Canada's Progressive Trade Agenda: NAFTA and Beyond

Abstract

Canada is developing a progressive trade agenda (PTA) in response to the global rise of anti-globalization populism. This Commentary reviews the PTA concept, its motivation, the specific elements that comprise it, the likely efficacy of these measures in addressing the factors thought to be driving populism, and the extent to which the PTA can shape Canada’s trade agreements in general and the renegotiated NAFTA in particular. It concludes the following:

• The PTA closely parallels the concept of “inclusive trade,” which has received much attention internationally, including in the World Trade Organization (WTO), the G20, and the World Economic Forum. It also closely parallels the concept of “trade sustainability” that has been developed by the European Union. It is, accordingly, part of a mainstream, progressive vision, rather than an idiosyncratic Canadian initiative.

• The PTA responds to a widely accepted view that the gains from globalization have not been fairly shared, that there have been losers as well as winners, and that this reality has been a factor fuelling the populist reaction against globalization. In particular, it responds, along with similar agendas elsewhere, to the declining middle class share of income in industrialized societies.

• While the policy is coherently framed and it goes without saying that trade policy should, indeed, help redress the distributional inequities to which it contributes, the role that trade policy has played in generating the current backlash against globalization was arguably relatively small.

• At the same time, the measures that have been developed to advance the PTA have limited traction in affecting economic structure and income distribution. Expectations concerning the PTA’s potential efficacy should be calibrated accordingly.

• The PTA faces modality issues: the norm-setting aspect is most effectively pursued at the multilateral level; in bilateral negotiations, policy coherence issues arise with both new and existing FTA partners, depending on the progressive credentials of partner governments (and changing administrations); and limiting the PTA’s substantive content in negotiations with less progressive trade partners may result in Canada facing competitive disadvantages and cause difficulties in mobilizing support for any trade agreement.

• A failure to achieve strong PTA outcomes as part of the NAFTA renegotiation would signal that the move to deeper integration on the North American continent in the sense of harmonization of policy is both unlikely and ill-advised.

Keywords: Trade and International Policy; Trade Policy and Negotiations

JEL Classification: F02; F13