Canada's Progressive Trade Agenda and the NAFTA Renegotiation

Abstract

Canada is developing a progressive trade agenda (PTA) that is pitched as a response to the rise of anti-globalization populism. This note reviews the concept of the PTA, 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 it can shape Canada’s trade agreements in general and the renegotiated NAFTA in particular. It concludes that the PTA closely parallels the concept of “inclusive trade”, which has received much attention internationally including in the WTO, the G20, and the World Economic Forum, and the concept of “trade sustainability” that has been developed by the European Union; that it 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 has been a factor fueling the populist reaction against globalization; and that, while the policy is coherently framed, the role that trade policy has played in generating the current backlash against globalization was arguably relatively small, and the traction the PTA would have addressing these issues would be commensurately small. Further, 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 substantive content of the PTA to carve-outs for Canada’s own progressive initiatives in order to achieve some elements even with less progressive trade partners may result in Canada facing competitive disadvantage and also a difficult time mobilizing support for the agreement. Finally, since deep integration requires relatively strong commitments in the areas addressed by the PTA, a failure to get the PTA through in the NAFTA renegotiation would signal that the move to deeper integration on the North American continent is truly over, with profound implications for commitments on behind-the-border measures in general.

Keywords: Progressive Trade Agenda, NAFTA, Canada, United States, Mexico, Anti-Globalization, Populism

JEL Classification: F13, F16, F18, F60