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