by Goodwin Ginger

On the whole NAFTA is dead. It must be recalled that the continentalists in Canada pushed for free trade with the US by arguing that the best Canadians could do is lock the US into a rules based free trade regime. While the new softwood lumber accord does allow for the resumption of duty free exports (to a point and at a price) the agreement is itself anything but a free trade agreement and gives the lie to the continentalist proposition that US protectionism can be stemmed by the rule of law.

Indeed this was the very argument nationalists and advocates of managed trade made at the time: the US only respects international law when it is in their interest. The US will of course continue to respect provisions of NAFTA when it suits their purpose. But a free trade agreement that degenerates into a series of managed trade side agreements with limited temporal tenure of application is the very thing continentalists sought to avoid.

Moreover, if the softwood agreement is anything to go by, all these managed trade side agreements will be initiated by the US and designed to degenerate into beggar thy neighbour (Canada) agreements when economic times get tough.

When the US economy cools as the leading private sector economists are predicting, commodity prices will soften. And this is where the present agreement really stinks. The agreement allows for the US to place duties on softwood imports from Canada when prices decline. So at the very point when Canadian producers will need expanded access to US markets they will be hit with a tax and quota. Producers will find themselves in the position of selling at a loss to stay competitive and or mothballing mills until prices improve.

We now have the worst of two worlds. A formal commitment to free trade that ties the hands of government with respect to trade policy and a substantively managed trade agreement that is stacked in favour of US producers.That NAFTA is dead is a good thing because it opens up space to contest and reconsider the continentalist strangle hold on the public policy debate over national economic development in Canada.