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Let Trump kill NAFTA

I am not a fan of NAFTA and its predecessor, the Canada-U.S. Free Trade Agreement. I do not believe either agreement has been in our best interests economically. They have cost us more than we gained.
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I am not a fan of NAFTA and its predecessor, the Canada-U.S. Free Trade Agreement.

I do not believe either agreement has been in our best interests economically. They have cost us more than we gained.

Back in 1988, when it was just Canada and the United States at the table, the world was a different place. Trade liberalization was in its infancy. The world economy was dominated by two super powers but organizations such as OPEC were flexing their muscles.

We'd spent a decade reeling from one energy crisis to the next.

The idea Canada and the U.S. should share resources and create a larger economic block seemed to have some merit. But it required both partners to participate equally and fully within the relationship.

Right from the start it was obvious this was never going to be the case. Canada does not have an economy based on war-mongering. We do not have the federalist structure found in the United States. And we do not have the imperialistic tendencies displayed by the Americans.

Furthermore, some things were excluded from discussion entirely.

It is why we still have softwood lumber disputes 30 years later. It was never included in the Canada-U.S. FTA.

And the idea of appealing to third parties for resolution of litigation arising from the agreement was a non-starter as far as both sides were concerned although I think we could have made it work.

In any case, the original agreement was a flawed document with really only one purpose according to the American Congress. It secured U.S. access to our oil.

Indeed, one congressman said that everything the Americans had "given up" was worth it to ensure access to our oil.

It is guaranteed by Chapter Nine.

To quote from the document, "Either Party may maintain or introduce a restriction... with respect to the export of an energy good of the Party to the territory of the other Party, only if: (a) the restriction does not reduce the proportion of the total export shipments of a specific energy good made available to the other Party relative to the total supply of that good of the Party maintaining the restriction as compared to the proportion prevailing in the most recent 36-month period... (b) the Party does not impose a higher price for exports of an energy good to the other Party than the price charged for such energy good when consumed domestically..."

There is more in the actual agreement which I have edited out but the important details are above. Written in legal language it essentially says our hands are tied.

The United States is guaranteed a proportion of our oil production and there is nothing we can do about. We can not "reduce the proportion of the total export shipments" relative to our total production. Period.

To be fair, Chapter Nine also addresses other sources of energy such as uranium ore, natural gas, and hydroelectric power, so it was not just oil but energy the American negotiators were seeking. But the proportionality clause, as it has been branded, limits our options. It was resoundingly denounced by Canadian organizations and people on all sides of the political spectrum.

When NAFTA was being negotiated, there was some hope Chapter Nine could be re-opened and reworked. Instead in Chapter Six, NAFTA simply re-iterates the terms and conditions of the previous agreement including the proportionality clause.

We have been stuck with the consequences ever since.

What are they? According to Alberta Premier Rachel Notley and her predecessor Alison Redford, our deal with the United States costs us about $10 billion per year.

We're constrained to sell a percentage of our oil to the American market at prices they set sometimes 20 per cent below world market value.

Some would argue $10 billion is a drop in the bucket compared to the cross-border trade of $673 billion in goods and services in 2017. However, much of this trade happens outside of the confines of NAFTA or its predecessor. Not everything is regulated by the agreement.

And outside of the energy sector, the consequences of the FTAs have been mixed.

In some areas they have resulted in the flight of good paying jobs to low wage states while stifling innovation and growth.

For other Canadian businesses the agreements have opened up cross-border opportunities.

One thing is certain - Canadians still pay higher prices than Americans for many goods which should be moving across the border without duties or tariffs even when you take the exchange rate into account. It is why there is still a massive flow of cross-border shoppers each weekend.

If U.S. President Donald Trump wants to rip up NAFTA, I would say let him. Then let's negotiate something better for our country because, despite all his bluster, the American economy needs Canada as much as we need them.