Trump’s vow to renegotiate NAFTA may be an opportunity for workers

Sworn into office less than two weeks ago,
President Trump has quickly disrupted the status quo. 
On January 23rd, for instance, he signed a Presidential Memorandum to withdraw the U.S. from the Trans-Pacific
Partnership (TPP), a move that has received broad union support.

Trump now
plans to renegotiate NAFTA to get a “much better deal for workers”. The White
House states that it will withdraw from NAFTA if its partners (i.e. Canada and
Mexico) do not renegotiate to the new president’s liking,

If our partners refuse a renegotiation that gives American workers a fair
deal, then the president will give notice of the United States’ intent to
withdraw from NAFTA.

Experience of Canada-US Free Trade

1988, under the CUFTA and later NAFTA, Canadians have seen a reduction in their
standards of living and an assault on workers’ rights. When the Mulroney
government signed the CUFTA, Canadians were promised the deal would increase
jobs, improve economic growth, and generate better wages. The reality has fallen
short of these promises. NAFTA ushered in a host of problems for Canadians,
including: lost full-time jobs and a rise in precarious work; a reduction in
real wages; and net (dis)investment in Canada.

In the
free trade era of NAFTA, downward harmonization ruled the day, with business elites
arguing that if Canada wants to be competitive, it had to make its social
protections more in line with the general inferior levels in the U.S.

This led
to a period of cuts to social protections under both the Conservative and
Liberal governments. Such cuts targeted unemployment Insurance, Old Age
Security, and federal transfers to the provinces for health and education. While
the government was cutting this swath through social protections, real wages declined
and corporate profits rose. The result was a growing problem with income and
wealth inequality.

Now that
Trump plans to renegotiate NAFTA, we may be looking at a back to the future
scenario that could take us further down the path of downward harmonization.
Interim Conservative leader, Rona Ambrose, has stated that Canada’s problem is
the country “
uncompetitive”. Ambrose blames Canadian
non-competitiveness, in part on labour costs, saying:
If our taxes are higher, our
labour costs are higher, our energy costs are higher… then there is no
level playing field anymore and we’ll lose.”
These are
chilling words that tacitly call for the downward harmonization that wrought
the problems with NAFTA in the first place.

But the
Liberals don’t have to accept Ambrose’s regressive vision of the
renegotiations. There are two broad paths when renegotiating NAFTA. One path
would be to accelerate the already failed strategy of downward harmonization. A
second path, however, would be to renegotiate terms that protect workers, and
bolsters the middle class.

Such renegotiation must focus on NAFTA’s Chapter 11. Chapter 11 promotes offshoring
by giving special protections to firms that offshore, and is a wellspring for
much of the damage that’s been done to the middle class.

The Investor-State
Dispute Settlement (ISDS) provisions in Chapter 11 allow corporations to sue a
government if it makes decisions or policies that harm the corporation’s profits,
or expected profits. These provisions
encourage companies to offshore by shifting any corporate risk in
relocating to a low-wage country and putting the risk back on host countries to
underwrite corporate losses. For more on why ISDS is bad for Canada, see our
previous post

could be good for Canada

does not have to be a zero-sum game, where any better deal for US workers will mean
a worse deal for Canadian or Mexican workers. Terms could be negotiated to
insist Mexico improve its wage levels, and meet health and safety standards
comparable to those of Canada and the US.  This would both prevent a race to the bottom
and protect Canadian workers from competing with the lower wages of their
Mexican counterparts. Not only would it benefit Canadian and American workers,
it would also help workers in Mexico improve their wages.

A further
term requiring all three signatory countries to enact and abide by
core standards and Conventions of
the International Labour Organization
, could also help to avoid a race to the bottom by
preventing corporations from demanding that governments refrain from
policy-making in the interests of workers. It would remove the incentive for
Canada to become more “competitive” by weakening its own workers’ rights.

If the
Liberals cannot renegotiate benefits for Canadian workers, well, then maybe
it’s time to take a page from Trump’s book and walk away ourselves.

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