Canadian Trade Policies since CUFTA

1. Canadian Trade Policies since CUFTA Geoffrey Hale Political Science 3170 September 30, 2010

2. Outline • The Chretien Era to 2001 • NAFTA and consolidation • Post-9/11 Trade Politics • Integrating Security and Trade Policies • Fighting Fires • Trade Policies under the Harper Government • A Changing North American Context • A Changing Global Context

3. NAFTA and the Chretien Era • NAFTA: an essential defensive policy response? • Mexico and trade liberalization • Contrast with Europe -- `minimal` institutional development. • Market adaptation to FTA / NAFTA • Export growth: 25.4% of GDP in 1989; 45.4% in 2000 • Supply chain integration – `just in time` inventory management • Two-way growth of FDI / CDIA • Liberal adaptation to FTA / NAFTA • Trade policies and domestic politics • Export growth as safety valve for budgetary consolidation • Support of US FTAA initiative – multilateralizing NAFTA? • Marginalization of anti-FTA political forces

4. 9/11 and North American policy change • 9/11 as 21st century `Pearl Harbour` • Immediate border closure / greatly increased security • Canadian effort to institutionalize border cooperation • Smart Border Accord of December 2001 • Acceleration of border management cooperation • Cargo Screening – Container Security Initiative • Land Border Supply Chain Security – C-TPAT / PIP, FAST • `Trusted Traveler` programs – NEXUS. • BUT – moving target in U.S. driven by: • Domestic politicization (`more secure than thou`) • Congressional policy initiatives independent of Bush Administration • Growing controversy over illegal migration • Internal policy conflicts - ˝cops vs. technocrats˝ (Alden)

5. Canadian domestic trade politics after 9/11 • Business pressures for `Grand Bargain` to secure access to U.S. markets within thickening security perimeter • Expand energy access + North American security perimeter + closer regulatory cooperation, BUT . . .

6. Canadian domestic trade politics after 9/11 • Business pressures for `Grand Bargain` to secure access to U.S. markets within thickening security perimeter • Expand energy access + North American security perimeter + closer regulatory cooperation, BUT . . . • Limited appetite for grand policy gestures in federal government • Openness to incremental policy moves • Internal divisions between `business Liberals`, nationalists • Growing public opposition to Bush Admin. in run-up to Iraq War. • Sectoral distractions: softwood lumber, BSE. • Minority government after 2004 limits room for manoeuvre

7. U.S. Trade politics after 9/11 • Trade-Commercial policies in North America increasingly sub-set of domestic politics, policies • Focus on sectoral, micro-level policies • Driven by interest group politics, coalitions in U.S. • Canadian strategy requires parallel engagement with relevant agencies in U.S. Executive Branch, interest group networks • Broader U.S. trade policies under Bush Administration • ̋multi-track˝ policy of ˝competitive liberalization˝ • FTAA (before 2003) + WTO Doha Round (after 2003) + multiple bilateral, plurilateral deals driven by tactical and broader foreign policy considerations. • Limited incentives for NAFTA expansion, esp. if focused on ˝mature˝ trade relationship with Canada.

8. Security and Prosperity Partnership (2005-09) • Trilateral effort to restore political, administrative momentum for incremental liberalization after 2004 Presidential election, BUT . . . • Deliberate focus on incremental policy measures on both trade, security designed to avoid necessity for legislative action in all three countries (minority govt. in Canada, divided govt. in Mexico, US after Nov. 2006.) • Minimal resources for bureaucratic coordination in US, Canada (esp. after 2006) • Effort to mobilize tri-national business focus after 2006 prompted political backlash from nationalist, anti-business groups in all three countries

9. U.S. Trade Policies after 2006 • Shift in control of Congress to Democrats in Nov. 2006 • Stronger union influence hostile to trade liberalization – stronger orientation towards “enforcing” trade deals • Reinforced by stagnant, declining U.S. living standards, growing hostility in U.S. Public opinion, even before 2008 recession • Loss of “trade promotion authority” (“fast track”) limits administration capacity to negotiate trade deals • NAFTA “revision” key focus of 2008 Democratic primaries, despite later Obama retreat to status quo positions.

10. Trade policies under Harper (2006-) • Emphasis on firefighting in Canada-US trade relations • Negotiation of Softwood Lumber Agreement (# 3) in 2006 • Heading off Congressional attacks on Canadian energy exports (esp. oil sands) – e.g. Section 526 • Seeking exemption from 2009 Buy American legislation • Incremental trade diversification • Negotiations of small liberalization agreements with EFTA, Latin American countries (catch up with US, Mexico) • Opening negotiations with EU, Korea • Stalemate at WTO • Defence of supply management interests limits room for expanded multilateral deal.