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Sunday, March 02, 2008


RENEGOTIATING NAFTA

The first ballot I ever cast was in the 1988 federal election. The campaign was essentially a plebecite on whether Canada should enter into a free trade agreement with the United States. The Progressive Conservatives under Brian Mulroney were for the deal that they had spent several years negotiating with the Reagan administration, and the Liberals and New Democratic Party promised to "tear Mulroney's deal up." I voted for Mulroney and the Free Trade Agreement.

I also supported the 1993 North American Free Trade Agreement, which essentially included Mexico into the FTA. Both agreements were deeply divisive in Canada, having the support of just over 50% of the population. To a much lesser degree, it remains so even today.

Just before Christmas I read Mulroney's 1,100 page Memoirs: 1939-1993, which deals with the FTA and its negotiations in great detail. One of the great surprises in the book is how often the deal nearly collapsed due to President Reagan's lack of seriousness in negotiating. It is only because of the last minute involvement of the Secretary of the Treasury and Reagan intimate, James Baker, that the FTA was finally agreed upon.

If you're interested in trade agreements and the negotiations behind them, I can't recommend the Mulroney memoirs enough. I'd also recommend the book to Senator Barack Obama.

During Thursday night's MSNBC debate, both Hillary Clinton and Obama promised to reopen NAFTA negotiations if elected president. Since Clinton isn't likely to be a factor in the election after Tuesday's primaries in Ohio, Texas, Vermont and Rhode Island, I'll focus on Obama's statements.


SEN. OBAMA: Well, I think that it is inaccurate for Senator Clinton to say that she's always opposed NAFTA. In her campaign for Senate, she said that NAFTA, on balance, had been good for New York and good for America. I disagree with that. I think that it did not have the labor standards and environmental standards that were required in order to not just be good for Wall Street but also be good for Main Street. And if you travel through Youngstown and you travel through communities in my home state of Illinois, you will see entire cities that have been devastated as a consequence of trade agreements that were not adequately structured to make sure that U.S. workers had a fair deal.

Now, I think that Senator Clinton has shifted positions on this and believes that we should have strong environmental standards and labor standards, and I think that's a good thing. But you know, when I first moved to Chicago in the early '80s and I saw steelworkers who had been laid off of their plants -- black, white, and Hispanic -- and I worked on the streets of Chicago to try to help them find jobs, I saw then that the net costs of many of these trade agreements, if they're not properly structured, can be devastating.

And as president of the United States, I intend to make certain that every agreement that we sign has the labor standards, the environmental standards and the safety standards that are going to protect not just workers, but also consumers. We can't have toys with lead paint in them that our children are playing with. We can't have medicines that are actually making people more sick instead of better because they're produced overseas. We have to stop providing tax breaks for companies that are shipping jobs overseas and give those tax breaks to companies that are investing here in the United States of America.

(...)

MR. RUSSERT: I want to ask you both about NAFTA because the record, I think, is clear. And I want to -- Senator Clinton. Senator Obama said that you did say in 2004 that on balance NAFTA has been good for New York and America. You did say that. When President Clinton signed this bill -- and this was after he negotiated two new side agreements, for labor and environment -- President Clinton said it would be a force for economic growth and social progress. You said in '96 it was proving its worth as free and fair trade. You said that -- in 2000 -- it was a good idea that took political courage. So your record is pretty clear.

Based on that, and which you're now expressing your discomfort with it, in the debate that Al Gore had with Ross Perot, Al Gore said the following: "If you don't like NAFTA and what it's done, we can get out of it in six months.

The president can say to Canada and Mexico, we are out. This has not been a good agreement." Will U.S. president say we are out of NAFTA in six months?

SEN. CLINTON: I have said that I will renegotiate NAFTA, so obviously, you'd have to say to Canada and Mexico that that's exactly what we're going to do. But you know, in fairness --

MR. RUSSERT: Just because -- maybe Clinton --

SEN. CLINTON: Yes, I am serious.

MR. RUSSERT: You will get out. You will notify Mexico and Canada, NAFTA is gone in six months.

SEN. CLINTON: No, I will say we will opt out of NAFTA unless we renegotiate it, and we renegotiate on terms that are favorable to all of America.

(...)

MR. RUSSERT: But let me button this up. Absent the change that you're suggesting, you are willing to opt out of NAFTA in six months?

SEN. CLINTON: I'm confident that as president, when I say we will opt out unless we renegotiate, we will be able to renegotiate.

MR. RUSSERT: Senator Obama, you did in 2004 talk to farmers and suggest that NAFTA had been helpful. The Associated Press today ran a story about NAFTA, saying that you have been consistently ambivalent towards the issue. Simple question: Will you, as president, say to Canada and Mexico, "This has not worked for us; we are out"?

SEN. OBAMA: I will make sure that we renegotiate, in the same way that Senator Clinton talked about. And I think actually Senator Clinton's answer on this one is right. I think we should use the hammer of a potential opt-out as leverage to ensure that we actually get labor and environmental standards that are enforced. And that is not what has been happening so far.
One should note by the examples that both Clinton and Obama cite that their quarrel isn't with NAFTA but with China and India, neither of which is party to NAFTA.

Having said that, maybe it is time to renegotiate NAFTA.

When the FTA was first being negotiated in the mid-1980s, Canada was an economic basket case. The government was spending $1.23 cents for every dollar that it took in. Over a third of government revenues were devoted just to servicing the massive debt accumulated by sixteen years of the Trudeau government. Since there was no political will to cut spending in a serious way, the only alternative was to increase GDP, and free trade was the best way to accomplish that.

Circumstances, as you may have noticed, have changed somewhat. As I write this, Canada is the only G8 country not operating at a deficit. The Alberta oilsands have made us the largest supplier of crude oil to the United States, with reserves roughly equal to those of Saudi Arabia.

As a consequence of President Bush's insane spending and tax policies, the United States is a fiscal mess. The American dollar is well on its way to being worthless, and because of the collapse of the housing market and rising energy costs, it could very well be facing a resurgent "stagflation" unseen since the 1970s. For the first time, more cars are produced in Ontario than in Michigan. We have the largest supply of fresh water in the world, which is something something the U.S will only need more of in the future as its population increasingly moves to the Southwest.

And the United States under Presidents Clinton and Bush haven't been the most reliable trade partners in the world. The softwood lumber dispute, which the U.S essentially stole $5 billion from Canada, is the most prominent example of this. Despite two rulings against it by the NAFTA abritration panel and one by the World Trade Organization against the United States, the Bush asministration pointedly refused to keep its word and abide by its own agreements. This story wasn't widely reported in America because President Bush was also pointedly ignoring the fact that one his major cities was under water at the time.

As I wrote at the time, I was completely prepared to withdraw from NAFTA in September of 2005. There's very little to be gained from engaging people whose word you can't trust. The United States has proven itself to be the Saddam Hussein of trade over and over again.

Former Prime Minister Jean Chretien explained how this happens in his recent memoir My Years as Prime Minister. According to Chretien, an American president can find himself under tremendous pressure from regional senators affected by trade imbalances, real or preceived and will sometimes bend to their whims.

There are two problems with Monsieur Chretien's explanation. Firstly, a president's disagreements with the legislative branch aren't Canada's problem. If you can't abide by your word, you shouldn't give it in the first place. Second, President Bush isn't exactly famous for his deference to Congress on other issues, why should he be with this one?

There's another issue that might prove problematic for the Clinton - Obama position. That would be whether the Executive Branch can unilaterally withdraw from a treaty that the Senate has ratified persuant to Article 2, Section 2 of the Constitution. Unless and until the Supreme Court clears up the ambiguities of Goldwater v. Carter, I'll take the word of an American president less seriously than I already do.

But let's assume that there is a President Obama in the near future and he does threaten American withdrawl from NAFTA. That would put Canada is a pretty enviable position. As things currently stand and will for the forseeable future, the United States needs NAFTA a whole lot more than Canada does. We have a measure fiscal breathing room and haven't spent the last decade antagonozing the rest of the world.

As soon as an Obama administration threatens withdrawl pending renegotiation, Canada can (and probably should) preempt it by withdrawing immediately without renegotiation. We can sign unilateral deals with the European Union, China and India and Australia to make up what we lose from the abrogation of NAFTA. Besides, we can make a small fortune on the tariffs we impose on American bound oil. If the United States doesn't like $3 a gallon gas, let's see how they like it at five or six dollars. Or they can just buy more from their greats friends, Hugo Chavez and the House of Saud. After the latest round of anti-Mexican rhetoric in American political circles, I can't imagine they'd be rushing to do the United States any favors either. By the way, Canada and Mexico would still have a free trade agreement, we'd just cut out the greedy and self-defeating middle man.

As things currently stand, Canada is bound to continuing the oil and water supplies to the U.S at preferred rates, even if our own market faces shortages. The same is true of electricity, which is largely generated by Canadian hydroelectric dams. I'd sure like to see cheaper gas and electricity, stopping the below market subsidization to American consumption would certainly accomplish that.

But if President Obama wants to improve labor and environmental standards, fine. The United States can adopt ours. We do have the highest standard of living in North America, after all. That would mean an immediate repeal of the Taft-Hartley Act of 1947. That should be popular in "Right to Work" states.

While we're at it, Canada should also demand the immediate repeal of the Helms-Burton Act of 1996. The days where Washington can dictate Ottawa's foreign and trade policies should be officially over. Failure to do so should result in a similiar measure to punish American companies and individuals that do business with an independent Kosovo. Something tells me that Russia, China, India, Greece and Spain would be willing to join us on that.

Upon abrogation of NAFTA, Canada should immediately support the European Union in any and all WTO disputes regarding agricultural subsidies. Sure, Canadians will pay more for oranges, but we'll make the money back in what we'll charge you for heating oil, electricity and water.

Upon abrogation of NAFTA, Canada should impose a tariff of three dollars a barrel on oil exported to the United States.

Just for fun, we could cut the export price of wheat, thereby singlehandedly destroying the American farm belt forever. Sure, we'd lose money in the short term, but we'd annhiliate our only real competition in the process and win in the end.

And you know what? American companies will continue to do business in Canada because what they save in health care benefits to their employees will be a greater saving than any retalitory tariffs by the United States would cost them. President Obama would very quickly find himself in the Vietnam of trade wars.

Senator John McCain seems to understands what's at stake.
"Every time in history we have practised protectionism, we have paid a very heavy price for it," McCain said.

"I want to tell our Canadian friends … that I will negotiate and conclude free trade agreements and I will not, after entering into solemn agreements, go and say that I will abrogate those agreements."

The long-time Arizona senator then thanked Canada for its "enormous contribution" in the NATO-led mission in Afghanistan against Taliban and al-Qaeda insurgents, a key military alliance he said was "interconnected" with the close relationship the U.S. shares with its biggest trading partner.

"One of the greatest assets we have in Afghanistan today, frankly, are our Canadian friends," McCain said. "It's very controversial in Canada, their commitment and suffering and the losses they have faced. And we need, we need our Canadian friends and we need their continued support in Afghanistan."
And yes, Afghanistan and NATO itself could become entagled in any reopening of NAFTA. Afghanistan, which the American government has pointedly ignored since it decided it had better things to do in Iraq, is deeply unpopular in Canada. It is a huge domestic political issue and the Harper goverment was saved from falling over it only because Opposition Leader Stephane Dion is a nutless wonder.

If Senator Obama is willing to use Canada's economy as a means of winning a few votes in Ohio, perhaps the time has come for Canada to reconsider the relationship in its totality.

But the Democrats still don't know when to leave well enough alone. There have been news reports in the last week that the Obama campaign has sent word to the Canadian embassy that his rhetoric on NAFTA isn't to be taken seriously.

Here's how that tidbit played out on Meet the Press this morning.


MR. RUSSERT: Let me show you another issue where there will be a big difference
between John McCain and either Obama or Clinton, and that's NAFTA, Mary Matalin, North America Free Trade Agreement. Bill Clinton, the centerpiece of his
presidency in 1993. What a difference 15 years makes. Here are both Democratic
candidates coming out against NAFTA. Let's watch.

(Videotape)

MR. RUSSERT: Let me button this up. Absent the changes that you're
suggesting, you are willing to opt out of NAFTA in six months?

SEN. CLINTON: I'm confident that as president, when I saw we will opt out unless we renegotiate, we will be able to renegotiate.

MR. RUSSERT: Senator Obama, simple question: Will you, as president, say to Canada and Mexico, "This has not worked for us. We are out"?

SEN. OBAMA: I will make sure that we renegotiate in the same way that Senator Clinton talked about. And I think, actually, Senator Clinton's answer on this one is right. I think we should use the hammer of a potential opt out as leverage to ensure that we actually get labor and environmental standards that are enforced.

(End videotape)

MS. MATALIN: Boy, so wrong on so many levels. First of all, the--25
percent of our growth is dependent on exports right now. NAFTA has worked.
Thirty-five percent of our trading is through NAFTA partners. He's wrong.
Secondly, our best friends, Canada, is sitting on--they're sitting on our most
secure source of foreign oil. Those sands up there have as much oil as Saudi
Arabia. And Harper and the trade minister came out and said, "You want to opt
out? You want to threaten to opt out? Guess what. We'll open up the clause, and
we'll renegotiate so you don't get favor--favorability relative to energy trade,
and I--we'll sell our energy to China." It was so naive. And he--and he opened
himself up to a real volatility, because in '04 he said enormously beneficial on
NAFTA. So he's either lying in '04 or he's lying to Ohioans now. And then he had
that Canadian thing, where, "I'm saying this, but I mean that," which the
Canandians are continuing to say...

MR. SHRUM: He absolutely denied that, Mary, so let's at least be fair to him.

MS. MATALIN: Well, the Canadians are...

MR. SHRUM: And you've got...

MS. MATALIN: ...absolutely confirming it.

MR. SHRUM: ...you've got a right wing government in Canada that is trying to help the Republicans and is out there actively interfering in this campaign. I sure hope John McCain campaigns the length and breadth of Ohio and Pennsylvania for NAFTA throughout the fall.
Before I go further, I should point out that Bob Shrum is the biggest loser in the history of presidential politics. Each and every one of the seven campaigns that he's been involved in have been crushed. Anyone who knows anything about statistics knows that he should have been able to win at least one, if only by accident. His getting repeatedly destroyed at the ballot box suggests a genetic flaw more than anything else. Christ, the guy lost to George W. Bush, the most beatable candidate ever, twice!

As to my "right-wing government," Shrummy, it's the only thing keeping my country in Afghanistan at this point, and pretty much the only thing that keeps millions of Americans employed and rolling around in relatively cheap oil. You really don't want to see what a "left-wing" Canadian government would do. Our left-wingers don't like Americans at all.

Furthermore shithead, we aren't "interfering in this campaign." Barack Obama made us an issue in it. And the Obama campaign pointedly hasn't denied anything. Right now, they're refusing to comment. Hey, did you know that Obama's campaign strategist, David Axelrod, was also on the payroll of the Ontario Liberal Party?

The Conservative Mulroney government went to the wall twice on FTA and NAFTA. The Conservative Harper government is the only thing keeping Canadian forces in Afghanistan, fighting to preserve an almost retarded American strategy after the United States ran away to play sandbox with Iraq.

I'm as pro-American a guy as you're likely to find in Canada without being a tool. There's also a federal by-election where I live on the 17th. I'm seriously considering voting Conservative for the first time in eight years based solely on Afghanistan. I want to avenge the slaughter of 9/11 even if the Bush admistration isn't all that interested in doing so.

But I'm finding that harder to justify. No matter what we do for the United States, it's never enough. It doesn't matter that we're America's largest trading partner or that we've got your back against the lunatics who killed 3,000 of your people when you had something better to do.

When the United States closed its airspace and borders for three days after 9/11, where do you think the planes bound for America landed? Where do you think that the passengers stayed for those three days? They landed in Canada and were taken into Canadian homes as an act of friendship.

And what do we get for it? We get threatened by a pretend president who thinks that lying to unemployed Ohio steelworkers whose jobs aren't coming back is the path to replacing another pretend president who stole five billion dollars from us. Better still, we're getting threatened over disputes that have nothing at all to with us. You screwed us on SARS, Mad Cow disease and softwood lumber. The godamned Rolling Stones showed more loyalty to Canada than did the United States. You know, it seems at times that Iraq got more out of being America's enemy in the last twenty years than Canada did from being its best friend.

Because FTA/NAFTA allowed Canadian banks to play a major role in the United States (which explains how Sam Waterson works for us - the "TD" in "TD Ameritrade" actually stands for Toronto Dominion,) Canadian consumers are getting killed by your subprime lending disaster. The Bank of Canada keeps lowering interest rates, which we don't see because you insisted on giving houses to people who could never hope to pay for them, which exposed our banks to your losses. Simply put, I can't get a break on my monthly credit card interest because of made in America stupidity. Thanks for that.

Trust me, Canada isn't sending lead painted toys into the U.S and your tech support jobs aren't going to Toronto. The high end jobs that are coming to Canada come here because of the simple market economics of health care, which is your fucking problem, not mine. The United States has become one of the most unprofitable G8 countries to do business in for that reason.

But if you want to vote for a trade war, feel free. We're in a much better position to win it than you are. In the words of your 30% approval president, "Bring it on."

Easy Listening Recommendation of the Day: Salt of the Earth By: The Rolling Stones From: Beggars Banquet





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