7. Canada and the United States 7.1. The Canada-US Relationship 7.2. Trade and NAFTA 7.3. Defending North America 7.4. North American Security and Terrorism 7.5. Sovereignty and the Arctic

7.1. The Canada-US Relationship Blessed and cursed by geography? Diplomatic Trade Social and cultural links Common Infrastructure Security and defence

7.2. Trade and NAFTA

Two way trade between Canada and the US totaled approximately $710 billion in 2008 Two way trade across the border is valued at approximately $1.9 to $2.2 billion per day Canadian exports to the US accounted for 76% of all exports in 2008 Canadian exports to the US generated 26% of Canada’s GDP in 2007 US investment in Canada in 2007 totaled approximately $289 billion (57.6% of total)

Exports of goods ($ millions) Exports420,657400,010453, , ,740.5 US352,083330,375368, , ,758.8 Japan10,1249,78510, , ,874.3 UK6,9127,6979, , ,242.1 Other EU16,71216,42019, , ,408.0 Other OECD16,71212,66815, , ,078.5 ROW22,69523,06229, , ,378.7

Imports of goods ($ millions) Imports350,682341,832388, , ,567.0 United States 254,949239,870259, , ,590.2 Japan10,57210,64411, , ,614.9 UK11,9528,8269,061.69, ,088.5 Other EU23,19725,98229, , ,431.0 Other OECD 18,64519,67624, , ,604.6 ROW31,36536,83154, , ,237.9

7.2. Trade and NAFTA Changes in Trade Policy

7.2. Trade and NAFTA Signed: 17 December 1992 In force: 1 January 1994

7.2. Trade and NAFTA Signed: 17 December 1992 In force: 1 January 1994 The NAFTA Debate

The case for NAFTA: Secure access, avoid the “hub and spoke” model Increase trade Increase investment Preserve right to regulate Stimulate innovation Good for Canadians Free trade not the source of economic troubles

The NAFTA Debate The case against NAFTA: US economy in decline NAFTA part of the neoliberal economic agenda Negative impact on workforce Loss of economic sovereignty Loss of cultural autonomy Weak environmental provisions The “slippery slope”

7.2. Trade and NAFTA NAFTA Provisions (22 Chapters) – Eliminates all tariffs on trade in goods (exemptions) – Liberalizes trade in services and government tenders – Investment protection (the notorious Chapter 11) – Intellectual property protection – Protection of right to adopt health, environmental, and safety standards

7.2. Trade and NAFTA NAFTA Provisions Parallel Accords on Environmental and Labour Standards: North American Agreement on Environmental Cooperation North American Agreement on Labour Cooperation

7.2. Trade and NAFTA NAFTA Provisions Parallel Accords on Environmental and Labour Standards: North American Agreement on Environmental Protection North American Agreement on Labour Cooperation Dispute Resolution Mechanism Free Trade Commission; Arbitral Panel; Scientific Review Panel

7.2. Trade and NAFTA Evaluating CUSFTA, NAFTA, and “Free Trade” Overall assessment Who benefits? Who does not? Is CUFTA/NAFTA the only variable?

Evaluating Free Trade Trade Between 1989 and 2002, Canadian exports rose by 221 percent, and imports by 162 percent Exports rose from 25.7% of GDP in 1989 to 45.5% of GDP in Imports increased from 25.7% of GDP in 1989 to 40.3% in Between 1985 and 2002 US-Canada trade grew from US$116 billion to US$420 billion The US became a larger market for Canadian manufactured products than the Canadian market (53% of manufactured products exported to US)

Evaluating Free Trade Investment Between 1996 and 2002 C$ 102 billion in investment came to Canada from the US The stock (or share) of US investment in Canada rose from 12% of GDP in 1989 to 20% of GDP in 2001 US investment in Canada fell as a percentage of total foreign investment in Canada (from 70% in 1989 to 65% in 2001)

Evaluating Free Trade Industrial Productivity Huge manufacturing transition: 47% of all plants in existence in Canada in 1988 (accounting for 28% of all jobs in Canada) had closed by Meanwhile, 39% of all plants in Canada in 1997 (21% of all jobs) did not exist in Productivity did increase by 14% per hour (but rose by 52 percent in the US and 53 percent in Mexico), so relative gains did not materialize

Evaluating Free Trade Jobs and Wages Huge layoffs in : in the manufacturing sector, one in five workers lost their jobs Canadian Centre for Policy Alternatives tracked largest 47 Canadian corporations after FTAs: 11 increased jobs (28,073) 36 cut (216,004). The workforce of 39 corporations was cut by 100,000 (14.5 %) in the years following NAFTA Unionization rates in manufacturing declined from 45.5% in 1988 to 32.4% in 2002

Evaluating Free Trade Access Still many trade disputes and the US still uses its legal system to harass and penalize Canadian exports Dispute mechanism has no enforcement capacity, and disputes take years to resolve

Evaluating Free Trade Social Issues Canadian social model remains different in social support, health care, insurance, education However, there has been some convergence between the US and Canada in some social indicators While Canada still spends more on social programs and public services relative to the US, the gap has been narrowing Income inequality has risen in Canada

7.2. Trade and NAFTA Canada – US Trade Disputes: – Agriculture (wheat, sugar, dairy products, potatoes) – In 1997 Ethyl Corp (MMT) – In 1998 S.D. Myers (PCBs) – Sun Belt Water (water exports) – In 1998 Canadian Loewen Group – In 1999 Methanex (MTBE) – Softwood Lumber

7.2. Trade and NAFTA The Softwood Lumber Dispute – At issue since 1982: subsidies – The 1986 dispute – The 1996 SLA (expired 2001) – The 2001 dispute – NAFTA and WTO rulings – July SLA

7.2. Trade and NAFTA Provisions of the 2006 SLA: – Seven year agreement (can be terminated after three years) – US returns 4 billion in subsidies – Ban on further US trade actions against Canada – Restriction on Canadian SL exports if prices fall below certain levels

7.2. Trade and NAFTA The Future of NAFTA Future of North American trade now linked to the North American security Widening of membership? Renegotiation? A Customs Union?