The most recent presentation of the CBA National Section on International Law Trade Law Intersections Series, held on May 8th, 2018, was on navigating trade agreements in a shifting landscape. This shifting landscape means a new protectionism or at least a new sense of wishing to re-establish local control through the assertion of domestic sovereignty. Perhaps the election of Donald Trump represents the epitome of protectionism; meanwhile, the Brexit vote sought to re-establish British sovereignty in the face of perceived or actual encroachment on that sovereignty by Europe’s “oligarchy.” Clearly there are linkages between protectionism and assertions of sovereignty. In fact when President Truman refused to endorse the establishment of the “new” International Trade Organization in 1948, it was on the grounds that it would usurp U.S. sovereignty. In some way the 1948 U.S. world view is reflecting itself in Trump’s concern about the impact of increased trade liberalization on the ability of the U.S. to control its own economic destiny. The panellists touched upon the connection of the 1948 regime to the present dynamics as part of the shifting landscape.
The webinar’s three panellists and moderator sought to make sense of the effect of peoples’ democratic choices, which have challenged traditional thinking about the benefits of trade liberalization, on the shifting landscape of the trade rules both present and future.
Moderator Abigail Dubiniecki, Director, Strategic Compliance Consulting Ltd. in London, had the panellists focus on the practical impact of a shifting trade landscape for lawyers providing advice to businesses doing business abroad.
Matthew Kronby, a partner with Bennett Jones LLP in Toronto, pointed out that the practical business benefits of NAFTA are the elimination of tariffs in the North American market, the temporary entry provisions for business people, the appeal process for subsidies and countervailing duty assessments (chapter 19) and the associated competitiveness which is enhanced further by North American supply chain integration.
Wendy Wagner, a partner with Gowling WLG in Ottawa, pointed out that there is the potential imminent negative effect of a withdrawal from NAFTA for supply chain integration coming from the loss of NAFTA tariff elimination. She also pointed out the potential benefits of the US withdrawal from the Trans Pacific Partnership for Canadian businesses that would have a competitive advantage in comparison to U.S. business in the market covered by the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. This benefit would be particularly enhanced if NAFTA remains in effect, in that Canadian businesses will have access to both CPTPP markets and the U.S./Mexican market (and therefore will be a “hub” for international trade). The privileged access to Pacific markets as compared to the United States will continue to provide Canada with an advantage over its U.S. competitors even if NAFTA does not survive.
London’s William Swords, the past president of the Canada-UK Chamber of Commerce, drew our attention to inquiries he had received relating to UK businesses wishing to establish a presence in Canada in order to preserve and potentially enhance their business prospects in the EU through CETA following an anticipated potential loss of market access opportunities caused by Brexit.
There was discussion about the potential of defaulting to the WTO rules if the U.S. withdraws from NAFTA. Noteworthy was the difference between the GATT tariff bindings and the tariff-free North American market under NAFTA. If the NAFTA parties are forced into the WTO universe, it will disadvantage the North American NAFTA market participants amongst themselves. The effects of NAFTA withdrawal are mitigated for government procurement because the WTO government procurement agreement supersedes the NAFTA rules. On the NAFTA withdrawal effect, it was noted that the suspended Canada-US Free Trade Agreement is intended to be reactivated, however there likely would be administrative and political impediments to it being brought back to life. It was noted that NAFTA was negotiated at the same time as the Uruguay Round of WTO negotiations was taking place and that there was a synergy and cross-fertilization between the NAFTA and the new WTO world which emerged historically in tandem so to speak.
The panellists noted that the “shifting landscape” has exposed a tension between the U.S. administration’s proposals to undermine the remedies embedded in trade agreements and the modern trade agreement, which is a robust rules-based system supported by a binding dispute resolution processes and engages with a deeper consideration of topics which intersect trade such as gender, labour, the environment and privacy. One has to question the extent to which the current U.S. position advances their agenda, given that the substantive provisions in the TPP which were suspended reflected key elements of the U.S. trade agenda, such as more stringent protection for intellectual property rights. This tension has played itself out in the NAFTA renegotiations as being composed of U.S. topic proposals to limit enforcement at the international level (pro-sovereignty) and modernization proposals. The latter is composed of what Canada has referred to as the progressive and modern trade agreement template. Perhaps in the NAFTA renegotiations another tension is exposed in the rules of origin negotiation, which reveal an underlying tension between two positions pulling in different directions. The push to enhance the North American content requirements relating to the consideration of goods produced in the North American market is conflicted with the objectives of enhanced global trade liberalization.
The panellists speculated about some of the trade shifts which could occur as a result of the U.S. withdrawal from the TPP and Brexit. Some of these have been mentioned above under the practical implications comments from the panellists. The discussion was insightful in regard to thinking strategically about new opportunities and the relative influence of the emerging role of China in capturing a greater portion of the market within the trade block areas. Canada’s access to the Japanese market is facilitated by the CPTTP to the detriment of the U.S. withdrawal from the TPP. Consideration was given to what role business could play in attempting to facilitate enhanced market share opportunities within the gaps exposed by the shifting landscape.
So far the shifts in the trade landscape have been driven by political change in the U.S. and the UK. But the Mexican election in July will likely add an additional dynamic to the NAFTA negotiations, assuming they will still be taking place after the Mexican election. The U.S. mid-term elections this fall are also an added dynamic on the NAFTA renegotiations.
The theme of the presentation, the shifting landscape of trade agreements, has of course been spurred by corresponding shifts in political thinking about those agreements. There may emerge a new unilateralism as some countries shift toward more protectionist policies. Wendy Wagner has suggested a way of describing the new shifting landscape as that of “fair trade.”
Another interesting insight raised by the panellists is the promotion of international competitiveness resulting from NAFTA for businesses competing internationally – businesses are obtaining the benefits of tariff-free rules of origin in developing supply chains within the NAFTA free-trade area. NAFTA gives these businesses the benefits of enhanced competitiveness with imports as well as the ability to develop export markets based upon lower input costs due to NAFTA. Both competitiveness benefits would dissipate as a result of the end of NAFTA and the application of the WTO rules to the NAFTA parties.
In this webinar the panellists did an excellent job of providing insights into the potential for countries and businesses to take strategic advantage of new opportunities created by the shifting landscape of trade agreements while the precise nature of what this shifting landscape will look like remains uncertain. Somewhat optimistically. the panellists pondered what could be accomplished by businesses attempting to influence governments in trade negotiations. An on-demand recording of the webinar is available here.
ABOUT THE INTERSECTIONS SERIES
The Intersections Series explores areas where trade law and other issues and areas of practice intersect. To date, the Series has explored corporate social responsibility and trade as well as advising on trade in the face of uncertainty. CBA members can access the recorded teleconference and materials from the first instalment of the Intersection Series, Trade and Corporate (Social) Responsibility and an article summarising the presentation here.
We look forward to the third instalment of the Intersections Series: Intersection of International Trade Law and Aboriginal Law: Key concepts and recent developments. This session is free for CBA members and will take place in September, 2018. Stay tuned to the Section’s website for further information on this webinar.
As part of this series, the Section is planning a session on the topic of trade and sustainability or environment. If you are interested in being a speaker, please contact Abigail Dubiniecki at abigail.c.dubiniecki@gmail.com or Danica Preville at danica.dp@gowlingwlg.com.
Bruce Macallum (British Columbia representative to the NSIL and Co-Chair of the British Columbia Branch International Law subsection)