Despite being on the sidelines since long, Canada has not just made it to the trilateral trade deal, but has successfully won its standards, that were there in the 1987 and 1992 free-trade agreements.
The North American Free Trade Agreement (NAFTA) has been renamed as the United States-Mexico-Canada Agreement (USMCA). The United States, Canada and Mexico reached a deal after a year of intense negotiations on Sunday evening, before a self-imposed US deadline.
In the original 1987 free-trade agreement with the US, Canada’s twin touchstones were the cultural exemption and the dispute-settlement mechanism. Both of these were maintained in the 1992 deal as well, which included Mexico.
This time too, in 2018, these have been major wins for Canada, although with one essential difference.
Canada’s twin touchstones in the original 1987 free-trade agreement with the United States were the cultural exemption and the dispute-settlement mechanism.
They were maintained in the first NAFTA deal that included Mexico in 1992, and have now been reconfirmed in the new trilateral trade deal announced Sunday evening, as the clock was counting down to midnight — a self-imposed U.S. deadline to get a deal to Congress 60 days before a vote.
The behavior of the US President Donald Trump, towards the Canadian Prime Minister Justin Trudeau has ranged from insulting to menacing. Besides, at one point, he had dismissed Trudeau as “weak and insulting,” then threatening auto tariffs that would be “the ruination of the country.”
Despite the threats, Canada has been able to achieve two major wins for in 2018 as well, just like in 1987 and 1992, with one important difference.
During the first deal of 1987, the then-Prime Minister Brian Mulroney was dealing with the rational President Ronald Reagan. He directly made the cultural exemption case of Canada to Reagan, and explained him that the cultural industries of Canada required protection from a behemoth US cultural with a 10 times larger home audience. The deal was confirmed and agreed by the treasury secretary to Reagan, James A. Baker.
Although the cultural exemption was called inadequate during the 1988 free-trade election, it was lobbied hard for its protection three decades later in the NAFTA renegotiation with George Bush.
This year, the cultural exemption needed to be updated more than being maintained. It should include online and digital industries that did not yet exist during the previous two trade deals.
On Monday, at the news conference with Trudeau, the Foreign Affairs Minister Chrystia Freeland noted that the cultural industry of Canada accounts for 650,000 jobs. She highlighted that it has become a major employer because they were protected from American dominance in the first place.
The dispute-settlement mechanism has been the Chapter 19 of the previous trade deals. It was a deal-breaker for Mulroney, and has been much of it for Trudeau as well.
On October 3, 1987, Saturday evening, the trade deal with the US has almost died when Baker called to inform Mulroney that the US could not accept the independent dispute-settlement tribunal, as it would infringe on their sovereignty.
Mulroney replied saying that he’d ask Reagan how he could make a nuclear-arms deal with America’s worst enemy, the Soviet Union, but couldn’t make a free-trade deal with its best friend, Canada.
His words turned in his favor, and 20 minutes later the US had agreed on the dispute-settlement mechanism.
On Monday, Freeland said that the new deal, USMCA “fully upholds Chapter 19.”
However, the Canadian Prime Minister had to pay a modest price for it, and had to grant a larger share of the country’s dairy market to the US, while keeping supply management for dairy, poultry and eggs, in place.
On Monday, in a news conference at the Rose Garden of the White House, the US President Donald Trump has also said that “dairy was a deal-breaker” for him.
Despite granting an increased dairy access, the Canadians has received a strategic advantage in making the trade-off of Chapter 19.
The United States believe it has defeated Canada by getting greater access of its dairy. On the other hand, Canada has been looking way beyond just the dairy industry for protecting the interests of its country.