Free Trade Doesn’t Have To Be As Unnecessarily Complex As NAFTA

The North American Free Trade Agreement negotiations are fast approaching the May 18 deadline that U.S. officials say needs to be respected in order to secure congressional approval under the president’s existing authority this year. With a presidential election in Mexico in July and mid-term elections in the U.S. in November, now would be a good time for a deal. But various obstacles remain; for example, in the interdependent auto sector.

From the outside looking in, the whole thing sure looks a lot more complicated than it needs to be. Why can’t we just agree to let people and companies trade with each other when they want to, and pretty much let it go at that? After all, if trade is voluntary, both sides come out ahead. That doesn’t change just because it happens across a political border.

Once upon a time, trade deals were indeed very simple and straightforward. Take the 1860 Cobden–Chevalier Treaty between the United Kingdom and France. Britain had been moving unilaterally toward freer trade since the repeal of the Corn Laws in 1846, but the treaty reduced French duties on most British manufactured goods, and reduced British duties on French wines and brandy. The value of British exports to France more than doubled in the decade that followed, as did the importation of French wines into Britain.

The document that accomplished this impressive feat — and also led to a flourishing of trade across Europe as other trading partners imitated it — clocked in at a very concise six pages in length.

In contrast, Canada’s latest internal free trade deal, signed in April 2017, runs to 345 pages, almost 140 of which are for exemptions. And this is for trade across provincial barriers, something that is already enshrined in Section 121 of our Constitution, which states: “All articles of the growth, produce, or manufacture of any one of the provinces shall, from and after the union, be admitted free into each of the other provinces.”

International trade deals are even more complicated, and accordingly longer, too. NAFTA bills itself as a “comprehensive” agreement and a “complex and lengthy” document. Tell me about it. It features 22 different chapters, and totals some 2,000 pages. CETA, the deal Canada signed with the EU in 2016, is around 1,600 pages. The stalled Trans-Pacific Partnership agreement is over 5,000 pages long.

Some may argue that the world is a lot more complicated today, which is why we need more complicated trade deals, but this is simply false. Trade deals are long and complicated today because they’re full of exemptions and the top-down micromanagement of minute details.

The U.S. request that a new version of NAFTA require 40 per cent of the manufacture of passenger cars to be performed by workers making at least $16 an hour, for instance, has nothing to do with free trade. It is in fact a limit on free trade, and being far more than what Mexican factory workers generally make, its purpose is to restrict trade with Mexico in this particular area.

Former Australian Prime Minister Tony Abbott had the right idea last year when he recommended that post-Brexit, Australia should do a one-page free trade deal with Britain. Of course, Australia has benefited enormously from its embrace of unilateral trade liberalisation in the 1980s and 1990s, as Alexander Downer, the country’s former high commissioner to the U.K., recently reminded BBC radio.

While unilateral free trade would be great, of course, I don’t want to ask for too much. I would personally be happy enough if trade negotiators got back to their roots and produced nice, tight six-pagers like the one that Cobden and Chevalier crafted over 150 years ago, during the first great wave of globalization.

Michel Kelly-Gagnon is President and CEO of the Montreal Economic Institute. The views reflected in this op-ed are his own. (Original link.)

Read more articles on the themes of Liberalization of Markets and Regulations.

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