NAFTA: Mend it, don't end it

The following was written by Alan S. Alexandroff, who teaches at the Munk Centre for International Studies, for the “globeandmail.com”. Mr. Alexandroff recently co-wrote, with Krista Lucenti and Gary C. Hufbauer, Still Amigos: A Fresh Canada-U.S. Approach to Reviving NAFTA, for the C.D. Howe Institute.

As Canada readies for a massive free-trade negotiation - perhaps starting as early as Oct. 17 - many hope the talks between Canadian and European officials could eventually result in a wide-ranging agreement. Such an EU-Canada agreement could even exceed NAFTA's scope by guaranteeing the free movement of skilled labour, free exchange of services and competitive public procurement.

While those of us who support trade liberalization welcome these latest efforts with the EU, it is worth recalling that Canada-U.S. trade and investment remains our most significant economic relationship, and that Canada remains the top trading partner of the United States. It is vital for our two countries to update and strengthen this key relationship.

The North American free-trade agreement needs improvement. After all, the text is 15 years old and the world has changed since 1993, when the deal was sealed. While some politicians may argue otherwise, NAFTA has been very good for Canadians and Americans and will continue to anchor our economies. But Canada also needs to focus, without fear, on updating this increasingly "tired" agreement.

What Canada and the U.S. need is a new negotiation agenda built on the mutual incentives that drive co-operation in energy security and environmental sustainability. Canada has struggled in recent years over how to engage the U.S. in reforming the agreement. Earlier in the decade, a number of experts - including Allan Gotlieb, former ambassador to the U.S., and Wendy Dobson, of the University of Toronto - urged a "big-bang" approach that would promise security for the United States and economic integration for Canada. But with a White House distracted by war and, for now, engulfed in financial turmoil, little else has advanced on the policy front.

Accordingly, others have argued that "below the radar" incremental changes offered a better approach than large-scale engagement with the U.S. Indeed, many incremental initiatives were adopted in the Security and Prosperity Partnership. Yet again, very little progress has been made on this agenda, whether in regulatory harmonization or lowering non-tariff barriers.

How then to reform and update NAFTA? Canada should offer an agenda with a focus on matters where the incentives on both sides suggest co-operation: energy, water, climate change and upgrading the environment and labour side accords. Working together, the two countries can significantly advance the agenda in each of these areas.

To be sure, in each area, domestic opposition will arise. Water, for example, has long sparked Canadian fears of bulk exports and Canadian officials have been reluctant to raise the issue bilaterally. Clearly, bulk water exports from Canada should be prohibited, but a collaborative project on water management could enhance water resources on both sides of the border. Also, ample room exists for an accord that would meaningfully contribute to North American energy security, and the same can be said of measures to control greenhouse gas emissions.

An additional payoff awaits a fresh look at NAFTA. If the EU and Canada can forge an accord that covers services, government procurement and skilled labour, that could well set the table for reviving the original NAFTA - the North Atlantic Free Trade Agreement espoused by far-seeing commentators in the 1960s. If the EU and Canada join hands, the U.S. and Mexico will be eager to join the party. The World Trade Organization is struggling, hoping against hope to give birth to a very small Doha agreement -