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Prospects for an Expanded NAFTA and
the Creation of a NAFTA-EU Trade and
Investment “Grand Bargain”
Earl H. Fry Prof. of Political Science and Endowed Prof. of Canadian Studies
Brigham Young University
University College London June 8, 2015
Introduction North American Free Trade Agreement (NAFTA)
Canada-EU Comprehensive Economic and Trade Agreement (CETA)
Transatlantic Trade and Investment Partnership (TTIP)
A “Grand Bargain” between NAFTA and EU?
Trans-Pacific Partnership (TPP)
Notion of “transatlantic drift” and a “global shift” toward the Asian-Pacific region
By mid-century, Asia may account for over ½ of world’s population, GDP, trade, and direct investment—will the “rules of the game” in international relations change dramatically because of this shift?
CETA
Euro Commission—”most far-reaching bilateral trade agreement negotiated to date”
Stephen Harper—”the biggest deal our country has ever made.”
1,600 page document which took 5 years to negotiate
Will provide Canada with preferential access to more than ½ of world’s economy, including its access to NAFTA
Includes liberalized trade and investment linkages, a controversial investor-state dispute settlement (ISDS) provision, easing of government procurement rules at all levels (Canada has a federal system), some easing in agricultural trade, and some harmonization of rules, standards, and procedures.
Accord must still be ratified by EU members
What is the TTIP? Proposed Transatlantic Trade and Investment Partnership ◦ Launched negotiations July 2013 involving U.S. with 320 million people and European Union composed of 28
nations and 507 million people
◦ 9th round of negotiations between the EU Trade Commissioner Cecilia Malmström and U.S. Trade Representative Michael Froman just concluded this week in New York City
◦ U.S. negotiations occurring at same time as ongoing talks on a Trans-Pacific Partnership ( TPP--U.S., Japan, Malaysia, Singapore, Vietnam, Brunei, Australia, New Zealand, Canada, Mexico, Chile, and Peru)—Most recent round held in Hawaii in March—TPP should pass before TTIP
Difficult Issues with TTIP
Is their sufficient “value added”?
Agricultural roadblocks, including GMOs
Investor protection--good for multinationals, not so much for small and medium-sized businesses and the work force?
Is timing right for an EU which continues to face numerous internal issues, including very slow economic growth and job creation, and major regional disparities?
Concern about transparency in negotiations and the democratic process
Rise in European populism and nationalism
Achieving consensus among all 28 nation-states within EU
Trade Promotion Authority (TPA) in U.S. Congress
The “Vision” of NAFTA Solidifying North American trade and investment ties and harmonizing some rules and regulations
Major step toward creation of Free Trade Area of the Americas (FTAA)
Help bring greater prosperity to Mexico which would curtail illegal migration northward
Movement away from branch plants and toward supply chains
Protect Canada and Mexico from bouts of U.S. protectionism
Illustrate that Canada and Mexico could take advantage of the huge U.S. marketplace without being overwhelmed by U.S. political influence
WHAT IS NORTH AMERICA?
Arctic Ocean to isthmus of Panama
Central America and Caribbean part of North America
24.5 million sq. kilometers, third largest continent after Asia and Africa and covers 4.8% of earth’s surface
Fourth largest continent in population after Asia, Africa, and Europe
NAFTA largest free trade area in world
Among largest economies in world—2013--US $16.8 trillion, Canada $1.8 trillion, Mexico $1.3 trillion (#1, 11, and 15 in world)
Differences between NAFTA and EU Free trade agreement vs. common integrated market
NAFTA does promote investment cooperation and limited labor and environmental cooperation
NAFTA limited movement of labor across national borders
NAFTA institutions are small with very limited power—EU Council of Ministers, Commission, Parliament, Court of Justice
NAFTA no common currency—eurozone with 19 member-states, EU with 28 member-states
EU is infinitely more complicated than NAFTA
EU promotes significant regional integration, NAFTA very limited economic cooperation
Canada-U.S. Relations September 10, 2001
Canada-U.S. Free Trade Agreement in effect 1989
North American Free Trade Agreement (NAFTA) in effect 1994
Canada 30 million people and C$1.1 trillion GDP
US 285 million people and US$10.2 trillion GDP
Canadian dollar worth 64 US cents
2-way trade in goods in 2000 $410 billion
No passports needed to visit either country
“Thin border” and orange cones
World’s “longest undefended border”
Canada-U.S. Relations September 11, 2011
Security trumps trade—NAFTA less important
Canada 34 million people, US 312 million
Canadian GDP C$1.6 trillion, US GDP US$15 trillion
2-way trade US$526 billion in 2010, but Canadian exports to United States C$50 billion lower in 2010 than 2001
US share of total Canadian exports down to 75% from 87% in 2000
Canadian dollar worth 1.02 US dollars
June 2010, US visits by car to Canada lowest since 1972 when US had 100 million fewer people
Two-thirds of Americans cannot visit Canada (no passports)
More Canadians visit US annually than Americans who visit Canada
6-fold increase in US agents along the Canadian border, plus drone and helicopter surveillance
“Thickened border”--no orange cones, no undefended border, negative impact on supply chains
Fry’s Recommendations for Improving NAFTA
End U.S. stereotypes of Canada as a peaceful Sleepy Hollow and Mexico as modern-day Tombstone
Disband DHS
Create world-class border infrastructure
Cut back on increase in Border Patrol agents
Push for nearly self-sufficient North American energy sector
Establish customs union between U.S. and Canada
Reject Fortress America mentality—Great Wall of China and Maginot Line along U.S. borders
Create TTIP between EU and NAFTA
The EU and NAFTA “Grand Bargain” NAFTA is the world’s largest regional economy (475 million people and combined GDP of $19.9 trillion in 2013)
The EU is the world’s second largest regional economy (507 million people and combined GDP of $17.4 trillion in 2013)
NAFTA countries a potential energy superpower
A North Atlantic free-trade zone would help establish trade and investment rules globally and hopefully strengthen WTO rules
A North Atlantic free-trade zone would also bolster security cooperation in an uncertain international environment (Russia, the Middle East, parts of Africa, East Asia, and the Arctic polar region)
If NAFTA and EU create a free-trade zone, there would be a combined market of almost 1 billion people and an annual GDP of over $37 trillion
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