US And Canada Discuss Trade

by Mike Godfrey, Tax-News.com, Washington

30 April 2009

United States Trade Representative Ronald Kirk held a meeting with Canadian Minister for International Trade, Stockwell Day, on April 27, although the vexatious issue of the North American Free Trade Agreement appeared largely absent from the discussions, at least publicly.

The meeting was Kirk’s first with his Canadian counterpart since he was appointed to the post of USTR following a Senate vote in March. On the agenda were a number of important topics, including achieving a successful outcome to the World Trade Organization (WTO) Doha Round of negotiations, the ongoing US/Canada softwood lumber dispute, intellectual property rights, country-of-origin labeling, and a US tax credit designed to encourage the use of alternative fuels. However, it is NAFTA, and the Obama administration’s ambition to “improve” parts of the pact that is likely to dominate the trade agenda between the two nations in the months and years ahead - although this touchy subject was scarcely mentioned in the statements issued by both camps following the meeting (and not at all by Kirk).

“During President Obama’s trip to Ottawa in February, the President made it clear that the United States wants to ‘grow trade and not contract it’ and he underscored the importance of trade to the United States, Canada and the global economy, I sent that same message to Minister Day today” said Kirk. “Minister Day and I discussed how trade plays a key role in our nations’ economies and the world economy as well. Canada is the United States’ largest bilateral trading partner. Since 1989, our trading relationship has been anchored by a free trade agreement. I look forward to working with Minister Day to find ways to make our trading relationship even stronger. We have a great track record here to build upon.”

“Ambassador Kirk and I had a productive meeting on a wide range of topics,” added Day. “We reiterated our shared commitment to support trade liberalization through the World Trade Organization, NAFTA, and also through the Canada-US economic relationship. We agreed to ensure that trade, investment, capital and services flow smoothly within North America.”

Day said he planned to emphasize Canada’s “aggressive free trade agenda and the importance of NAFTA to North American prosperity” during an address to the US Chamber of Commerce in Washington on April 28, adding: “I plan to highlight the need to open doors to commercial cooperation wherever we can, while resisting protectionist impulses.” By contrast, the Obama administration has put a hold on the negotation of new free trade agreements, and has stated its intention to review FTAs and bilateral investment treaties already signed by the US government "to ensure that they advance the public interest."

A trilateral agreement between Canada, Mexico and the United States, the final NAFTA text was signed in December 1992. It was ratified by Congress and signed by President Bill Clinton in 1993 after additional labor and environmental agreements had been negotiated. Tariffs on qualifying goods traded between Canada and the United States became duty free on January 1, 1998, in accordance with the Canada-United States Free Trade Agreement which was carried forward under NAFTA for goods traded between Canada and the United States. Tariffs on virtually all originating goods traded between Canada and Mexico were eliminated in 2008, with the exception of Canadian agricultural goods in the dairy, poultry, egg and sugar sectors (which are exempt from tariff elimination).

NAFTA has underpinned strong growth in trade between Canada, Mexico and the US. According to figures published by the Office of the US Trade Representative last year, from 1993 to 2007 trade among the NAFTA nations more than tripled from USD297bn to USD930bn. Meanwhile, business investment in the United States rose by 117%, compared to a 45% increase between 1979 and 1993.

Canada is currently America’s largest bilateral trading partner with more than USD1.6bn in goods crossing the border each day. Two-way trade (exports plus imports) totaled USD597bn in 2008.

While NAFTA has undoubtedly had a positive impact on trade throughout North America, President Obama has made clear that he wants to see changes to the agreement, notably to labor and environmental standards, although he has toned down some of the more strident rhetoric used against the agreement during the campaigning season since he took office in January.

The administration’s trade policy document released in March stated that Washington would identify ways in which NAFTA could be improved "without having an adverse effect on trade."

"We will do this in a collaborative spirit and emphasize ways in which this process can benefit the citizens of all three countries,” the document promises.

Much to the relief of the Canadian government, Kirk revealed recently that the US government thinks these changes can be achieved without reopening the agreement.

"We're obviously very delighted with this decision from the Americans," Prime Minister Stephen Harper said at the conclusion of the Summit of the Americas in Trinidad earlier this month. "Once we reopen it (NAFTA), it would be very hard to get that cat back in the bag."

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