been perfecting its short- and medium-range missiles for years, and could easily overwhelm the THAAD system in South Korea with those weapons.

“That would mean 10 million dead in the first hour of a conflict,” Leuprecht said.

That threat has existed on the Korean peninsula for years, but what Kim Jong Un really wants is to extend the threat to include North America.

He adds that, if North Korea ever did strike at North America, NATO’s member nations would all be drawn into the conflict. “They know,” he said. “If there’s a missile that flies toward North America, it’s going to be ‘all in.’”

Ballistic Missile Defence

Canada should join ballistic missile defence system, but it will cost us: experts

WATCH: Ballistic Missile Defence has suffered from negative coverage: Macdonals

The Canadian government must consider paying up to join the U.S. ballistic missile defence program, say a former diplomat and a former NORAD commander.

In a panel discussion on The West Block with Vassy Kapelos, former Canadian diplomat Colin Robertson and retired Lt-Gen. George Macdonald agreed that the time has come to take steps to actively protect Canada in the event of a ballistic missile strike like the ones being threatened by North Korea.Related

At the moment, Canada has no means to defend itself against such a strike should a missile be aimed at us, or veer off course after being aimed at a U.S. city.

READ MORE: U.S. won’t defend Canada during North Korean missile attack, official says

“I think that the NORAD mission, which has been aerospace warning and defence for almost 60 years now, always included ballistic missile warning, but a natural extension of (missile) defence was not agreed to by the Canadian government in 2005,” said Macdonald, a former deputy commander-in-chief at NORAD.

That decision came as a surprise to many within the joint defence organization, he noted.

WATCH: U.S. won’t defend Canada from North Korea attack

But the U.S. ballistic missile defence program (BMD) suffered from a great deal of bad press a decade ago, Macdonald said.

At the time, there were concerns that it was destabilizing from a global military perspective, that the costs were too high and that it simply it didn’t work (the complexity of stopping a nuclear-armed missile mid-flight has been compared to hitting a bullet with another bullet).

“In the 10 or 12 years that have passed since then, the system has evolved,” Macdonald told Kapelos. “There is more confidence in the ability to defend against a ballistic missile attack … I think it’s topical now to revisit the situation.”

Robertson said Canada will need to go in with “eyes open,” however, especially as the Americans have no real motivation to bring us into the fold. Ottawa will need to commit resources, and money, to the endeavour. So far, there have not been any signals that the government is preparing to change its position.

“I think if we want in now we’re going to have to pay for it,” Robertson said.

“There is a piece in the (Canadian Armed Forces) defence policy review which says that we will be looking with the Americans at all threats to North America, so this would give the government the political cover they need to take a look at this.”

Prepared Remarks before House of Commons Standing Committee on National Defence on ‘Canada’s Abilities to Defend Itself and our Allies in the Event of an Attack by North Korea on the North American Continent’, Thursday, September 14, 2017

My remarks draw on 33 years of experience in the Canadian Foreign Service and, since then, my work as a fellow with the Canadian Global Affairs Institute. I spent a week earlier this year in Seoul, as the guest of the Korea Foundation, meeting with Korean scholars and senior Korean defence and security officials.

 

Let me address three questions:

  • Canadian participation in Ballistic Missile Defence (BMD)?
  • Our policy towards North Korea?
  • How can Canada contribute to nuclear non-proliferation?

 

Ballistic Missile Defence

 

It is time for Canada to participate in BMD as an insurance policy to shield Canadians should missiles come our way. Our European allies and Pacific partners employ it. So should we.

The Government dodged consideration of BMD in the recent Defence Policy Review (DPR). When I asked at the technical briefing at the launch of the DPR last May, I was told that the Government was staying with the policy adopted by the Martin and then Harper governments that we will not participate in BMD, but that the government is discussing defending North America against ‘all threats’ with the American government.  That would have to include BMD.

 

From discussions around the 2005 decision I understand that at that time the Government could not get adequate answers to three questions:

  • Does it work and how would BMD protect Canada?
  • How much participation would Canada have in what is essentially a US managed system?
  • How much would it cost?

 

These are still good questions and the current Government should get these answers and share them with Canadians.

 

That said, based on the evidence presented to it, the Senate National Defence Committee unanimously recommended in June 2014 that Canada participate in BMD.

 

Since then there is abundant evidence of North Korea’s improved capacity to both miniaturize a nuclear warhead and then project it by ballistic missile across continents. As then President George W Bush reportedly asked then Prime Minister Stephen Harper in 2006: ‘but what happens if a North Korean missile aimed at Los Angeles or Seattle winds up heading towards Calgary or Vancouver…don’t you want protection?’

While the US may protect a Canadian target near to a US city, there can be no guarantee since the US system is limited in size and the North Korean ICBM force of uncertain number. Unless we are inside the system – and making a contribution – we have no assurances even if the US commander would wish to protect a Canadian target that is remote from a US asset – think Edmonton or Calgary.

Consideration of Canadian engagement on BMD should cover all possible initiatives beyond the simply positioning of anti-missiles in Canada. These would range from a Government declaration that we acknowledge the missile threat to North America, to allocating additional Canadian Forces resources to NORAD, to equipping our naval assets with appropriate gear to detect missiles, to radar arrays in Canada, to writing a cheque to support research. In each case it will require more attention to security in Canada’s North.

 

The US is not asking us to join BMD. They did in 2005 and we said no. My sense is that if we were to ask now to included they would probably agree but it will oblige them to make changes to a system in which they have invested billions. There would be a cost to Canada. So if we decide to join, we do it because it serves Canadian interests and protects Canadians, not because, as some suggest, we are doing the Americans a favour. On the contrary, they would be doing us a service having made the initial and ongoing investment.

Joining BMD would likely bring the continental BMD defence function under NORAD and NORTHCOM. Canada has participated in NORAD’s missile warning function for many years, and bringing BMD into it would strengthen the bi-national institution at the heart of Canada-US relations and the defence relationship in particular.

North Korea

 

I believe that the Government, as part of its commitment to active internationalism, needs to reconsider its current policy approach to North Korea. Diplomatic relations are not a seal of good housekeeping but rather the means by which advance Canadian interests and protect Canadians. Relations also allow us to bring insight, intelligence and a Canadian perspective to the diplomatic table.

 

The current policy of controlled engagement was adopted by the Harper Government in 2010 after a North Korean submarine torpedoed a South Korean warship in blatant disregard of its international obligations.

 

This policy limits engagement to discussion of (1) regional security concerns; (2) the human rights and humanitarian situation in North Korea; (3) inter-Korean relations; and (4) consular issues and this latter provision was how National Security Advisor Daniel Jean negotiated the recent exit from North Korea of Pastor Lim.

 

The Lim episode aside, it has meant we have virtually no contact with the Kim regime. There has not been an Ambassadorial visit to North Korea since 2010. In fact, no Canadian Ambassador has been accredited to North Korea since 2011. This contrasts with like-minded embassies in Seoul whose Ambassadors have regularly travelled to North Korea in the last 7 years. Seven EU countries also have resident Embassies in North Korea.  Our current policy helps no one, hinders communication, particularly at times when we most need it, and puts us at an information disadvantage with, and lessens our value to our closest allies.

 

The authoritarian regime of Kim Jong-Un, continues to break international nuclear non-proliferation norms, despite repeated Security Council resolutions.

 

My view is that while any role for Canada would likely be limited, it would serve our interests to engage the North Koreans, thus enabling us to bring some intelligence or niche capacity to the table. My former foreign service colleague James Trottier who made 4 official visits to North Korea in 2015 and 2016 recently wrote an informed and useful piece in the Ottawa Citizen arguing for a combination of negotiations, incentives, sanctions and strengthened missile defence.

 

Some observations:

 

First, South Korea is our friend, fellow middle-power and the only nation in Asia with which we have a free trade agreement. It’s a country that we should cultivate, keeping in mind that they respect understand and respect toughness in trade negotiations.

 

South Korea has lived under the threat of bombardment by North Korea since the Armistice in 1953. Seoul, a city of ten million people, is 60 kilometers from the border and within easy range of conventional bombardment. After meeting with a very senior official in March he walked me to the elevator where I saw what I thought were a bunch of goggles. He looked at me and said “That’s for a chemical or biological gas attack. I don’t fear a nuclear bomb because what we have created in South Korea is just too valuable for Kim Jong-Un to destroy. He’d rather eliminate us so he can put his own people here.”

 

Second observation, Kim Jong-Un is ruthless, acting like something out of Game of Thrones, but his behaviour is rational and based on self-preservation.

 

For him and the 200,000 or so senior officials who benefit from his autocracy, a nuclear bomb is their insurance policy against the fate of Muammar Gaddafi or Saddam Hussein. Kim will not give up his weapons.

 

Third, we will have to live with a nuclear North Korea. We need to establish a new equilibrium and accept the least offensive outcome if we are to realize objectives under the failed ‘strategic patience’ policy.

 

The time for a military intervention, if it ever existed, has probably passed, short of some sort of extraordinary intervention by the Chinese, the only power with real leverage in this situation. But, for now, China does not want a failed regime and the migrants it would bring.

 

So we must live with the situation. An engaged Canada could perhaps be helpful. We used our convening capacity in the lead-up to President Obama’s opening to Cuba. President Trump has said he would consider meeting Kim Jong-Un. Throw in Dennis Rodman and a Raptors game and Niagara Falls and who knows what would happen.  The point is that to contain North Korea we have to think outside-of-the-box.

 

Nuclear Non-Proliferation

 

The fundamental issue with North Korea is nuclear proliferation. As part of our commitment to active internationalism, Canada should re-dedicate itself to the cause of nuclear non-proliferation.

 

For Canada, one of the world’s biggest producers of uranium, there is an important role to play in helping to secure the materials needed to make a nuclear bomb.

Canada, Australia and Kazakhstan account for more than two-thirds of global production. What if the three agreed to become permanent stewards of used uranium products?

We would permanently “own” our uranium and ensure that its waste, including radioactive and fissible material, was properly disposed of, perhaps in mines no longer in production. While this doesn’t solve the problem of existing nuclear waste, it would control most new supply.

The International Atomic Energy Agency would provide on-site accounting oversight and supervise the transportation of all uranium. Rates would reflect risks to make it commercially and politically viable.

Given their secure geography, Canada and Australia would have to take the lead in long-term global disposal. This will require leadership and explanation to persuade Canadians to take on this responsibility.

Saskatchewan is home to Canada’s uranium mines and the industry is one of the largest employers of indigenous people. People in Saskatchewan strongly support their industry. They recognize the value of nuclear medicine research, but they oppose nuclear waste storage. They will need to be convinced aboåut the safety, security and economic returns of long-term stewardship.

Nuclear energy, which emits no carbon, is also a key piece of the solution to climate-change mitigation. China is betting heavily on nuclear energy in its migration from coal. France derives about 75 per cent of its electricity from nuclear energy. Nuclear power supplies half of Ontario’s electricity.

The nuclear genie is out of the bottle. We must do a better job of handling its waste and curbing nuclear proliferation. As both a producer and user, Canada can take the lead in the control and containment of our own uranium.

Conclusion

We live in a world in disarray but we are not without assets and opportunities. I recommend that we look hard at ballistic missile defence as an insurance shield for Canadians, engage with North Korea to see if we can be helpful, and take a leadership role in controlling nuclear materials.

 

Can Trump pull USA from NAFTA

Can Donald Trump pull the U.S. out of NAFTA all on his own?

Some lawyers say withdrawal without congressional approval would be unconstitutional, but the politics of the play might be another matter

CHARLESTON, WV - MAY 05: United States Republican Presidential candidate Donald Trump models a hard hat in support of the miners during his rally at the Charleston Civic Center on May 5, 2016 in Charleston, West Virginia. Trump became the Republican presumptive nominee following his landslide win in indiana on Tuesday.(Photo by Mark Lyons/Getty Images)

Listening to President Donald Trump, or reading his Twitter musings, sure leaves the impression he claims unfettered power to yank the United States clear of the North American Free Trade Agreement whenever he feels like it. “I think we’ll end up probably terminating NAFTA at some point, okay?” Trump said in a rambling late-summer speech in Phoenix. He followed up with this classic Trumpian Tweet: “We are in the NAFTA (worst trade deal ever made) renegotiation process with Mexico & Canada. Both being very difficult, may have to terminate?”

A superficial reading of NAFTA lends some support to the notion that Trump might have the power to act on his bluster. The deal among Canada, the U.S. and Mexico, which came into force in 1994, does include Article 2205, which lets any of the three countries back out on six-months notice. And, since U.S. presidents have broad power over foreign affairs, that might seem to be Trump’s clause to trigger. Indeed, some trade experts read it that way—but others see it differently.

READ MORE: NAFTA: A brief historyFor instance, Riyaz Dattu, of the law firm Osler, Hoskin & Harcourt in Toronto, says Trump’s problem is that while presidents negotiate trade deals, Congress passes the laws to make them a reality in the U.S. “President Trump would have to get Congress to repeal the [NAFTA] provisions that were written into U.S. law,” Dattu says. He concedes, though, that the potential clash over presidential and congressional clout when it comes to quitting a trade deal is “an area that has not been tested.” Trade and constitutional lawyers on both sides of the border agree that if Trump tried to act unilaterally, a court battle would likely ensue, perhaps ending up in the U.S. Supreme Court.

That assumes, however, sufficient political will among Trump’s foes to fight him over NAFTA. Colin Robertson, a former diplomat with long experience in the U.S., who has analyzed the new NAFTA talks in depth for the Ottawa-based Canadian Global Affairs Institute, predicts Trump would carry the day. “In a practical sense, if he says, ‘I’m pulling the plug,’ I don’t think there will be enough pressure in Congress to question his authority,” he says.

RELATED: NAFTA: What each country wants out of a new deal

Still, Robertson says potent U.S. domestic forces have already pulled Trump back from the brink once when he was close to trying to exit the agreement on his own say-so alone. When his administration was approaching its 100th day in power last April, rumours spread that he was contemplating a hasty NAFTA withdrawal. The U.S. farm lobby weighed in with the White House against that precipitous move, Robertson says, and succeeded. NAFTA supporters hope that if Trump again came close to abrogating, domestic forces would rally once more rally to persuade him to retreat.

If not, the question of Trump’s unilateral power to turn his anti-NAFTA rhetoric into reality will stop being an intriguing debating point for lawyers, and turn into a matter of massive real-world implications for a continental economy.

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Can Trump pull out of NAFTA?

Can Donald Trump pull the U.S. out of NAFTA all on his own?

Some lawyers say withdrawal without congressional approval would be unconstitutional, but the politics of the play might be another matter

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NAFTA

What was behind Trump’s comment on NAFTA and energy?

There is wide-ranging speculation on the implications of US President Donald Trump’s recent comments about Canadian energy exports and the upcoming renegotiation of the North American Free Trade Agreement (NAFTA).

On Thursday (April 20), Trump said, “I was in Wisconsin the other day, and I want to end, and add, by saying that Canada, what they’ve done to our dairy farm workers is a disgrace. It’s a disgrace. We can’t let Canada or anybody else take advantage and do what they did to our workers and to our farmers. And again I want to also just mention: included in there is lumber, timber and energy.”

The Globe and Mail now reports, “Neither Canada’s government nor oil industry have any idea what U.S. President Donald Trump was talking about when he warned that the U.S. will target Canada’s energy sector in renegotiations of the North American free-trade agreement. Finance Minister Bill Morneau, in Washington at the International Monetary Fund and World Bank spring meetings, said he could not think of any energy-related trade disputes between the two countries.”

A border adjustment tax?
That article adds, “Mr. Trump did not specify what he was aiming to do. He has previously presented himself as a friend to Canada’s oil and gas sector, restarting the Keystone XL pipeline project blocked by Barack Obama. The President is planning to unveil his tax plan next week [on April 26], which some economists have speculated could include a tax on foreign oil imports.”

According to the US Energy Information Administration, the US imported 3.76 million barrels of oil a day from Canada in 2015. Last month, the US Department of Energy said the United States posted a $39 billion energy-trade deficit with Canada due to imports of oil, natural gas and electricity.

An American border adjustment tax on energy exports from Canada would be a clear violation of NAFTA.

Proportional sharing clause for Mexico?
The article further speculates, “The United States is heavily dependent on Canada for oil and gas because it does not produce enough to meet demand. A more likely target for NAFTA negotiations is Mexico’s energy sector, which has historically been the subject of government monopolies but has been opened up to private investment since 2013. One Canadian official, speaking on condition of anonymity, said bringing Mexican oil and gas under NAFTA would be an attractive prospect in trade talks.”

This could suggest that Trump may seek to have NAFTA’s proportional sharing provision apply to Mexico as well. That provision basically says that Canada must maintain at least the same level of oil and gas exports to the United States as it had supplied for the past thirty-six months. Author-activist Gordon Laxer has commented, “Proportionality, the de facto, mandatory-exporting clause applies only to Canada, since Mexico refused it.”

In December 2013, Mexico ended 75 years of government control of its oil reserves when it passed an energy reform law that allows transnational corporations to explore and extract oil and gas. That reform is expected to attract as much as $15 billion of foreign investment annually and increase oil production to as much as 4 million barrels per day by 2025 and double natural gas production.

Timelines
Speculation has suggested that NAFTA negotiations could begin this summer or fall.

Former diplomat Colin Robertson has stated, “At the earliest I think the renegotiation – with or without Mexico – will take at least a year, probably 19 months. After that we have to go for ratification, which adds on another year plus. My guess is that NAFTA, or whatever we call it, doesn’t get wrapped up until spring or summer 2019, meaning it will be front and centre in our October 2019 election.”

Mexico’s economy minister Ildefonso Guajardo sees a shorter time frame. He believes talks could start in late July and be concluded in April 2018. That may be because a general election will take place in Mexico in July 2018 and the early front-runner to be the next president of Mexico is Andres Manuel Lopez Obrador, a vocal opponent of Trump. He has stated, “[NAFTA] didn’t hurt, but it wasn’t the panacea”, suggesting he would be willing to walk away from the deal during the negotiation process.

To demand public consultations on NAFTA — and the removal of the proportional sharing clause from NAFTA — please click here.

North American Free Trade Agreement (NAFTA)

Primary tabs

Not For SaleThe clock is ticking on the North America Free Trade Agreement (NAFTA). Both the U.S. and Canada have opened up public consultations on the tri-country deal between Canada, the U.S. and Mexico. NAFTA renegotiations could start as early as August.

President Trump has made it clear he wants
NAFTA renegotiation to put “America first.”

Prime Minister Justin Trudeau has unsuccessfully tried to placate Trump. Prime Minister Trudeau has also tried to defend the deal, despite the evidence. For years we have seen the ravages of NAFTA – the Chapter 11 corporate lawsuits that have cost Canada millions of dollars and eroded our environmental and public policy, hollowed out manufacturing towns and hundreds of thousands of people put out of work, and greater inequality in Canada, the U.S. and Mexico.

We must stand up for an alternate vision – NAFTA renegotiations present an opportunity for a better, fairer NAFTA that will improve things for people and the planet.

Give the Canadian government a strong negotiating mandate by calling on it to:

Eliminate Chapter 11, the investor-state dispute settlement (ISDS) process, from NAFTA. ISDS provisions allow corporations to sue governments for policies or regulations that restrict corporate profits. Corporations have used these provisions to challenge laws that protect people’s health and the environment.

Remove all references from NAFTA to water as a good, service or investment. Canada is vulnerable to bulk water exports and increased privatization under the deal. President Trump could see Canadian water as a way to hydrate drought-ridden U.S. states.

Eliminate NAFTA’s energy proportionality rule. This rule requires Canada to export a locked-in percentage of our energy production to the U.S. This forces continued production in the tar sands, which will stop Canada from meeting its climate commitments.

We must stand up to Trump’s dangerous agenda on trade. We can make NAFTA fairer by protecting and expanding Canadians jobs, safeguarding water and the environment, and strengthening our economy.

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NAFTA Talks Begin

Talks begin to renegotiate NAFTA trade agreement

Listen to this storyNorth Country leaders are watching closely as officials from the U.S., Canada, and Mexico renegotiate the North American Free Trade Agreement. The talks began on Wednesday after years of heated rhetoric about NAFTA from American politicians.
Robert Lighthizer, U.S. Trade Representative. Photo: Office of the President

Robert Lighthizer, U.S. Trade Representative. Photo: Office of the President

And the tough talk continued on Day One. Robert Lighthizer, the U.S. Trade Representative, said, “We cannot ignore the huge trade deficits, the lost manufacturing jobs, the businesses that have closed or moved…. We feel that NAFTA has fundamentally failed many many Americans and needs major improvement.”But some experts say the deal isn’t likely to undergo radical changes.

Colin Robertson, vice president and fellow at the Canadian Global Affairs Institute, thinks NAFTA will get a few updates, but mostly remain the same.

And he says while Lighthizer may talk a big game in public, things might not be so dramatic behind the scenes.

“Within the negotiating tables themselves, is there drama? Not usually,” Robertson said. “Because remember, this is all behind closed doors, these are professional negotiators, they know each other. We’ve just been through the Trans Pacific Partnership talks. Yes, that agreement was put on ice but that will be – a lot of the content of that will be the base. And the Americans have said that already – that they’re going to be taking a lot of the language from the Trans Pacific Partnership and they’ll be bringing that into the negotiating table as the kind of starting point.”

There are major disputes over lumber, dairy, manufacturing, and other areas.

The renegotiation talks continue for the next several months.

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NAFTA Negotiaions

Colin Robertson was also on CGTN to give the Canadian perspective on how NAFTA renegotiation may turn out:

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You can watch that interview Here.

Colin Robertson joined CTV News Network to give commentary on the first round of NAFTA talks:

Colin_Aug_25.JPG
You can watch that interview Here.

Provincial News

Support within U.S. key to successful NAFTA renegotiation

  • Corwyn Friesen, mySteinbach
  • Posted on 08/21/2017 at 11:00 am

The Vice President of the Canadian Global Affairs Institute says strong American support for NAFTA, particularly within the agricultural community, will play an important role in the renegotiation of agreement.

Canadian, U,S. and Mexican negotiators completed the first round of talks yesterday aimed at revamping North American Free Trade Agreement.

Colin Robertson, the Vice President and a Fellow of the Canadian Global Affairs Institute, says strong support within the United States for the agreement will be an important factor.

What ever agreement that the Trump Administration negotiates will be subject to an up or down vote in the American Congress, in the House of Representatives and the Senate so it is important for us and we have made a sustained effort along with the Mexicans over the past six months to remind Americans at the local level why trade with Canada works for Americans.

We start of with what is Mr. Trump’s principal objective and that’s to create jobs. We point out that the Canada, United States, Mexico agreement accounts for roughly 14 million jobs in the United States. The trade with Canada and Mexico makes that possible.

Most Americans have not appreciated that fact but now we’re reminding them on a kind of daily basis and certainty we use every occasion when a minister or a legislator or a premier and this has been an all of Canada effort to do so. It’s not just been the federal government ministers that have been going down to the United States.

It’s been also Premiers, provincial legislators, business persons and those in the farm community for example have been very diligent over the last few years in working the various farm bureaus and going to state fairs just to remind them that trade with Canada creates wealth and jobs in the United States.

~ Colin Robertson, Canadian Global Affairs Institute

Robertson observes we have had a very good response from the Americans. He notes the Governor of Nebraska, during a recent visit to Canada, pointed out Canada is the number one export market for 35 American states.

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NAFTA Talks Begin

Former Canadian diplomat: We shouldn’t be under the impression that NAFTA talks will be easy

Colin Robertson, who is VP & Fellow at the Canadian Global Affairs Institute, a former Canadian diplomat, and was a member of the team that negotiated the first NAFTA deal, joins BNN to provide his perspective as NAFTA talks begin.

 http://www.bnn.ca/video/former-canadian-diplomat-we-shouldn-t-be-under-the-impression-that-nafta-talks-will-be-easy~1188468

Nafta Talks Open With Spat Over How to Resolve Tariff Conflicts

By Paul Vieira in Ottawa, William Mauldin in Washington and Anthony Harrup in Mexico City Features Dow Jones Newswires

Talks to remake the North American Free Trade Agreement are starting off today with an early dispute — over how to settle disputes.

Under Nafta, the U.S., Mexico and Canada have resolved tariff conflicts by submitting them to expert panels that can sustain or overturn tariffs. The system has helped guide the trilateral relationship for 23 years.

Now the U.S. wants to do away with those dispute-resolution panels, while Canada is digging in on its insistence that they are a crucial tool for Canadian firms to use to fight tariffs imposed by its powerful southern neighbor. Mexican senators have also called for retaining the mechanism.

Though the system for resolving tariff disputes is only one of many issues that U.S. officials are expected to put on the table in the talks that begin Wednesday in Washington, it is a particularly divisive one. For President Donald Trump, the panels’ power to overturn tariffs strikes at the heart of his “America First” trade policy and his campaign’s spirited defense of measures to protect U.S. industries against what he sees as unfair trade practices.

“This first session could be quite confrontational,” said Fred Bergsten, founder of the Peterson Institute of International Economics in Washington and a member of the U.S. advisory panel for trade negotiations. He expects the U.S. to put the issue on the negotiating table early in the process.

Without Chapter 19 — the portion of Nafta that creates the panels — disputes over tariffs would end up in national courts or before the World Trade Organization, a body the administration also views with skepticism.

The divide is worrying to business groups that want to ensure the talks stay on course. Major changes to Nafta have to be approved by all three countries’ leadership, plus their legislators. Business lobbyists and former trade officials say gridlock could lead to renewed threats from member countries to pull out of the deal or feed political opposition during election seasons.

The opening bids suggest a compromise won’t be easy.

“Canada absolutely stands very firm in the importance of having such a mechanism,” Foreign Minister Chrystia Freeland said this week as she unveiled the country’s objectives ahead of the Nafta talks.

Similarly, Mexico’s Economy Minister Ildefonso Guajardo said the current system provides a deterrent against the improper use of duties. Dismantling it could end up hurting exporters in all three countries, he told The Wall Street Journal in a recent interview.

A U.S. trade official told reporters Tuesday that Washington plans to “be quite ambitious in this first round.”

One question is whether the early rhetoric will give way to compromise once the give and take of the negotiations begin. Trade negotiations are all about compromise, and Chapter 19 could end up being a bargaining chip in a broader set of concessions each side seeks.

“Everything that’s released publicly is a negotiating position,” said Celeste Drake, a senior expert at the AFL-CIO, the biggest U.S. labor federation. “There is always a middle ground if negotiators are willing to work.”

U.S. labor groups tend to oppose Chapter 19, saying tariffs levied on the grounds of alleged dumping or subsidies can be challenged in the court system or through the WTO. Ms. Drake said the Trump administration should press hard to resolve differences with the other governments to achieve the best deal for workers.

Stephen Powell, a former senior counsel at the Commerce Department who has written extensively on the dispute-resolution process, said given the historical importance Canada places on Chapter 19, it would likely demand a “very large concession” for abandoning the system. “Canada can certainly insist on something very big, so can Mexico,” Mr. Powell said.

But for Mr. Trump and U.S. trade representative Robert Lighthizer, Chapter 19 symbolizes an erosion of sovereignty, since the panels have primarily been used to overturn tariffs imposed by the U.S. Commerce Department on Canadian and Mexican products. The issue is of particular note to Mr. Lighthizer, who spent about three decades as a Washington trade lawyer arguing for the types of tariffs that can be overturned under Chapter 19.

Mr. Lighthizer’s office in July left flexibility in most of its official objectives for Nafta talks, but it said clearly in the trade remedy section that it wanted to “eliminate the Chapter 19 dispute settlement mechanism.”

The third-party dispute system dates back to 1987, when President Ronald Reagan granted Canada’s demands for an independent resolution mechanism to salvage the U.S.-Canada free-trade pact, Nafta’s predecessor. The issue threatened to become a deal breaker 30 years ago, and it took the intervention of Canadian Prime Minister Brian Mulroney and U.S. Treasury Secretary James Baker to get resolved.

Colin Robertson, a Canadian negotiator at those 1987 talks, said Canada’s business community pushed for independent panels after years of amassing large legal bills unsuccessfully fighting U.S. trade sanctions in the American courts.

Since coming into force, nearly 150 Chapter 19 cases have been adjudicated, two-thirds of which were brought by either Canada or Mexico against the Commerce Department.

The rate at which countries are filing Chapter 19 cases has recently slowed, with panels having dealt with just over a dozen cases since 2010. Trade watchers say the falloff in cases stems in part from the greater U.S. focus on trade cases involving China, and illustrates how Nafta has ushered in greater integration across the North American economy, with firms owning assets in each of the three countries. “There’s no us versus them any more,” said Peter Glossop, trade lawyer with Toronto firm Osler Hoskin & Harcourt.

Canada hasn’t always had clear-cut wins in Chapter 19 cases, but some — most notably dealing with the decadeslong spat over lumber — have gone its way. Ottawa’s most recent win was in April, when an independent panel directed the U.S. Commerce Department to roll back the bulk of a proposed 20% tariff on a type of glossy magazine paper made by a mill in the Atlantic coast province of Nova Scotia. The U.S. claimed the mill unfairly benefited from power rates set by the province’s regulator, but the panel found that the U.S. offered little evidence to support its case.

“We certainly knew that with Chapter 19, all of the facts would be addressed by an independent panel…in a more fair manner,” said Marc Dubé, a senior manager at Port Hawkesbury Paper, the mill that faced the 20% duty.

Write to Paul Vieira at paul.vieira@wsj.com, William Mauldin at william.mauldin@wsj.com and Anthony Harrup at anthony.harrup@wsj.com

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As NAFTA Renegotiation Begins, Canada Feels Optimistic

17 August 2017

Manitoba Pork Council

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CANADA – The Vice-President of the Canadian Global Affairs Institute says, with the renegotiation of NAFTA now underway, there’s good reason for Canadians to be optimistic, Bruce Cochrane reports.

The first round of negotiations aimed at renewing the North American Free Trade Agreement kicked off yesterday in Washington.

Colin Robertson, the Vice President and a Fellow of the Canadian Global Affairs Institute, says the fact that Canada is actually at the table is cause for optimism.

Colin Robertson-Canadian Global Affairs Institute

President Trump, running as candidate Trump, declared on many occasions that NAFTA was the worst trade deal ever negotiated and that on his first day in office he would tear it up.

He did, on his first day in office, shelve the Trans-Pacific Partnership which effectively was an updating of the NAFTA but done with 12 countries including Canada, Mexico and the United States.

But the NAFTA, I think there was serious consideration to indeed tearing it up, giving notice and it would have taken six months for the United States to pull out but, particularly the farm community in the United States, protested, came back and said look this is working for us.

We’re selling a lot of our produce to Canada and to Mexico so do no harm please.

I think that’s what helped persuade President Trump to renegotiate the agreement.

He has said that he has had conversations with both Prime Minister Trudeau and President Pena Nieto of Mexico.

As well there was opposition from both sides of the aisles up in Congress.

And, of course, to proceed into the renegotiation, he has had to seek the permission of Congress through the Trade Promotion Authority so we have a pretty clear sense of what the Americans are looking for.

The United States Trade Representative, Robert Lighthizer submitted a list of objectives to Congress about a month ago and then, when he and his colleagues, Chrystia Freeland and Ildefonso Guajardo, the Mexican Trade Minister, opened the negotiations they spelled out what they were looking for as well.

Mr Robertson is confident Canada will have a good indication of how negotiations are going soon after each round.

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Canada has Edge in NAFTA Negotiations

Experience, outreach give Canada an edge in achieving NAFTA renovation goals

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NAFTA Primer for Canadians

A NAFTA Primer for Canadians

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by Colin Robertson
CGAI Vice President and Fellow

August, 2017

DOWNLOAD PDF


Table of Contents


Introduction

After months of speculation, ministers and negotiators from Canada and Mexico fly to Washington this week to hear how the Trump Administration wants to change the North American Free Trade Agreement (NAFTA), the set of rules managing continental trade since 1994. Partnered with the Mexicans, Canada is well equipped to advance our own objectives and use the talks to even greater advantage.

The NAFTA re-negotiation is part of a bigger exercise by the Trump Administration aimed at reducing US trade deficits, bringing jobs back to the USA, and getting a ‘fairer’ deal for Americans in their trade agreements.

Market access and rule-making are the twin pillars of trade policy and this is what the negotiators will spend their time discussing. Seven rounds are scheduled from now until Christmas, when both the US and Mexico hope a deal can be done. The Trump Administration wants the deal through Congress well before the November, 2018 midterms. The Mexicans want it out of the way before their presidential election in July, 2018.

North America is home to over 480 million people and over one-quarter of the world’s economic output. That makes us one of the most competitive regions in the world, according to the Bush Institute. Under NAFTA, total trilateral merchandise trade has reached nearly US$1trillion, representing more than a three-fold increase since 1993.

With 77.8 per cent of our merchandise exports destined to our NAFTA partners, one in six jobs in Canada depends on trade. As Foreign Minister Chrystia Freeland observed, Canada’s economy is 2.5 percent larger every year, thanks to NAFTA: “it is as if Canada has been receiving a $20 billion cheque each year since NAFTA was ratified.”

But it is time to update our continental economic constitution.

The path that led to these negotiations has been contentious and, at times, acrimonious, especially in the wake of President Trump’s threats to ‘tear up the NAFTA’, build a wall on the Mexican border, deport ‘illegal immigrants’ and impose a border tax.

All three nations successfully negotiated new rules and improved market access in the Trans-Pacific Partnership (TPP) that President Trump pulled out of after taking office. The TPP, now under resuscitation efforts by the other 11 partner nations, including Canada and Mexico, involved many of the same negotiators. Inevitably, the stillborn TPP will be a reference point for chapters in a new agreement.

A NAFTA 2.0 must bridge some profound differences.

The Americans want to rescind the current dispute settlement process for countervail and anti-dumping cases, leaving Mexico and Canada to rely on the U.S. trade remedy system. For Canada and Mexico, this is a non-starter. A fair dispute settlement mechanism will be essential to any new agreement.

For Canada, the overriding objective is a deal that sustains and improves access to the US market. Trade with the U.S. (nearly three-quarters of our trade) accounts for an estimated 1.9 million Canadian jobs.

The border continues to be as much chokepoint as gateway. We made progress in the Harper era to reach beyond-the-border and to embrace regulatory cooperation. But this work needs a re-boot.

We have some house-keeping to take care of: the legislation enabling more US customs clearance operations for cross-border passage by air, sea and rail. We also need to figure out, with the US, how to manage the new refugee flow from the USA resulting from Mr. Trump’s immigration changes, real and anticipated.

The experienced Canadian team, having honed their skills negotiating free trade deals across the Atlantic and the Pacific, are well positioned.

First, surveys show that Canadians are confident in the Trudeau government’s ability to negotiate a good deal on their behalf. Canadians don’t like Mr. Trump. Neither do Mexicans or the rest of the world according to Pew surveys. The antipathy towards Mr. Trump will give the Trudeau government elbow room.

Second, the U.S. has taken the idea of a border tax off the table. This would have been a show-stopper. But the driving force for the tax came from House Speaker Paul Ryan, whose support for a re-negotiated NAFTA will be necessary.

Third, the economic auguries are good. Canadians are optimistic about their future prospects. The OECD projects unemployment in Canada (6.1 per cent) and the U.S. (4.3 per cent) at the lowest point in a decade – lost jobs are always blamed on trade – while growth in Canada (2.3 per cent) and the U.S. (2.4 per cent) will lead the G7. Mexican unemployment is at 4.3 per cent with growth projected at two per cent.

Fourth, there is broad public support in all three countries for continental free trade. A Pew survey conducted in May says NAFTA enjoys the support of three in four Canadians and six in 10 Mexicans. Surprisingly, half of Americans (51 per cent) say NAFTA has been a good thing for the US.

President Trump’s focus on NAFTA has brought hitherto silent support for NAFTA to the surface, especially in the U.S. farm community, a core part of the Trump base.  Their support for NAFTA is one reason why Trump decided to renegotiate, rather than scrap, NAFTA.

The Canadian outreach campaign –at the political level it has netted meetings with 50 governors and lieutenant governors and over 200 congressmen– has revealed that we have more allies than we thought for continuing our mutually-profitable continental trade. Canada and Mexico must continue cultivating their support. We will need it when the new deal reaches Congress.

The auspices for a new deal are good, but fasten the seatbelts. Negotiators will need to contend with threats and counter-threats, midnight tweets, and other noise.

Negotiations are traditionally conducted in secrecy but the US system is leaky by nature and by design and it is exacerbated by the current factionalism on Capitol Hill and within the Trump administration. To sustain public support Canadian negotiators will have to keep consulting with stakeholders and then explain, explain, explain.

Canadian governments should use the negotiations as an opportunity to improve Canadian competitiveness. Canadians want their governments to regulate for public safety and sovereignty but there are still thickets of red tape that need weeding. We need new and better connections – rail, road and pipe -to our ports. And we need to take another swing at inter-provincial trade barriers.

Trade promotion could do with a boost. Canada can compete continentally and globally as we proved in the decade of trade-led growth that followed the 1988 Canada-US FTA . The premiers have taken to sales and marketing like ducks to water. So should our big city mayors.

The ‘Canada brand’ is strong and, for now, Justin Trudeau represents the ‘face’ of Canada. Let’s leverage this into more trade and investment that creates and sustains jobs. As Canada’s top salesman, Mr. Trudeau needs to lead this parade.

 

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How did we wind up in negotiations?

During the remarkable 2016 American election campaign, Donald Trump called NAFTA the “worst trade deal ever” and promised to tear it up, along with the TPP and Trans-Atlantic Trade and Investment Partnership (TTIP).

After his election, the U.S. withdrew from the TPP. The TTIP was put in the freezer. Threats to “terminate” NAFTA continued until just after his 100th day in office when, as President Trump tells it, telephone calls from Prime Minister Justin Trudeau and President Enrique Peña Nieto persuaded him to “give renegotiation a good, strong shot.” Opposition from both sides of Congress and the farm community likely weighed significantly in the Trump decision.

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Who are the negotiators?

At the ministerial level, Robert Lighthizer is the United States Trade Representative (USTR). A long-time litigator and former USTR official during the Reagan era, he will work closely with Commerce Secretary Wilbur Ross, whom Trump has charged with overseeing the negotiations, with the support of Peter Navarro, Director of Trade and Industrial Policy. John Melle, a long-time senior official at the USTR responsible for North America, will direct the day-to-day negotiations.

Foreign Affairs Minister Chrystia Freeland, who previously served as Trade minister, will oversee the Canadian team. Steve Verheul, a long-time agriculture trade negotiator and chief negotiator for the Canada-European Union Comprehensive Economic and Trade Agreement (CETA), will be Canada’s chief negotiator.

Ms. Freeland has also named an advisory committee of eminent Canadians including former Conservative leader Rona Ambrose and former Harper cabinet minister James Moore, Assembly of First Nations Chief Perry Bellegarde and Canadian Labour Congress president Hassan Yussuff. A Canada-U.S. cabinet committee chaired by Transport Minister Marc Garneau will keep watch. The NAFTA file will also sit prominently and permanently on Trudeau’s desk.

Mexican Economy Minister Ildefonso Guajardo will oversee the negotiations with veteran trade negotiator Kenneth Smith Ramos, currently director of Mexico’s NAFTA office in Washington, as their chief negotiator.

The negotiating teams will be drawn from the professional trade policy officers in government ministries. Canadian Chief Negotiator Steve Verheul told the Trade Committee (August 14) that there will be 28 tables of negotiators. They will be tasked to come up with language for the individual chapters e.g. procurement, intellectual property, services, of the new deal. Where trade policy was once about tariff rates it is increasingly about regulations around, for example, labour and the environment. Trade is now a horizontal issue that cuts across government.

In addition to the input from their respective executive offices, domestic agencies and departments, the negotiating teams will also rely on advice from their respective ambassadors: Canada’s David MacNaughton in Washington and Pierre Alarie in Mexico City;  Mexico’s Dionisio Pérez-Jácome Friscione in Ottawa and  Geronimo Gutiérrez Fernández in Washington; the U.S.’s Kelly Knight Craft in Ottawa and Roberta Jacobson in Mexico City.

The Mexicans, in outlining their objectives, described well the actual negotiating process:

“As in all negotiations, in the modernization of NAFTA, there will be different levels of interaction between the negotiating teams of the three countries. At the technical level, those responsible are the negotiating heads. At a next level, there will be the undersecretaries or their equivalents, who will be in charge of advancing those topics that after the technical work so require, and at the strategic level will be the secretaries or ministers who will lead the negotiation process in each country.”

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How long will the negotiations last?

The preliminary negotiations will begin in Washington on Aug. 16 for three or four days, after which the negotiating teams will go home, take stock and reconvene at roughly three-week intervals, likely rotating between respective capitals (or cities with direct air connections), with seven scheduled rounds before Christmas.

Both Mexico and the U.S. would like the negotiations over by Christmas or early in the New Year lest they intrude into their election cycles. The TPA, which enabled the negotiations, expires in July although there is a provision to extend it. Mexico will elect a new president, Chamber of Deputies and Senate in July. U.S. midterm elections for the House of Representatives and one-third of the Senate take place in November.

The U.S. initiated these negotiations and while it wants an early conclusion, USTR Robert Lighthizer said in June that completing the negotiations by the year’s end was a “very, very quick time frame and we’re not going to have a bad agreement to save time.”  Under the TPA, the USTR will have to give Congress notice after negotiation of any agreement and this starts a process that can last up to six months before Congress holds an up or down vote on the agreement.

Trade negotiations almost always take longer than anticipated. It took four years, and a contested election in Canada, to negotiate and then implement the Canada-U.S. Free Trade Agreement. NAFTA took over three years, with elections in both Canada and the U.S. resulting in additional side agreements on labour and the environment. CETA, most of which will be implemented in September, took eight years. The Doha round of the World Trade Organization negotiations began in 2001 and there is no end in sight. The TPP negotiations started in 2006, with Canada and Mexico joining in October 2012. While agreement was reached in 2016, the U.S.’s withdrawal means it must be renegotiated before it can go into effect.

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What do the Americans want?

The U.S. objectives, mandated by congressional oversight in the Trade Promotion Authority,  reflected the input from dozens of meetings and formal hearings with stakeholders and over 12,000 comments received online through the Federal Register.

In mid-July Lighthizer submitted to Congress a summary of American objectives designed to “seek a much better agreement that reduces the U.S. trade deficit and is fair for all Americans by improving market access in Canada and Mexico for U.S. manufacturing, agriculture, and services … Since NAFTA was implemented in 1994, the U.S. bilateral goods trade balance with Mexico has gone from a $1.3 billion surplus to a $64 billion deficit in 2016. Market access issues have arisen in Canada with respect to dairy, wine, grain and other products — barriers that the current agreement is unequipped to address.”

The U.S. negotiating objectives also include the addition of chapters on the environment and labour (currently side agreements) and on the digital economy, including data flows,  as well as “to eliminate unfair subsidies, market-distorting practices by state-owned enterprises, and burdensome restrictions on intellectual property.”

The US had some specific asks of Canada including raising the Canadian customs inspection and duty (the de minimus level) threshold for imports entering by mail or UPS or FedEx from its current level of $20. The US level is $800 while Mexico’s de minimus level is $50. While e-commerce shoppers of Amazon, eBay and others would like this and it would lift some of the regulatory burden for small and medium sized business that depend on sourcing material from south of the border, Canadians retailers say this could put them out of business. But Perrin Beatty, Canadian Chamber of Commerce CEO got it right when he said that Canada is “literally spending dollars to collect dimes,” while “important trade facilitation programs and enforcement issues are not pursued as aggressively because of resource constraints.”

The US has also identified Canada’s protectionist dairy supply management system as a target. It needs reform. It deprives Canadians of choice (a 270 percent duty on foreign cheese beyond a tiny quota is a mighty deterrent) and does nothing to encourage development of our cheeses as a world-class premium product. But, when it comes to farm subsidies, the US is no slouch, with its support for American dairy, sugar, corn and other produce. The US also enjoys a 5-1 advantage in the dairy trade with Canada.

The US has also identified the rules of origin need to be enforced and better defined. Canada and Mexico want to preserve the rules of origin for autos establishing North American-sourced content at 62.5 percent. As Prime Minister Trudeau told state governors Canada and the US make things together. The auto trade is probably the best example and, as both Trudeau and Chystia Freeland have observed,  Ontario-based Magna “employs 62,000 Americans, 22,000 Mexicans, and 20,000 Canadians – building auto parts and components that rely on supply chains that crisscross the borders.”

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What do the Mexicans want?

The Mexicans, after similar consultations with industry, educators, agricultural groups and other stakeholders, tabled their objectives in early August. They want to strengthen Mexico’s growing energy sector. They want to protect intellectual property and to improve access for goods and services. They want greater labour market integration. They would like improved rules of origin to guarantee regional benefits. They want to unify agriculture, animal and health safety regulations. They want a stronger dispute resolution mechanism and all parties in the Mexican congress recently voted to sustain the bi-national panels (Chapter 19) that hear complaints about illegal subsidies and dumping and then issue binding decisions.

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What does Canada want?

In a speech at the University of Ottawa and remarks before the Standing Committee on International Trade (August 14) Foreign Minister Chrystia Freeland compared the negotiations to ‘renovating a house’ and laid out her main objectives:

  • Modernize the 23 year-old NAFTA to take into account the technological and digital revolution;
  • Make it a progressive “fair trade” agreement, using CETA as a model, through inclusion of chapters on the environment to address climate change, labour, gender equality, indigenous peoples;
  • Reforming dispute settlement to ensure governments’ have the right to legislate in the public interest with fair dispute settlement (Chapter XIX);
  • Improvements for business through easing business travel (Chapter XVI), cutting red tape and focusing more on harmonized regulatory cooperation;
  • Preserving supply management and cultural exception.

Consultations on NAFTA – the government has received over 21, 000 submissions –  have underlined the need to ‘Do no Harm’. Canadians understand that trade has worked to their advantage. Planning on the Canadian side falls into in three baskets:

Defensive Interests: We want to preserve the dispute settlement mechanism for countervail and anti-dump, i.e., NAFTA Chapter 19. Canada attempted unsuccessfully to have anti-dumping duties and countervailing duties done away with in the FTA negotiations in the mid-1980s but then settled for a dispute settlement system that was rolled into the NAFTA. We may have to push back on US efforts to broaden the scope of US trade remedy intervention around safeguard action and national security. If water is raised (doubtful), Canadian negotiators can be expected to enunciate longstanding Canadian policy and, if necessary, draw on the recent CETA agreement  that explicitly declares that water in its natural state is not subject to the terms of the agreement.

Modernization: This should be relatively easy to agree on especially on use of technology to create e-authorizations for customs clearance. This is already underway, but not completed, in the regulatory cooperation and beyond-the-border initiatives. Modernization, Minister Freeland and the negotiators told the Trade Committee, will also draw from the work already done in the TPP agreement and CETA. This could include the e-commerce chapter that Commerce Secretary Wilbur Ross has made a priority. Canada would not be unhappy to see the end – or reform – of the investor-state dispute settlement mechanism, i.e., NAFTA Chapter 11. As trade law expert Larry Herman chronicles, it has cost Canadian taxpayers a lot of money, especially with its successful application by U.S. industry over provincial government practices.

Offensive interests: Ms. Freeland has said she will push on the environment, labour, indigenous people, and gender equality. A consistent theme in the ongoing stakeholder consultations is the need more streamlining at the border. In some cases, the NAFTA provisions are not used because they involve too much work filling in forms and getting approvals. Canada wants to expand labour mobility to include occupations not included in original NAFTA (so as to cover, broaden the scope and depth of government procurement, and curb the application of U.S. trade remedy laws.

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Is NAFTA unpopular?

Support for NAFTA is lowest in the U.S., hardly surprising as most presidential candidates, especially Democrats, have consistently campaigned against NAFTA since its negotiation in 1992.

Bill Clinton campaigned against it in his election victory over NAFTA architect George H. W. Bush, but then embraced it as president (as did the Chrétien Liberals) after the incorporation of side deals on the environment and labour. But passage in Congress required an all-out White House campaign. Even then, most Democrats voted against its passage.

Donald Trump was especially critical of NAFTA in the 2016 campaign but Hillary Clinton also promised NAFTA reforms, as both she and then-candidate Barack Obama did in 2008.

The big change has been the shift in GOP support. It became free trade-minded with Ronald Reagan, and still enjoys significant support, if declining support, with Capitol Hill GOP. But Donald Trump mined the discontent of Rust Belt and working-class voters, who blame NAFTA for job loss and industry dislocation, even though technological innovation, notably robotics and its productivity gains, is more responsible.

Surprisingly, the recent focus on NAFTA has galvanized what public opinion surveys say is a quiet majority of support for continuing the North American free trade regime. This is especially significant in the U.S. because the negotiation and implementation of a new accord will depend on Donald Trump’s ability to achieve congressional agreement.

Both Canada and Mexico have launched unprecedented outreach campaigns in the USA involving their ministers, premiers and governors, and legislators at all levels of government as well as key business and labour stakeholders reaching out to their American counterparts and reminding them that NAFTA works for them as well. This effort will need to be sustained.

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In recent weeks, the major business associations in each country have all rallied around a renewed NAFTA. The national chambers of commerce of the U.S., Canada and Mexico have launched the North American Economic Alliance as a platform for an updated trilateral agreement on the principle of “do no harm.” The Business Council of Canada, the Business Roundtable and the Consejo Mexicano de Negocios have also warned about “disrupting supply chains that enable our companies and workers to produce globally competitive goods and services.”

There is also support from the auto workers. In a recent release, the leaders of Unifor Canada and the U.S. United Automobile Workers argue jointly for a deal “to raise wages and labour standards in Mexico; ensuring that autos and auto parts granted tariff-free access are actually made in North America and meet high enough content rules; structuring the agreement to achieve greater trade balance, and to ensure that workers in each country get a fair share of the benefits of the industry.”

Farm groups have also come out in support of NAFTA with U.S. Agriculture Secretary Sonny Perdue, a former Georgia governor, telling farmers that “First of all, the principle is: ‘Do no harm.’ Overall, agriculture’s done very well under NAFTA and we hope to continue that.”

The Canadian Cattlemen’s Association, the Confederación Nacional de Organizaciones Ganaderas in Mexico and the National Cattlemen’s Beef Association sent a joint letter to Trump, Trudeau and Peña Nieto urging them “not to jeopardize the success of the men, women and families engaged in the cattle and beef industries of each of our countries, who depend on the success that market access provides under NAFTA.”

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Recent polling on NAFTA

A recent Pew survey (May 2017) revealed that NAFTA enjoys the support of three in four Canadians and six in 10 Mexicans. Surprisingly, half of Americans (51 per cent) say NAFTA has been a good thing for the US.

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A recent Nanos survey of U.S. business (July 2017) revealed that 45 per cent of U.S. businesses think the U.S. economy is better off because of NAFTA, while 25 per cent think the economy is worse off and 13 per cent think there has been no impact.

After a decline in support for free trade agreements in general during the 2016 campaign, a plurality of Americans support them again, according to another 2017 Pew Research Center survey. According to Pew, political partisanship is linked to views of NAFTA, most notably in the U.S. In a switch of historical allegiance, about two-thirds (68 per cent) of Democrats but only 30 per cent of Republicans see NAFTA as good for the U.S. Gender, age and race also divide Americans with women, youth, Hispanics and African-Americans more likely to back freer trade.

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In Mexico, the Pew survey reveals that 59 per cent of those who identify with the governing PRI party and 68 per cent of those supporting the PAN (the party of former presidents Fox and Calderone) support NAFTA.

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Canadians like trade

Most Canadians back free trade. According to Pew, supporters of all three parties – Conservatives (83 per cent), Liberals (82 per cent), NDP (70 per cent) – say it has been a good thing for Canada.

Canadians have consistently backed freer trade since the early 1990s when the rewards of the Canada-U.S. FTA ushered in a decade of economic growth. That agreement was no sure thing with Brian Mulroney’s Progressive Conservatives fighting the 1988 election on the issue. They won a majority of the seats (with 43 per cent of the popular vote) but only carried three provinces – Alberta, Manitoba and Quebec – with the Liberals and NDP and most premiers opposed to the agreement.

Today, the Trudeau Liberals are champions of freer trade and a renewed NAFTA enjoys strong support from the Conservatives as well the premiers. The premiers and provincial legislators are vital to the Canadian campaign reminding Americans that we are their biggest export market and that trade with Canada generates an estimated nine million American jobs.

Recent surveys by  NANOS  and IPSOS reveal that the Canadian public has confidence in the Trudeau government’s ability to negotiate a good deal and people are also willing to cut the government a lot of slack in its NAFTA renegotiation. A recent Angus Reid survey also showed that Canadians are ready to make changes to the supply management system that protects the dairy and poultry industries but with a higher cost to consumers.

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What about softwood lumber?

Softwood lumber, or timber as it is called in the U.S., was likely the first trade dispute, dating back before Confederation to the George Washington administration when Massachusetts timber merchants (Maine was then part of Massachusetts) sought redress for competition from New Brunswick lumber used in shipbuilding. It has been a regular, unfortunate and visceral feature of Canada-U.S. relations for much of the last half century. The rancour over shakes and shingles almost undid the negotiations leading to the 1988 Canada-U.S. FTA. A series of carefully negotiated agreements have managed the trade but with the expiry of the 2006 agreement in September 2015 and inability to secure a deal in the year-long moratorium that followed, Canadian lumber producers are once more paying export duties.

At the crux of the dispute are our different practices on domestic support and taxation, with most U.S. timber harvested from private lands (as in our Maritimes) rather than public lands (as in the rest of Canada). Even though the industry is increasingly integrated in terms of ownership, there remain lots of small timber holdings, especially in the southeastern U.S., that view Canadian practices as subsidized by government. Any deal is likely to once more see a managed trade deal with a quota on Canadian lumber imports after which a levy would kick in. Any deal is also complicated by the requirement for the provinces – British Columbia is the biggest supplier, Alberta, Ontario, Quebec and New Brunswick – each with their own particular forestry practices, to agree on how they will divvy up the trade.

A deal may be in the making with Canadian supply capped at around 30 per cent of U.S. requirements. In the meantime, the Conference Board of Canada estimates that the U.S. levies will result in the reduction of 1,100 jobs this year, underlining the need for a deal as well as market diversification.

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What happens if we don’t get a new NAFTA?

If the US were to rescind NAFTA they would have to give six months’ notice of withdrawal (and this might be litigated given the US system). The NAFTA would stay intact between Canada and Mexico. Canada-U.S. trade would revert to the provisions of the 1989 Canada-U.S. Free Trade Agreement. If that were also rescinded, then the most-favoured nation (MFN) provisions negotiated under the WTO would apply with the U.S. MFN duty rate generally lower than the Canadian rate (2.2 per cent versus 3.2 per cent).

A more probable scenario is an impasse or breakdown in negotiations, as happened during the Canada-U.S. FTA talks. There could well be threats and counter-threats around retaliation. During the country-of-origin labelling (COOL) dispute, Canada and Mexico prepared a retaliatory list of goods on which they would apply higher duties. We would have targeted, for example, California wine.  California has the biggest congressional delegation and they did not look kindly on sacrificing their wine sales to protect ranchers.

This targeted approach in potential trade retaliation helped convince the U.S. Congress to rescind the COOL legislation in December 2016 and thus conclude a dispute that had dragged through both NAFTA and WTO since 2008. You can be sure Canada and Mexico will have a new retaliatory list in hand should, for example, plans for a border tax re-emerge.

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Did NAFTA work?

By any economic estimate NAFTA worked. But as the Council on Foreign Relations recently observed:

“Economists largely agree that NAFTA has provided benefits to the North American economies. Regional trade increased sharply [PDF] over the treaty’s first two decades, from roughly $290 billion in 1993 to more than $1.1 trillion in 2016. Cross-border investment has also surged, with U.S. foreign direct investment (FDI) stock in Mexico increasing in that period from $15 billion to more than $100 billion. But experts also say that it has proven difficult to tease out the deal’s direct effects from other factors, including rapid technological change, expanded trade with other countries such as China, and unrelated domestic developments in each of the countries. Debate persists regarding NAFTA’s legacy on employment and wages, with some workers and industries facing painful disruptions as they lose market share due to increased competition, and others gaining from the new market opportunities that were created… In the years since NAFTA, U.S. trade with its North American neighbors has more than tripled, growing more rapidly than U.S. trade with the rest of the world. Canada and Mexico are the two largest destinations for U.S. exports, accounting for more than a third of the total.”

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To underline the increasingly integrated nature of continental trade, a Wilson Center study concluded that Mexican exports to the U.S. market contain 40 per cent U.S. content and Canadian exports to the U.S. contain 25 per cent U.S. content.

But did NAFTA exacerbate social inequality? Did it unduly benefit some, i.e., investors, while failing to help with adjustment assistance or retraining those affected by trade and technological change? We can and have to do better in ensuring the gains of trade are broadly shared and that trade lifts all boats, not just the yachts.

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What is in a trade agreement?

Trade agreements set out the rules of the road for trade including how to manage disputes. Where once they focused on tariffs – the government levy on imports – they increasingly address regulations and standards.

NAFTA, now 23 years old, was pathbreaking in its scope and breadth and while it has remained evergreen, a revision to take into account, for example, the digital economy, makes a lot of sense. The TPP effectively would have achieved this goal and NAFTA 2.0 will probably resemble it, at least in its framework of the 30 chapters in both the TPP and CETA versus the 22 chapters in NAFTA. (see annex for the chapters)

A trade agreement begins with a preamble (declaratory and intended to be inspirational), objectives and general definitions. Then comes the heart of the agreement – trade in goods, technical barriers to trade, procurement, investment and services, intellectual property, anti-corruption, competition, labour, environment, competitiveness, regulatory coherence, transparency – and finally any other provisions and then annexes with specific obligations.

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Further reading

I learned my trade policy during the negotiation of the Canada-U.S. FTA, led by Simon Reisman, and then NAFTA, led by John Weekes. Throughout and since I have benefited from the tutelage of Michael Hart, Canada’s preeminent trade policy historian and the late Bill Dymond. With Michael in the lead, we wrote a book, Decision at Midnight: Inside the Canada-US Free Trade Negotiations, that is still a good primer on Canada-U.S. trade policy. Michael, Bill and I wrote the explanatory document to the FTA and then, as NAFTA was negotiated, Michael and I wrote NAFTA: What’s it all About. It was a big help in the NAFTA parliamentary implementation, until recently the biggest piece of implementing legislation, another reminder of the cross-cutting scope of trade agreements. Bill and Michael went on to direct Carleton University’s Centre for Trade Policy and Law that has spawned many able trade policy experts. One of the most notable is Dr. Laura Dawson who now heads the Canada Institute at the Wilson Center in Washington. With its sister institute for Mexico, headed by Duncan Wood, they are a continuing source of knowledge and inspiration on North American integration.

I have benefited over the years from the work of the Peterson Institute for International Economics and especially the thoughtful advice of Gary Hufbauer and Jeff Schott. The Peterson Institute continues to track NAFTA through its superb research, seminars and conferences on A Positive NAFTA Renegotiation.

The Bush Institute in Dallas has done excellent work on North American competitiveness and their mapping project, led by former diplomat Matt Rooney, deserves attention.

Scott Miller and Andrea Durkin at the Center for International Strategic Studies produce Trade Vistas, a great way to learn more about trade and trade policy.

The Council on Foreign Relations has done excellent work on North American integration. CFR fellow Edward Alden’s Failure to Adjust: How Americans Got Left Behind in the Global Economy (2016) is a must-read.

In Canada, the C.D. Howe Institute, the Conference Board, the Canada West Foundation and the Institute for Research on Public Policy have all given continuing attention to Canada-U.S. and North American trade policy. I recommend a recent series of IRPP essays on redesigning trade policy and the ongoing trade policy work of the Centre for International Government Innovation (CIGI). Agriculture Canada has a very good website with some superb graphics, including the ‘supply chain hamburger’. The Canadian Embassy’s state fact sheets are excellent.

For podcasts, listen to a quartet I recently hosted on The Global Exchange with fellow CGAI collaborators Laura Dawson and Eric Miller (in the aftermath of the U.S. objectives), John Weekes and Rob Wright (on the big picture), Sarah Goldfeder (on the U.S. process) and Lawrence Herman (on dispute settlement). Larry is Canada’s legal expert on trade disputes and his own website is a wealth of information.

For intelligent commentary on how we can improve North American economic integration, the SAGE (Strategies, Advocacies, Gateways, Engagement) group, a loose association of Canada-U.S. business groups steered by Dan Ujczo, is doing good work in reimagining the Canada-U.S. relationship.

The Pacific Northwest Economic Region (PNWER), led by the indomitable Matt Morrison, has an active group looking at specific proposals. The Council of the Great Lakes Region led by Mark Fisher has written to Trudeau and Trump with specific recommendations including expanding the integrated border enforcement teams (IBET) and creating a free trade zone in the region.

A lot of practical work is done by the North American Strategy for Competitiveness (NASCO) directed by Tiffany Melvin, Rachel Connell and Jennifer Fox (in Ottawa) and by the Canadian/American Border Trade Alliance led by longtime CEO Jim Phillips. The Canadian American Business Council (CABC), led by the irrepressible Scotty Greenwood, has put forward 10 useful proposals around Canada-U.S. trade including making permanent the Regulatory Cooperation Council; creating a zero-tariff zone; mutually recognized standards, testing and certification; revising procurement rules to include all jurisdictions, state and federal, in Canada and the U.S., i.e., buy “Canada-U.S.”; further integration of our energy potential through joint infrastructure and regulatory standards; easier movement by professionals; and more predictable border processing.  The best state-level Canada-U.S. business council is in Arizona and led by Canadian Honorary Consul Glenn Williamson. They make trade real. We should clone him and put him in every U.S. state.

The Canada-U.S. business relationship is an ongoing preoccupation for the Business Council of Canada, Canadian Chamber of Commerce, the American Chamber of Commerce in Canada, Canadian Manufacturers and Exporters and IECanada – Canadian Association of Importers and Exporters.

The case for North American integration is made in the tripartite report Building a North American Community (2005), sponsored by the Canadian Council of Chief Executives (now the Business Council of Canada) first led by Tom D’Aquino and now by Canadian chair John Manley (who succeeded Tom as CEO), the Council on Foreign Relations and Consejo Mexicano de Asuntos Internacionales. The Council on Foreign Relations published a subsequent report, North America: Time for a New Focus (2014) authored by General (Ret’d) David Petraeus and Robert Zoellick. Petraeus also authored The Next Great Emerging Market? Capitalizing on North America’s Four Interlocking Revolutions (2015) for Harvard’s Belfer Center. Eric Miller, John Dillon and I authored a report Made in North America (2014) for the Business Council of Canada.

The School of Public Policy at the University of Calgary, the School of Global Studies at the Universidad Anáhuac México Norte, the College of Public Service and Community Solutions, and the Morrison Institute at Arizona State University hosted the third in a series of conferences about the North American process. I have also benefitted from recent panel appearances with scholars including Carleton University’s Reisman Chair Meredith Lilly and Ottawa University’s Patrick Leblond.

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Appendix: NAFTA and the TPP

The NAFTA, TPP and CETA agreements are all available on the Global Affairs Canada website. Below are the chapters in the NAFTA and TPP (likely the framework model for a NAFTA 2.0).

NAFTA

Preamble

The Trans-Pacific Partnership (minus specific country-by-country obligations):

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