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Will Obama Change NAFTA?

Will a President Barack Obama revise the North American Free Trade Agreement? Four experts share their predictions.

Inter-American Dialogue 

According to a recent Zogby/Inter-American Dialogue poll, 42 percent of likely US voters believe that the North American Free Trade Agreement (NAFTA), passed in 1993 with Canada and Mexico, should be revised and another 17 percent believe it should be withdrawn entirely, while only 21 percent believe it should be left unchanged. Will NAFTA be revised in the next US administration, and if so, what sort of revisions to the agreement are possible or likely? How would Canada and Mexico?

Andrés Rozental, president of Rozental and Asociados: The North American Free Trade Agreement has undergone several modifications since it entered into force almost 15 years ago. These changes have mainly been to phase-in periods and some minor adjustments. To ’revise’ NAFTA the way Barack Obama and the quoted public opinion polls suggest would, of course, require the consent of the two other parties to the Treaty, namely Mexico and Canada. Many analysts and public officials in both countries have dismissed the rhetoric around free trade and protectionism as more of a political campaign issue than a real worry that NAFTA has hurt the US economy or that a new Administration would pull out of one of the most successful free trade arrangements in existence. On the contrary, most serious economists agree that international trade will be one of the driving forces to bring the US and other countries out of their current recessions and that it therefore needs to be encouraged rather than demonized. At the end of the day, I predict that although the three governments might well sit down to discuss ways of improving NAFTA, especially as regards dispute settlement and excluded sectors, there won't be either a wholesale repudiation of the agreement, nor any fundamental changes to the environmental and labor side agreements (which is what the Democrats are ostensibly unhappy about).

Jeff Vogt, Global Economic Policy Specialist in the Government Affairs Department at the AFL-CIO: John McCain and Barack Obama have staked out opposing positions on trade policy generally, and NAFTA specifically. The former has presented himself as an uncritical booster of the current trade regime, while the latter has criticized current US trade policy as unresponsive to the needs of the American worker. For Senator Obama, one (small) part of the solution is to revisit (at least) the labor and environmental provisions of NAFTA. If elected, President Obama would likely open a dialogue with the Harper Administration in Canada and the Calderon Administration in Mexico to gauge the possibility of renegotiating various aspects of the agreement. It is unclear, however, whether the Canadian and Mexican governments would agree to reopen NAFTA to strengthen the weak labor and environmental side agreements. For Mexico, I would suspect that a comprehensive review of the agricultural provisions would be a high priority. While some of the problems in Mexican agriculture are domestic, the trade agreement certainly contributed to the rural crisis. A revival of the moribund North American Development Bank may be another enticement to bring the Mexican government to the table. As for Canada, softwood lumber trade has been a long-standing and unresolved issue. Additional concerns remain on the agreement’s provisions on energy and natural resources. It remains to be seen whether the three nations will be able to come to an agreement on these and other issues. For the AFL-CIO, what is most urgently needed here (and for North America generally) is an economy designed to generate new and well-paying jobs. For too long, workers have faced declining real incomes even as productivity has increased. And now, hundreds of thousands of workers are losing their jobs, and our financial sector is in a shambles. There are many reasons for this crisis, some of which are trade-related. Strengthening NAFTA's worker rights and environmental provisions, funding and reforming the NADB, adopting a just, sensible immigration policy, and addressing other pressing concerns for all three countries could be a constructive step toward implementing a much broader North American economic strategy to put our countries back on track.

Robert A. Pastor, Professor of International Relations at American University: American support for NAFTA and free trade has fluctuated during the last 15 years, but until the recent economic decline, a plurality or a majority has been in favor, perhaps because NAFTA quadrupled trade and quintupled foreign investment. All three countries benefited but not everyone in them, and the income gap between Mexico and its northern neighbors widened. As with the current financial crisis, the market enlarged, but there was a failure of governance. Trade was important but not enough. People are dissatisfied for good reasons, but opening NAFTA would divert us from the real issue, which is the future of North America. In a competitive world threatened by terrorism, we need Canada and Mexico as partners. The new President should meet his two counterparts, draft a social charter to lift labor and environmental standards, and devise common plans to address problems of development, infrastructure, and security at the borders and the perimeter. For eight years, Mexican and Canadian leaders have been waiting for a serious dialogue with the US President on ways to better coordinate our economic, security, and environmental policies—goals shared by the majority of Americans, Canadians, and Mexicans. If the new President approaches these issues with a spirit of cooperation and a seriousness of purpose, the Mexican and Canadian leaders will do so as well, and North America will become a model for the world.

Carlo Dade, Executive Director of the Canadian Foundation for the Americas (FOCAL): Although NAFTA did not emerge as an issue of debate or comment during the just concluded Canadian federal elections, public sentiment in favor of NAFTA appears to be soft, according to a public opinion survey this summer by Angus Reid, with 52 percent of respondents saying Canada should do whatever is necessary to renegotiate the terms of the commerce deal but only 18 percent saying Canada should continue in NAFTA under the current terms and 11 percent believing that Canada should leave NAFTA as soon as possible. However, in both Canada and the US one has to be careful to separate ’abstract’ survey responses from the more focused and informed public discussions that will occur if, or as appears more likely in the case of NAFTA and an Obama administration, when the renegotiation questions become an immediate and real event. While it appears almost certain that Obama is keen to open some sort of discussion about NAFTA, it is unclear as to how serious or deep an exercise this will be. One could hope that this would be nothing more than a dog and pony show timed for the mid-term congressional elections. But what is clear from the US presidential candidates' debate Wednesday night is the issue of renegotiating NAFTA will be tied to US energy security. According to data from the US Department of Energy the top five oil exporters to the US are Canada, Saudi Arabia, Mexico, Venezuela and Nigeria. A cursory perusal of that list would convince most Americans, even those in the rust belt, that it is not in their interest to do anything that might negatively impact the flow of oil from the only two countries on that list that could be described as friends. For Canada, issues on the table with any NAFTA re-negotiation, discussion or review would have to include improved dispute resolution, limits on foreign investment in media — which would be popular with all three opposition parties—and the issue of oil exports. Under the NAFTA agreement's prohibition on discriminatory export controls for oil, Canada is prohibited from cutting exports to the US unless distribution in Canada is cut by the same amount. For Canada and the US ending of NAFTA would not necessarily mean the end of free trade. The US-Canada Free Trade agreement was only suspended when NAFTA was signed. Should NAFTA end both sides may have the option of reviving the dormant FTA. Given the current global energy situation, this may be some solace for Canada but certainly not for the US or Mexico. 

Republished with permission from the Inter-American Dialogue's daily Latin America Advisor newsletter.



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