October 10, 2017

By Noah Arshinoff and Samukele Ncube

If round 3 of the NAFTA re-negotiation was trying to emulate the undeserved sleepy reputation of its host city (Ottawa), it succeeded. Most contentious issues remain in the realm of political speaking points and have yet to hit the reality of the negotiating table. Politicians rather than negotiators continue to dominate the headlines on the topics of labour standards, dispute resolution and trade deficits. As round 4 heads back to Washington, it seems the United States is waiting until they are on home turf before tabling their proposals on these issues. In the meantime, we can still sift through the rhetoric in anticipation of the realities.


Canada is pushing for more progressive labour standards, particularly aimed at working conditions for labourers in Mexico and “right to work” jurisdictions in the United States. Canada has stated that Mexico should do away with particular unions that favour and focus on the interests of employers over employees. Canada and the U.S are also concerned about the exodus of investment and quality jobs attracted by low wages in Mexico. The U.S. held off on tabling a proposed text addressing labour standards, seemingly due to some internal squabbling about its content. Interestingly, the Democrats signaled support for Canada’s position vis-à-vis Mexico. However, Canada’s rhetoric around dismantling “right-to-work” may be just that: a ploy to ensure it can concede something and back off on its demands if the three partners agree to a balanced agreement.


Chapter 19 details a dispute-resolution mechanism that allows independent, binational panels to review anti-dumping and countervailing duty cases, rather than having judicial reviews done by domestic courts (it is separate and distinct from the Chapter 11 investor-state dispute settlement mechanism).

The U.S. has had long-standing issues with Chapter 19, partly due to its unfavourable rulings on softwood lumber. The U.S. has also previously stated that it violates national sovereignty.

Well…they say timing is everything. Just as this chapter inches closer to the reality stage of the negotiations, a U.S trade panel imposed hefty duties on Canadian jet manufacturer Bombardier. Their U.S competitor Boeing accused Canada of unfairly subsidizing Bombardier’s CSeries jets. The U.S trade panel’s decision sheds light on why this chapter is important to Canada and why they do not want to subject international disputes to domestic courts. While the U.S has been rather bombastic about their dislike for this chapter, we will have to wait to see what gets tabled to get a full picture of how this may play out in the negotiating room and whether Canada has any wiggle room.


“Trade deficits are bad.” This blatant rhetoric coming out of the U.S doesn’t tell the whole picture of trade (or even part of it), yet it has been the cornerstone to the President claiming that NAFTA is the “worst trade deal in history”. However, the reality behind this rhetoric is that NAFTA has, in fact, increased trade among all three countries – quadrupling trade between Canada, the U.S and Mexico since its inception in 1994.

Where rhetoric and reality differ on this front, however, is further being muddled. The U.S is looking to tie the trade deficit to a sunset clause, giving the U.S. the ability to decide – based on assessments of their trade deficits with Canada and Mexico – whether or not to withdraw from the deal after five years. Whether anything of this nature comes to fruition is doubtful, especially since it would undermine the intent of a trade agreement and mainly be supported by faulty and misplaced reasoning.


Expect text on dairy, rules of origin, and possibly labour standards to be tabled by the U.S in Round 4.  Although the negotiations resume in Washington D.C. on October 11th, the slow pace so far has not been met with optimism that a deal can be signed in the aggressive timelines sought by the parties.

You can reach Noah via everydaytrade.ca and Sam via LinkedIn