There are many things about the Trump Presidency that keep me awake at night. After Trump was elected, I was among those who turned to James Madison and the Federalist Nos. 10 and 51 for solace. I was certain the same institutional design that intentionally put so many barriers in the way of "getting things done" would constrain Trump's worst (but then not fully appreciated) excesses. My alarm at the damage being done grows by the day. In fact, as great as Madison's design is, I'm not sure it was designed to constrain this kind of aberrational president, nor the sustained assault on the core institutions of American democracy.
I openly wonder who is going to put the toothpaste back in the tube? Can it be put back? Trump didn't create this mess so much as he's a manifestation of a host of problems that have been simmering for a long time. Indeed, one of the most insightful comments I read during all of the memorials around Sen. John McCain's death is that in selecting Sarah Palin as his running mate in 2008, he played a significant role in laying the foundation of today's populist assault on the truth in the GOP
Rock Paper Scissors for Trade
To Trade or Not to Trade?
Of course, one of my interests is the global trading system and my alarm at the damage being done here is also acute. The amount of damage Trump has done to America's leadership credibility in global trade is going to take a very long time to repair. It's unclear to me that it can be repaired since, in my view, Trump has arrived at the most inopportune moment for resolving important problems within. Smarter, more thoughtful voices were already calling for significant changes to how the global trading system's rules were written. Of note here, the basis for the long-stalled Doha Round of the WTO launched in late 2001 was development; hence the name Doha Development Round. Indeed, issues important to the developing world were to be the center-piece of the Round, starting with agriculture. We know what has happened there.
Much as I turned to Madison to ease my concerns about the erosion of American political institutions during Trump's reign, I similarly sought solace in the rules of the global trading regime. "We'll be able to ride this out," I thought. Moreover, "we've seen this movie before." Indeed, xenophobia in the hands of anti-trade populists has been the weapon of choice for centuries. Yet, I reasoned that rules largely designed and underwritten by U.S. leadership would, even in the face of nonsense from Trump, not quickly be tossed aside. It was in America's interests to stick to the rules. Not only had the United States been a financial beneficiary of open, rules-based trade, the political prestige and leadership benefits of being the "indispensable" country for that system would surely appeal to Trump's better senses (or at least his ego).
I've been searching high and low for sources of solace about the state of global affairs with Trump in the White House. They are depressingly hard to come by. I've found a sliver of solace in, believe it or not,... trade policy.
Last November, the Government of Canada launched what it called a "Progressive Trade Policy" agenda. I wrote a little piece offering a few critiques (linked here). The punchline was that I thought it was devoid of much substance, starting with default proposition that trade liberalization as practiced was not progressive. Trade liberalization is inherently progressive. Always has been.
I have noted in a few posts over the past year and a half how frustrating it is to try and follow the chaos and incompetence that is the Trump Administration. Apart from being completely exhausted (and exasperated) by nearly everything, it hasn't gotten any easier to see anything resembling coherence or a grand plan.
Competence Need Not Apply
Just after Trump's election in November 2016, I'd have to characterize my outlook as a kind of hopeful resignation. I was resigned to the fact that nativist populism had carried the day and that Trump had put forward too many policy positions on the campaign trail I simply couldn't support. However, I was hopeful that there would at least be a modicum of competence in their implementation. "Perhaps I'm wrong," I thought. "Perhaps those who voted for Trump saw something in his messaging I was missing?" "Perhaps voters in the UK had seen something similar months earlier when they narrowly voted to exit the European Union?" I was well aware that there were voters out there, under pressure economically, anxious about their status in the global economy, and disgusted by the evident ineptitude of our political leadership to do anything about it.
There were some small glimmers of hope floated last week (March 19-23) that the NAFTA 2.0 talks were moving in a constructive direction. The source of that hope was testimony by USTR Robert Lighthizer before the House Ways and Means Committee on March 21 and Senate Finance on March 22. Specifically, Ambassador Lighthizer suggested there had be a convergence of positions on some of the most pernicious issues in the talks, notably on America's nonsensical position on rules of origin.
I made a quick trip to the Bay Area last week to give a presentation to a group of University of Alberta alumni. In one of the surest signs of my getting older, I keep seeing more and more former students at these things. Apart from that, however, it's gratifying to see them come out and to learn about the interesting things they are doing.
The topic of my presentation was the NAFTA2.0 negotiations. The timing was good. The 5th round of negotiations had just concluded in Montreal the previous week and Canadian Prime Minister Justin Trudeau was going to be in San Francisco in the following couple of days touting the merits of trade as well as the high-tech sector for Canada.
In future I might try and record some of what I say at these things. Now and then I say something interesting only to wish I had written it down somewhere. Actual PowerPoint presentation is linked here. However, I thought I'd try and reconstruct a bit of what I said with an "annotated" form of that presentation.
Those of us following the progress (or lack thereof) through the first several rounds of talks aimed at renegotiating the NAFTA have lamented the difficulty posed for Canada and Mexico by a number of American negotiating positions; among them, tough positions on government procurement, investment protections, and rules of origin. Yet it is the American position on Chapter 19 dispute settlement that seems to be giving Canada one of the biggest cases of heartburn. Frankly, I am not sure why?
There are two reasons for my skepticism. First, Chapter 19 is far more limited in it's capacity to "adjudicate" disputes than is commonly believed. Second, data indicate that the incidence of NAFTA disputes is low, not because of dispute settlement, but because North America has become so integrated that the scope for these disputes is falling.
I'm not suggesting that Canada and Mexico should simply acquiesce to American demands on Chapter 19. But I do think Chapter 19 has become more of a psychological barometer of their relationship with the United States than a mechanism delivering sufficient value to be worth scuttling the talks. I'm not sure Chapter 19 is a hill worth dying on.
What is Chapter 19?
Trade buffs will know that NAFTA Chapter 19 set up a dispute panel system to deal with the application of domestic anti-dumping and countervailing (anti-subsidy) duties levied against imports from NAFTA members. The idea was to take review of the application of these duties out of the national court systems and place them in some kind of quasi arbitral system. Anti-dumping and countervailing duty laws exist everywhere and are designed to protect domestic industry from the effects of dumping by foreign firms and/or subsidies to those firms conferred by foreign governments.
Progress So Far
In principle, such trade remedy laws are designed to level the competitive playing field. The reality is that national legislatures write these laws in ways obviously favourable to domestic commercial interests. More to the point, trade remedy laws are written in ways giving administrative agencies broad latitude in their application so as to defend domestic interests. To state the obvious, trade remedy statutes are among the most politically sensitive in any country; second only perhaps to agriculture and entitlements.
A dispute settlement system, it was thought, might take some of the air out of the politics, making the application of those duties fairer and less arbitrary. Moreover, by moving legal challenges to these laws away from domestic court systems and into bi-national dispute panels, some believed the legal process would be fairer as well.
Hills 1987 and 1993
In the fall of 1987, Canada and the United States were facing an October Congressional deadline for completing bilateral free trade negotiations. Among the final sticking points was dispute settlement around trade remedy laws. In the midst of a late September round of negotiations in Washington, the Canadian delegation got up and walked away (pictured below) from the table over American unwillingness to have trade remedy laws subject to dispute settlement. For a short time, the entire deal seemed dead.
A "Trade Time Out" 1987 Style
Canada wanted the agreement to permanently exempt each country's products from the application of trade remedy laws-- indeed, this was initially a red-line bargaining position for Canada. Maintaining the applicability of trade remedy laws in the context of a trade agreement ostensibly aimed freeing trade strikes many as inherently contradictory. For the U.S., both exemption from trade remedy laws and the creation of a supranational dispute settlement process with extra-judicial powers were both off the table.
When Canada came back to the negotiations, the two sides agreed to something that fell quite some distance short of what Canada wanted. Instead, Chapter 19 of the Canada-U.S. Free Trade Agreement included a bi-national dispute settlement mechanism to which Parties agreed to have disputes heard. However, the panel system's scope was limited in two very important ways: 1) panels could only investigate and rule upon whether administrative agencies actually applied domestic law as it was written. In other words, had they followed their own rules, and 2) rulings were essentially advisory. The panel had no enforcement power to force agencies to change anything.
Nevertheless, when the NAFTA negotiations began in 1990, Mexico figured it would give exemption from trade remedy a second try. Canada was rightly skeptical of Mexico's efforts, but both were eventually lucky just to get Chapter 19 enshrined in the NAFTA. As limited as it is, American legislators and subsequent administrations have had grave doubts about Chapter 19 from its inception; many arguing it created an unconstitutional, extra-judicial process by which foreigners could challenge U.S. law.
But Does it Work?
If Canada and Mexico are currently angst-ridden over America's NAFTA 2.0 position on Chapter 19, that must be because America is always losing cases, right? Perhaps Chapter 19's limitations are not so limiting after all? In 2002, Patrick Macrory argued that Chapter 19 had been successful in dissuading some of the more arbitrary applications of U.S. trade remedy law to Canadian and Mexican products. Yet, Chapter 19 has also been an abject failure in resolving disputes like softwood lumber. Indeed, every adverse determination by a Chapter 19 panel against American duties comes a new round of administrative investigations and Chapter 19 panels, eventually resulting in a politically negotiated settlement. As long as there's no supranational police power enshrined in dispute settlement mechanisms like Chapter 19, there will always be scope for one side to ignore the mechanism's findings.
Recent data presented by the Petersen Institute's Chad Bown suggests that the real reason for the apparent "effectiveness" of Chapter 19 may be connected to the process and depth of North American integration. Indeed, Bown demonstrates that between 1994 and 2016, the application of trade remedy laws by NAFTA countries against one another has declined and remained low (softwood lumber being an obvious outlier). One reason, Bown argues, is that growth of cross-border intra-industry trade has inherently undercut the rational for private actor claims of injury due to dumping or subsidy by a NAFTA partner. Moreover, each of the NAFTA countries is increasingly applying their trade remedy laws to the same non-NAFTA products from the same non-NAFTA countries.
In other words, it's North American integration itself-- not the dispute settlement mechanisms themselves-- that are driving the decline in anti-dumping and countervailing duty cases by NAFTA parties against NAFTA parties.
A Psychological Barometer
Hence, I think one of the more important components of NAFTA Chapter 19 for Canada is psychological. Chapter 19 has become a touchstone, of sorts, for Canada in terms of how it's being treated by the United States generally. For example, every time there's a Chapter 19 ruling in Canada's favor in the softwood lumber dispute and America more or less ignores it, a loud hue and cry in the Canadian press immediately goes up; American flouting the rule of law, America ignoring trade rules, or America is violating the spirit of the NAFTA.
In essence, Chapter 19 has become a symbol of access to American decision-making, a lever to be pulled to make Canada's case on trade issues that are invariably more important north of the 49th parallel than they are to the south. Chapter 19 is a formalized forum in which to drag the American side to the table to hear Canada's complaints about their treatment.
Moreover, Chapter 19 dispute settlement is something that the Americans have never extended in any other trade agreement... EVER. Canada (and Mexico) are special. Hence, given my doubts about the utility of Chapter 19 in resolving disputes, it's likely that it's become symbolic of the "special-ness" and regard with which Washington views its relationships with Canada and Mexico. For Donald Trump, Mexico certainly isn't "special," but neither is Canada.
How Red a Red Line?
So,... exactly how hard should Canada and Mexico push to preserve Chapter 19 in NAFTA 2.0? Should they demonstrate their resolve and stage a walk-out similar to that staged by Canada in 1987? My answer is no! Let it go! There are bigger fish to fry in these talks. Preserving and facilitating the deepening of North American integration is the greater, more long-lasting solution to any harassment from trade remedy laws. Even the dreaded softwood lumber dispute will eventually go away as firms, workers, and the supply of wood products both transcend and move unimpeded across borders.
Earlier this month, on the sidelines of the APEC Summit in Vietnam, the 11 remaining signatories to the Trans-Pacific Partnership trade pact agreed to move ahead without President Trump's America. Withdrawing from the U.S.-backed TPP was, of course, one of Trump's very first actions upon assuming office this past January. That the TPP lives on signals many things, not the least of which is a decline in the importance of American leadership in the Asia-Pacific Region.
Not Voting Their Interests
It is my belief that America's withdraw from the TPP was a strategic mistake and my hope that sometime after 2020, a new U.S. administration will rejoin the fold.
Nevertheless, the TPP-11 emerged with a curious new mouth-full of a name: The Comprehensive, Progressive, Agreement for Trans-Pacific Partnership (CPTPP).
So, what exactly is "progressive" trade policy, anyway?
What's in a Name?
The name change was evidently made to mollify Canada regarding some previously unexpressed objections to the text (link). Indeed, Canada seems to have engaged in a strange bit of 11th hour gamesmanship for no particular reason other than the name-change. But what's in that name change? Negotiators of the original TPP agreement would certainly balk at Mr. Trudeau's suggestion that it was not "comprehensive" Indeed, at nearly 600pgs of basic text (never mind annexes), the TPP-12 was nearly twice as long as the basic text of the 1994 NAFTA-- easily the biggest, most comprehensive multilateral trade agreement concluded since the WTO. Moreover, most analysts agreed that the TPP-12 contained some major advances in a number of the most controversial areas of contemporary trade policy; notably, labor, investment disputes, and the environment.
Yet, it's the "progressive" label that intrigues most. While a lot of critics don't see it this way for some reason, trade liberalization is inherently progressive. Indeed, for a good part of human history, the protection of markets by the powerful and privileged at the expense others (foreign or domestic) has been the default. Eliminating barriers to trade has been an unqualified boost to global economic activity, raised the living standards of billions around the globe, undercut the power of monopoly, and unleashed the "creative destruction" of capitalism to re-order the strictures of privilege in many societies.
To be sure, all of this comes with the narrowly focused, and politically potent, adjustment costs predicted by economic theory. Here And our failure to deal with all of that adequately has, in part, paved the way for the Trump wrecking ball. Indeed, the political failure to "purchase" additional social and political license for the "losers" by using some of the broadly based proceeds from the "winners" to compensate them has given great cover to the xenophobic populists that now dominate debates over trade.
Addressing this fundamental problem would be a far more "progressive" approach to trade policy than the semantic changes made to the TPP's title..... But let's explore this further.
The Skeptical Progressive
Birds of a Feather
When Prime Minister Trudeau says Canada's trade policy is "progressive," my spidey-senses tingle. What the Government of Canada actually means by this in practice is rather murky, but the outlines were advanced by Chrystia Freeland, Canada's foreign minister, in a speech given August 14, just before the start of the NAFTA re-negotiations:
... Here, then, are some of Canada’s core objectives.
First, we aim to modernize NAFTA. The agreement is 23 years old. The
global, North American, and Canadian economies have been transformed in
that time by the technology revolution. NAFTA needs to address this, in a
way that ensures we continue to have a vibrant and internationally
competitive technology sector and that all sectors of our economy can
reap the full benefits of the digital revolution.
Second, NAFTA should be made more progressive. We will be informed
here by the ideas in CETA, the most progressive trade deal in history,
launched by Conservatives and completed, proudly, by our government.
In particular, we can make NAFTA more progressive first by bringing
strong labour safeguards into the core of the agreement; second by
integrating enhanced environmental provisions to ensure no NAFTA country
weakens environmental protection to attract investment, for example,
and that fully supports efforts to address climate change; third by
adding a new chapter on gender rights, in keeping with our commitment to
gender equality; fourth, in line with our commitment to improving our
relationship with Indigenous peoples, by adding an Indigenous chapter;
and finally by reforming the Investor-State Dispute Settlement process,
to ensure that governments have an unassailable right to regulate in the
public interest.
One reason that these progressive elements, particularly on the
environment and labour, are so important is that they are how we
guarantee that the modernized NAFTA will not only be an exemplary free
trade deal, it will also be a fair trade deal. Canadians broadly support
free trade. But their enthusiasm wavers when trade agreements put our
workers at an unfair disadvantage because of the high standards that we
rightly demand. Instead, we must pursue progressive trade agreements
that are win-win, helping workers both at home and abroad to enjoy
higher wages and better conditions....
These are all important issues, but except for ISDS, I'm not completely sure trade agreements are the right forum for dealing with any of these issues. For those seeking to have these issues raised in prominence, trade agreements are obvious targets for doing so. At bottom, trade agreements are rules-based arrangements designed to foster transparent cooperation on all of the issues covered. Indeed, simply getting new issues attached to trade agreements is a big victory since it indicates their status.
On the other hand, one concern with trying to have trade agreements become vehicles for more and more issues is that we already expect such agreements to do more than they reasonably can. Indeed, one of the biggest problems for the NAFTA has always been that its proponents over-sold what the Agreement could do while critics overstated the negative byproducts.
Adding a whole range of issues (however desirable it might be to address them) to trade expands the scope of agreements that have already become hideously complex and a lightening rod for populist critics. Trade agreements like the NAFTA are actually quite limited in what they do; they liberalize flows of trade, services, investment, and some categories of people. As a comparatively shallow preferences agreement, the NAFTA never contemplated the kind of supranational institutions (pooled sovereignty) that would be needed to deal with the kinds of political and social questions implied by Canada's progressive agenda. None of the proposals put forward for the modernized NAFTA2.0 involves the pooling of sovereignty. Hence, asking NAFTA2.0 to be "progressive" is asking too much of it. Labor and Environment
For evidence, look no further than the original NAFTA. In the midst of the 1992 U.S. Presidential campaign, then-candidate Clinton was pressed on the campaign trail to take a position on the nearly complete NAFTA negotiations. In classic Clinton style, he found a way to sit on the fence. He was "for" the NAFTA so long as there were proper protections for labor and the environment.
I've written about this elsewhere, but the punchline is that -- for good or for ill-- President Clinton permanently attached labor and environmental issues to the process of trade liberalization with the creation of the so-called NAFTA Side Agreements. The Commission on Environmental Cooperation (CEC) has become a surprisingly robust organization for the exchange of information about North America's shared ecosystems by scientists, civil society, and interested citizens. It wasn't meant to be such.
Indeed, the CEC was never given any real enforcement power and has instead relied on being able to "shame" member governments into taking action. In many ways, it has become a pleasant, and still relatively unknown, institutional surprise.
The North American Agreement on Labor Cooperation never really got off the ground, in part, because it was never given any institutional teeth. My read of the text of the NAFTA Side Agreements is that the three governments were committed only to paying lip-service to these issues, first, by sticking them in texts outside the NAFTA, and second, by leaving them devoid of institutional teeth. It is noteworthy in this context that nothing like the CEC has ever been part of a U.S. FTA negotiation subsequent to the NAFTA.
In spite of these weaknesses, the Side Agreements permanently planted labor and the environment on the international trade agenda such that there are now provisions on labor and the environment in nearly every global trading agreement. For the most part, however, the language in these agreements is merely designed to ensure states adhere to internationally agreed standards of worker protection (International Labor Organization, for example) and do not manipulate or relax aspects of their domestic labor and environmental regulations for the purposes of gaining advantage in their trading relationships (See text of Chapter 19 of the TPP-12 Agreement).
Interestingly, nothing like the CEC has ever been re-created alongside U.S. FTAs subsequent to the NAFTA.
Smells Like Progressivism, Looks Like Protectionism?
A big reservation I have about the future of labor and the environment in the context of trade is how readily professed concern for these issues can slide into protectionism. Labor and environmental
standards are a major source of political cleavage in the global trading system. Developed country labor and environmental standards are generally well above those maintained in developing states. Developing states argue they are doing their best to raise the bar in these areas, but that raising living standards must take precedence over higher labor and environmental controls. Critics say development and the establishment of high standards can happen simultaneously. Developing countries argue that richer societies can better afford such controls and that it's hypocritical for developed states to push this approach when for many decades their own development evolved on the basis of much lower labor and environmental standards-- today's Pittsburgh is very different in both of these areas than it was in the 1940s.
Moreover, the insistence of high standards for labor and environmental standards as a condition of trade strikes a number of developing states as nothing but veiled protection. It sounds nice and progressive to insist upon and use trade liberalization as a means for ratcheting up standards. But beneath it is less a concern about labor and the environment in developing states than a means of making the products of those countries less competitive in developed states.
Don't Mess with Flipper
Some of the earliest experience with this cleavage came in the late 1980s when the WTO was still the GATT. In 1990, the United States banned imports of tuna caught by Mexican fishers because the methods used to catch the tuna did not include safety measures to prevent dolphins from also being caught. The U.S. measure was subsequently modified to allow tuna imports provided Mexican suppliers could prove no dolphins were harmed. Mexico complained to the GATT arguing that restrictions on imports could only be applied to "products" and that U.S. measures were being applied to the "process" by which tuna were being caught. A similar case was brought against the U.S. by Malaysia, Pakistan, and Thailand in the late 1990s over U.S. restrictions on shrimp harvested without the use of turtle exclusion devices on fishers' nets. At issue again was whether restrictions could be placed on imports under WTO rules on the basis of "process" rather than just "product."
Trade and Climate Change
My concern about the global trading regime becoming a vehicle for dealing with the growing importance of climate change is all about this "product vs. process." I imagine there are voices who would very much like to have the terms of trade agreements reach into various parts of a nation's production chain, deem certain processes unsustainable, or dirty (high CO2 content in production), and use trade sanctions to raise those standards. Yet, what sort of moral high ground would we really be standing on when the effects of new sanctions would fall most heavily on those who can least afford them?
It would be easy to use the lure of U.S. market access, for example, to try and impose rich-country labor and environmental standards on developing countries that wanted to sell their goods to Americans. Yet, I wonder greatly how many rich country labor unionists or environmental advocates really care about what goes on in developing countries apart from the impact it might have on their jobs at home? That's probably too cynical. But I certainly think venturing very far down this road risks deepening the cleavage between rich and poor countries in the global trading regime.
There are already lots of measures available to WTO members to limit trade through safeguard measures, negotiated quotas, for conservation or national security purposes, or health and safety-- all of these measures apply to end "products." I wonder how long we'd credibly be able to claim our policy was "progressive" if we adopted trade rules that effectively threatened countries with trade barriers because of productive "processes" we didn't like?
Moreover, those in glass houses should not be throwing stones. For that, look no further than the asbestos industry. In 2001, France banded the importation of asbestos and products containing it. Canada went to the WTO in an effort to overturn that ban and lost. Canada is also a major fossil fuel exporter and parts of its heavy industry are based upon fossil fuel consumption. Would Canada necessarily be a beneficiary of an evolved set of trade rules that could be used to police "process" issues in the manufacture of dirty goods?
Gender and Indigenous Peoples
This brings me to the final two pillars of Canada's current efforts to pursue "progressive" trade policy. Like labor and the environment, gender and issues involving Indigenous peoples around the world are extremely important. Societies everywhere are better off depending on the degree to which they are able to make advances on each of them. But is the global trade agenda the correct place for this?
In some ways, absolutely! As I noted above, trade liberalization inherently breaks down the power of privileged interests and opens economic opportunity to people for whom it may normally be closed. Trade empowers minorities, women, and the poor. As noted in a 2015 World Bank publication titled "The Role of Trade in Ending Poverty," trade is responsible for cutting the number of people living in extreme poverty in half since 1990 to just under a billion people.
As part of its pursuit of gender as a focus of "progressive" trade policy, Canada and Chile recently amended their 1995 FTA to include a new chapter on gender. It lays out a number of lofty goals with respect to gender equality and economic empowerment, including a number of ideas for cooperative initiatives.
However, Article N bis-06 is also clear that "A Party shall not avail itself of the dispute resolution mechanism
provided for in Chapter N (Institutional Arrangements and Dispute
Settlement Procedures) with respect to any matter arising under this
Chapter." In other words, like the NAFTA's labor and environmental Side Agreements, the amended Canada-Chile agreement has no institutional teeth. Wouldn't a more genuinely progressive agenda between Chile and Canada entail modernization that went further in eliminating barriers to trade, including those entrenching differential access to international markets for women?
Could the new Gender chapter evolve in the same way as the Commission on Environmental Cooperation and become far more robust than the governments intend? Perhaps, and there are important agenda-setting qualities to having such text formalized in an agreement.
But how far down a road toward making labor rights, the environment, gender, or Aboriginal peoples subject to dispute settlement mechanisms and sanction in the context of trade are we prepared to go? Do we really want the mechanisms of the WTO or of regional agreements like the Canada-Chile FTA to reach behind borders into "processes" of one sort or another to sanction inequities or right past injustices we find upsetting? I think trade can be an important vehicle for raising awareness of all these issues. But I am unsure how deeply we should venture into using trade mechanisms to sanction behavior we think should be more "advanced" when not directly tied to trade?
Should the threat of trade sanctions be used as a way to forcibly improve the production "processes" in developing countries? As Canada's experience with asbestos suggests, rich countries are not without a few skeletons in their closets. Canada is big and pristine looking, but its management of the environment in the harvesting of softwood lumber leave much to be desired. Should trade rules be reconfigured to make failure to enforce part of the "subsidy" provided to lumber companies? What about trade sanctions for gender inequality, the lack of workplace pay-equity laws, or lax enforcement? How would Canada stack up there? And, finally, what about Indigenous peoples? Could trade somehow be used to remedy past wrongs in a number of different countries? Should it be? Could the very same rules Canada puts forward regarding Aboriginal peoples in the context of trade be turned against Canada in ways that compromise reconciliation processes?
I'm inclined to think we ought to just let trade be trade.
In no way do I intend to minimize the importance of these "progressive" issues. Rather, I merely question the utility of adding them to a trade agenda already paralyzed by cleavages between rich and poor countries; it would be nice to first deal with agricultural subsidies. Moreover, the entire global trading regime is teetering under the challenge from populists in both Europe and North America who feel too much sovereignty has already been ceded to unaccountable institutions like the EU or WTO.
I am all for advancing "progressive" policy positions. But trying to attach them to trade policy strikes me as cowardly and empty-- especially without institutional teeth. The cynic in me thinks Trudeau's rhetoric about all of this is largely for domestic consumption. Moreover, before launching moralistic volleys about "progressive" trade policy, the Trudeau Government would do well to think about how those same volleys might be used by others in ways that complicate the ability of Canadians to advance on things like the environment, gender, or Indigenous peoples at a pace of their choosing.
A sense of doom is beginning to take hold about the future of the NAFTA's "renegotiation," "modernization" or "destruction" (pick your favorite). Last week, at the end of Round 4 of NAFTA 2.0 talks, the three governments announced the 5th round would be postponed for a month (late November) to allow for some stock-taking by all parties.
Fake smiles, failed Round
It's hard to read into this delay much that is positive, if for no other reason than that it will probably push completion of any agreement into the spring of 2018 and closer to presidential elections in Mexico. The proximate reason for "stock-taking" are the positions being taken by the Trump Administration on a range of issues (dispute settlement, procurement, supply management, agriculture, rules of origin, etc) unpalatable to Canada and Mexico-- see my previous pieces on these things as the talks have moved along (here, here and here).
In my search for a silver lining in all of this, I have tried to tell myself that all negotiations look doomed right before a deal is struck. In truth, I predict that before the end of the year Trump will make formal what I believe he's wanted all along; scrap the NAFTA.
One of the most ardent proponents of North American integration, American University's Robert Pastor, died in early 2014. To the end, he vigorously pursued efforts to more firmly connect
Over the last few months, I've thought about what he'd say about what's going on. One of my very first posts to this blog was about North America and was connected to Pastor's passing. I thought I'd re-post it since it's as relevant today as ever.
New Year’s Day 2014 marked the 20th anniversary
of the implementation of the North American Free Trade Agreement (NAFTA). About
a week later, January 8, Robert Pastor, one of the NAFTA’s fiercest defenders,
and one of academia’s most tireless advocates of deeper North American
integration, died after a 3 ½ year battle with cancer. To the citizen on the
street, Robert Pastor is hardly a household name. Yet, among those in academia
or public policy for whom North America was a focus, Robert Pastor’s work could
not be ignored. Indeed, for much of the past three decades we have all—academics,
politicians, and the general public-- implicitly been debating the merits of
his policy prescriptions.
Pastor’s death also comes at a time of great uncertainty
about the future of North American integration. Government priorities in all
three countries have shifted elsewhere. Academic centers focused on North
America have been disappearing. There’s little private sector consensus on the
merits of further integration. Academic centers focused on North America are in
rapid decline. And security has become entrenched as the overarching framework
for governing the North American economic space. The last phase-ins of the
NAFTA came into force some five years ago and the agreement has largely done
what it set out to do. Many of the undergraduates I see every fall know little
about the NAFTA. In short, the NAFTA is old news.
Robert Pastor’s final book was entitled The North American Idea (2011) but what’s actually left of that
idea?
For proponents of North American integration, the early
1990s were heady times. The Cold War was over. Democracy and liberal capitalism
had emerged as the victorious, dominant mode of global governance anchored by
the United States as the pre-eminent example of both. Yet, for proponents of
this view, euphoria gave way to despair as the 1990s wore on as challenges to
liberal capitalism and integrated markets emerged. The NAFTA’s implementation
in January 1994 was marred by the Zapatista rebellion in Chiapas, Mexico. The
newly created World Trade Organization was infamously rocked by violence at its
1999 ministerial meeting in Seattle (Battle in Seattle). And the proposed Free
Trade Area of the Americas, hatched with some fanfare in 1994, was effectively
dead by 2002.
Efforts to build upon what the NAFTA had begun mostly fell
on deaf ears after 1994. The Clinton Administration, which spent so much of its
political capital on getting the NAFTA through the U.S. Congress, seldom
mentioned it again during the two terms of his administration. The NAFTA had
already become synonymous with all that was wrong with the rapidly expanding
global trading regime, Pastor more recently complaining that it became a
“piñata for pandering pundits and politicians.” Indeed, critics from both ends
of the political spectrum came to see what they wanted in the NAFTA. For some,
the Agreement was too shallow and didn’t do enough institutionally to level
North America’s asymmetries. For others, the NAFTA dealt with too few issues
and left a lengthy list of festering problems off the table. For others still,
the NAFTA represented a kind of Trojan Horse, poised to destroy sovereignty,
force the export of bulk fresh water, facilitate the construction of twelve
lane super-highways, destroy the environment, or unleash waves of low-cost,
job-killing labor.
Prior to the September 11 attacks on the United States,
virtually every global meeting of economic leaders was guaranteed to illicit
protests numbering in the tens of thousands, epitomized by the 1999 Battle in
Seattle, anti-FTAA protests in Quebec City in 2001, and tragically capped by
the death of a protester at the hands of police at the G8 Summit in Genoa,
Italy in July 2001. It had all become a poisonous mix that North America’s
political and private sector leadership wanted no part of.
As many others retreated from the debate, Robert Pastor jumped
in with two feet, publishing Toward a
North American Community in August 2001. There he argued that the central
failing of North American integration was that the NAFTA had done too little to
institutionalize and strengthen trilateral cooperation. He contrast the absence
of institution building in North America with the sclerotic,
over-institutionalization of the European Union and argued for a unique
approach to North America that landed somewhere in the middle, reflective of
the continent’s unique history. Nevertheless, his argument instantly made him
the target of intellectual and political foes, among them, CNN’s Lou Dobbs, whose
anti-trade, anti-immigration rhetoric was openly xenophobic. Whereas members of
the Clinton and Bush administrations refused to challenge Dobbs and others,
Pastor took them on, transforming himself into a political piñata as well.
I have heard Robert Pastor referred to as North America’s
Jean Monnet; a reference to one of European integration’s greatest intellectual
and political champions. The Monnet Plan was designed to jumpstart the
integration of Europe through the integration of French and German coal and
steel production. Monnet himself was later appointed president of the European
Coal and Steel Community’s governing body. Monnet lived to see even more
economic integration among western European economies, but died in 1979, well
before Europe’s post-Cold War expansion and the creation of the Euro. The
European project remains a work in progress, and there were certainly days on
which Monnet wondered if his vision of an integrated, prosperous, and peaceful
Europe would ever come to pass.
Comparing Pastor to Monnet might be taking matters too far,
particularly since many of his ideas (customs unions, common currency) are
controversial.Yet, the comparison is
apt in that, like Monnet, Pastor pushed his vision for North America everywhere
he went; within academia, the halls of power, the private sector, and the
media.
Yet, the timing of Pastor’s Toward a North American Community could not have been worse. The
9/11 terrorist attacks instantly put the economic integration debate on hold,
quickly replacing it with security—in many minds, the antithesis of economic
openness.
In recent years, Pastor became an outspoken critic of the
impact post-9/11 security measures were having on the economic benefits of
North American integration. He was dismayed at the absence of political courage
by the three governments to pursue a larger vision of an integrated, and
secure, North American economic space. In 2005, the three governments launched
the Security and Prosperity Partnership aimed at balancing the benefits of
economics with the new imperatives of security.
It was the first serious trilateral cooperative effort since
the NAFTA. Yet its main achievements were to upset nearly every stakeholder
group imaginable, each of the national legislatures, and provide fodder to
conspiracy theorists on the political left and right. The SPP generated a long
list of issues the three countries could work on, but was never guided by an
overarching vision of what North America could become, and quietly went away in
2009, further solidifying border security as the overarching paradigm through
which our leaders see the continent. In 1994, scholars spoke of the
implications of a borderless North America with passport free travel and
integrated labor markets. In 2014, North America’s borders are more prominent
than ever, acting as both commercial choke-point and security dragnet.
Much as Winston Churchill warned of an “iron curtain”
descending across Europe at the onset of the Cold War, Pastor was aghast at the
descent of a “security curtain” over North America and its effect on trilateral
cooperation. He was especially critical of the leadership in Ottawa as it
sought to sideline Mexico City and deal with Washington bilaterally. Ottawa
believed it could cash in on Canada’s “special relationship” win security
concessions from Washington that would prevent the “Mexicanization” of the
Canada-U.S. border; the U.S.-Mexico and Canada-U.S. borders are actually more
similar now than they are different. In fact, Pastor argued that Ottawa’s
approach only exacerbated the asymmetries of power among the three countries
that Canada had spent much of the last two decades trying to minimize through agreements
like the NAFTA. Further, he argued, the leadership in Mexico City was far more
open than Ottawa to a collective, perimeter approach with Washington to the mix
of economics and security. More troubling still, Ottawa’s approach represented
a puzzling misread of the importance of Latin America, and Mexico in
particular, in U.S. policy-making that has netted Canada few, if any, benefits.
In his last book, The
North American Idea (2011), Pastor argues that the historical experiences
of Canada, the United States, and Mexico have far more similarities and points
of intersection than is often assumed. In addition, public opinion surveys in
all three countries suggest the populations of all three are more open to the
idea of a more unified North America than any of the three governments. However,
the idea of a unified North America seems more elusive than ever. Security
overwhelmingly dominates our approach to border policy, arguably undermining
many of the economic benefits of economic integration. Apart from border
security issues, North America has faded in the policy priorities of all three
national capitals. And the academic and policy research focus on North America
is in rapid retreat throughout the continent.
The European project has been over 60 years in the making
and remains a work in progress. Jean Monnet did not live to see the advent of
passport free travel or a common currency in Europe, and must have despaired
over the pace at which is vision was being implemented. Yet, the idea of a more
unified Europe remained.
Robert Pastor’s specific prescriptions for North America
were not always popular, even among those who basically agreed with him. Yet,
he, like Monnet, spent much of his life trying to keep the “idea” of North
America alive in whatever form it eventually takes. North America is not
Europe, nor will it ever be. However, the “idea” of a more trilaterally oriented
North American economic, security, and (I’d argue) ecological space is as
important as it’s ever been to the people who live in it. Our policy leadership
would be wise to keep this “idea” in mind.
Hillary Clinton has slowly been normalizing her return to public life following 2016's stunning presidential election outcome. Her new book, aptly titled "What Happened," includes many depressing details about the tumult of 2016 and her personal struggles in the year since. In a recent interview with CNN's Anderson Cooper about the book, she also revealed that one of the techniques she had tried as a means centering and calming herself was the practice of alternate nostril breathing.
I have, of course, expressed a growing level of angst about the Trump Administration as its first year in office comes to a close. It seems a little goofy, but since it seemed to work for Mrs. Clinton, I thought I'd give it a go.
It wasn't helpful.
I probably wasn't doing it right; sort of like my experience with yoga a few years back. Just not my cup of tea.
Of late, I have sought more and more comfort from a different source; the Federalist Papers. I've written here before about my admiration for what Madison and Hamilton wrote in New York newspapers more than 220 years ago in the midst of the ratification debate. However, those musings were more of an attempt to understand the political paralysis that frustrates so many observers of American politics. Whether it's foreigners or Americans themselves, the perpetual inability to get things accomplished is most often depicted as a sign of impending doom for the entire system. Yet, as I repeated over and over again, Madison (especially) and Hamilton largely designed it that way.
The whole point of America's infamous "checks and balances" at the federal level, and replicated inside each of the 50 states, is to thwart the concentration of power, to pit "ambition against ambition," and short-circuit the "mischiefs of faction" that Madison worried could undermine everything. It is a system that is incredibly open, with multiple points of entry into different branches and levels of government. It's a system that rewards organization, virtually ensures countervailing forces will organize against you, and necessitates messy compromise. That might seem an odd thing to say in an era of hyper-partisanship and the virtual absence of anything that looks like compromise. Yet, whereas just a few years ago the failure to compromise, the inability to make progress on many issues, and the paralysis in policy-making were-- for some-- signs of the apocalypse, many of those same people probably see more virtue in it all than ever.
The fact is, wherever I look in the Trump Administration these days, I see the Federalist No. 10 and No. 51 in action. In his first year in office, President Trump has crashed spectacularly into the standard problems all presidents encounter. The main difference for Trump is that he's compounding them with a potent combination of navel-gazing narcissism and staggering incompetence.
For normal presidents, the fundamental dilemma facing them is that they have too little authority to satisfy public expectations of their performance. If you read Madison's thinking about this in the Federalist, and quickly peruse Article II of the U.S. Constitution, you'll quickly realize how true this is. On its face, Article II powers are pretty minimal. Indeed, there's a
strong argument to be made that Madison and company thought of the U.S.
president in largely ceremonial terms. "Commander in Chief" is pretty
important, but Congress is in charge of raising and financing the troops
under the President's control? There are some foreign affairs duties
assigned to the President, but they all come with important limitations;
ambassadorial appointments and treaty-making functions all require
Senate approval.
I am not arguing that American presidents are weak figures. Indeed, throughout the course of American history, presidents have had a very liberal reading of the meaning of Article II's "Executive power" to do all kinds of things and effectively expand presidential authority and influence. Trump can clearly do a lot of harm; he's got his finger on the nuclear button, is sabre rattling with North Korea, and just today made moves to undo the nuclear deal with Iran.
For a variety of practical reasons, U.S. presidents have assumed responsibility for broad swaths of American foreign policy, including many duties ostensibly reserved for Congress under Article I, Section 8's "enumerated powers." Yet, presidents have to be cautious with the exercise of power. Power isn't static nor is it without limits, particularly within a U.S. system which gives comparatively little nominal or statutory power to the president, and sets up all sorts of other actors looking to undermine presidential power. The kind of power presidents need to get things done must be carefully cultivated and wielded judiciously or risk having it eviscerated away by other parts of Madison's original design.
President Trump swept into office after one of the craziest, most surprising campaigns in American history. In his first couple of weeks in office, President Trump signed all kinds of Executive Orders designed to get the ball rolling on parts of his agenda. Many of them reversed Executive Orders put in place by the Obama Administration. Trump has withdrawn from the Trans Pacific Partnership, threatened to scrap the NAFTA, and hectored the South Koreans into revisiting the U.S.-Korean Free Trade Agreement. He has initiated a travel ban from several Muslim-majority countries, threatened not to implement the 2015 Paris Climate Change Agreement, and threatened to cut the budgets of key executive branch agencies-- State, EPA, Interior-- he doesn't like. All serious and deeply troubling.
Feelin' the Love Last Spring....
Yet, to get anything big done, Trump needs some friends on Capitol Hill; he needs legislation. Unlike parliamentary systems, the only two elected officials in cabinet are the President and Vice-President, neither of which sits in the legislature. In the United States, party discipline is a faint shadow of what it is in parliamentary systems, and the President, while the most prominent member of their political party has virtually no authority over those within their party elected to Congress.
For a time, Republicans on Capitol Hill probably felt they owed part of their own electoral victories to the phenomenon that Trump became on the campaign trail. Yet, many of those same members have always had reservations about Trump, a number probably want Trump's job in 2020.
Getting Congress to go along with White House policy priorities is a bit like herding 535 kittens (100 in the Senate, 435 in the House); it requires a near-constant persuasive offensive on the part of White House staff, and the President himself. Where presidential priorities are concerned, the most effective White House's behave more like a "legislators in chief," frequently drafting legislation that reflects those priorities, and then seeking sponsors on Capitol Hill to shepherding them through committees, amendment, and final votes. All the while, Presidents and their staffs are monitoring the proceedings, paying recalcitrant Members visits, making promises in exchange for their support, or sometimes exerting a little not-so-friendly pressure.
President Obama was terrible at this; probably one of the biggest reasons ObamaCare is where it is today. But Trump is even worse at all of this. His main tactic seems to be using Twitter to critique legislative initiatives on healthcare or taxes he hasn't bothered to read. Moreover, if he wants anything done about immigration, infrastructure, or his ridiculous border wall, he's going to need support from some of the same people he's been excoriating.
For a stark contrast with both of these leaders, just listen to parts of the Lyndon Johnson Tapes. Therein, you will hear a master-manipulator calling recalcitrant Members of Congress about their lack of support for his priorities. President Johnson was alternatively persuasive, abrasive, and crude with is former Hill colleagues, but he was brilliant in the way he wielded carrots and sticks to get his way.
As Trump racks up failures, many of which are own-goals, his influence and "power" over his agenda are beginning to wane. In short, President Trump has failed to cultivate and preserve the limited power he had in his sails on Election Day in 2016. Presidents have always been uniquely positioned to appeal to the entire country, rally support, and pursue their agendas. Who else has a 747 to fly around in? Who else can request national television time to pitch their ideas to voters? Who else in the country can serve as "consoler-in-chief" in times of national crisis (hurricanes, mass shootings, etc)? What about the role of an American president as "leader of the free world?"
None of this happens or resides fully within the control of U.S. presidents unless it's actively maintained, cultivated, and wisely exercised. Trump is quickly squandering what little of this power he had. Waiting in the wings are a long list of actors in the American political system eager to marginalize the White House, undercut its power, and move a different agenda forward while they wait for the next president to be elected in 2020.
Few people imagined someone like Trump ever moving into the White House. But Madison and Hamilton did.
Whether Trump serves just four years or eight (a possibility I do not discount), I'll be leaving the alternate nostril breathing to Mrs. Clinton. At the moment I've got no plans to build a survival bunker in the backyard and hide for the next few years. Instead, my solace, my zen in the middle of all this chaos, will continue to come from the Federalist Papers.
With no shortage of global chaos drawing our attention these days, not the least of which is North Korea, you may not have been paying attention to the fact that the second round of NAFTA 2.0 talks
The Three Amigos 2.0?
wrapped up in Mexico City this past weekend. Complex negotiations like the NAFTA 2.0 have a fascinating set of dynamics worthy of study in their own right. You don't just show up in a hotel conference room, sit down with your counterparts, and begin hashing out an agreement. Negotiations are dynamic, sometimes unpredictable situations. All sides can be hyper-prepared with their briefings, position papers, and demands. But once negotiations are formally underway, all bets about the precise outcome are off. Everything from the shape of the bargaining table, to the actual process by which parties negotiate, and, of course, the personalities of the negotiators themselves, is pivotal to the outcome. Indeed, it is frequently the case that negotiations seem doomed just before an agreement is struck.
