THE TTALK QUOTES
On Global Trade & Investment
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No. 46 2017
THURSDAY, JULY 27, 2017

Click  here for last Friday's quote from Meredith Broadbent. 

FIRST CETA, THEN NAFTA

"I think the response from Canada [to the U.S. proposal for renegotiating NAFTA] was a very open response to the possibility of modernizing and updating. And I think you have to look no further than CETA to see what Canada means by that."

Colin Bird
June 23, 2017
CONTEXT
Colin Bird is the Minister for Trade and Economic Policy at the Canadian Embassy in Washington. As a panelist at the GBD event on June 23, he made several major points in a calm and quiet voice. For us, the biggest of these is that Canada has just notched a big win in trade policy. CETA, Canada's Comprehensive Economic Trade Agreement with the European Union, is largely a done deal. And it is a big deal. In the words of the EU Trade Commissioner, Cecilia Malmström, "It is the most modern and advanced trade agreement ever made."

As for when it will be implemented, Mr. Bird said, "We are, I think, very, very close to application of the CETA." But that was in late June. In early July, Canada's prime minister, Justin Trudeau, and EU Commission president, Jean-Claude Juncker, met on the margins of the G-20 Summit in Germany, and they set a date. Provisional application of CETA will begin on September 21, 2017.

So, how provisional is "provisional" application? Mr. Bird put it this way:

"When you're talking provisional application, that sounds very tentative. In reality, it means essentially full application of the CETA, with the exception of certain investor issues that are in member state competence.

"So, what does that mean? You're looking at 98 percent of tariff lines going duty-free as of day one, as soon as we bring it into force. We've got fairly concise phase-outs for those very sensitive products in the sort of 3, 5, 7 year range. So that will be at about 99 percent of tariff lines duty-free by the time the phase-ins are complete."

But tariffs are just a part of it. Mr. Bird praised CETA for an array of elements including its provisions on labor, on environment, on transparency, on services, and most notably (for us) on government procurement. "You look at the level of ambition on government procurement and it's really quite dramatic; so that we are down to the provincial, the Member State, [and] city level in terms of openness to procurement."

And Mr. Bird was quite clear in making the connection between CETA and NAFTA. "We've had an agreement [CETA]," he said, that has essentially leap-frogged NAFTA." That in itself, he suggested, makes the case for the effort to try to modernize and update NAFTA.

As to how difficult the NAFTA project is going to be, Mr. Bird took note of the mixed character of the climate for the negotiations. He spoke positively of the high-level engagement in all three NAFTA countries. On the other hand, he also took note of the "challenges in terms of managing an agreement going forward, particularly when you have rhetoric that can sometimes look win-lose."

But overall his assessments of the looming NAFTA talks was more positive than negative, more upbeat than otherwise. That, at any rate, is how we understood this passage in his comments:

"The rhetoric around America first and economic nationalism that we're hearing in the United States does not necessarily have to translate into a win-lose model. And Canada is very focused on keeping a win-win model going forward into these negotiations, or a win-win-win model going forward into these negotiations."
COMMENT
An honored boss of many years ago would often brush aside our over-reliance on precedence, footnotes, and documentation. "Just assert it," he would say. So we shall simply assert our belief that any negotiation -- and certainly the negotiation of a major trade agreement -- is more likely to end successfully if the partner or partners on the other side of the table are strong, confident, and clear in their purpose. In that sense, Mr. Bird's comments at GBD were full of good omens for the upcoming NAFTA negotiations. For starters, Canada is feeling confident about trade. "We are probably at one of the most unified places I've ever seen Canada on trade," he said.

Even if, from an American perspective, such confidence is a good thing, it's probably not an unqualified blessing. By itself, it may make it harder for the U.S. to get Canada to budge from the protectionist barriers it still enjoys. When you add in the well-founded concerns in the U.S. that the NAFTA talks could end up doing more harm than good, the situation becomes even more complicated.

That said, count us among the optimists. It is our strong impression that USTR Robert Lighthizer, Canada's Minister for International Trade, François-Philippe Champagne, and Mexico's Secretary of the Economy Ildefonso Guajardo Villarreal, all have a clear idea of what's at stake and that each of them is responding to the same unwavering imperative: Don't screw it up!

SOURCES & LINKS
 The Diplomatic Panel takes you to the YouTube video of the Diplomatic Panel on the EU and North America from the GBD conference on June 23, 2017. This was the source for today's featured quote.

On the EU Website. Among other things, this page on the EU website includes a video clip with the above quote from Cecilia Malmstrom.

Date Set takes you to the BBC story about the July meeting between Justin Trudeau and Jean-Claude Juncker, in which they set September 21 as the date for provisional implementation of CETA.

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