New USMCA trade deal provides few benefits for Canadians

By Kayle Van’t Klooster, October 11 2018 —

After nearly two years of negotiation and non-stop posturing from political leaders, there is finally a new agreement to govern trade between Canada, the United States and Mexico — the U.S.-Mexico-Canada Agreement (USMCA). Unfortunately for Canadians, it doesn’t seem like we really got much from the debacle.

Prime Minister Justin Trudeau looked great throughout the whole process. He scored plenty of political points across the spectrum for appearing to stand up to America, defending farmers and steelworkers and staying cool in the face of U.S. President Donald Trump’s schoolyard insults. According to a Nanos Research survey, about seven in 10 Canadians approved or somewhat approved of Trudeau’s handling of trade relations with Trump.

In the end, however, all Trudeau can really boast is that the final deal isn’t as bad as it could’ve been.

Let’s start with the agriculture sector. Besides opening our egg and poultry markets, the concession that everyone is talking about is increased access to our dairy market. Since 2015, the Government of Canada has opened up about 10 per cent of the country’s domestic market to foreign competition. The USMCA also scraps the Class 7 dairy product classification, a system that created lower-priced domestic dairy ingredients for processors to make into products like cheeses and yogurts to compete with imports coming from the U.S.

To be fair, the federal government has said that they are prepared to subsidize the dairy industry, but Canada shouldn’t want a dairy industry propped up by government dollars. South of the border, the American market is plagued with overproduction fuelled by their own irresponsible subsidies and a rise of corporate factory farming. Our dairy system works, giving a fair price to consumers and ensuring the survival of family farms across Canada. We shouldn’t disrupt that in favour of importing American problems.

The concessions, unfortunately, don’t end there. We could soon find ourselves paying more for their prescription drugs as well. The deal contains an agreement restricting the production of cheaper generic alternatives for name-brand drugs. Richard Gold, a law professor at McGill University, told the CBC that this change could cost Canadians “tens of millions” in the coming years. This is highly irresponsible considering a recent trend of Martin Shkreli imitators boosting trademarked drug prices by 200 or 300 per cent for a quick profit.

Trudeau and his team don’t have a lot of wins to point to in this deal to help this bitter pill go down easier. One that keeps coming up is the preservation of Chapter 19, the conflict resolution section from the original agreement. It’s still in place, almost word-for-word from the previous trade agreement. That is a relief because if the U.S. had its way, trade conflicts like the current soft lumber dispute would be decided on by American judges. It’s a demand so laughably unfair that it’s hard to believe American negotiators requested it with a straight face. But it achieved its purpose — it took so much to protect Chapter 19 that Trudeau’s team lost the ability to demand concessions elsewhere.

Yet still, Foreign Affairs Minister Chrystia Freeland came out of the negotiation process saying she “felt throughout this negotiation truly a sacred trust.” The statement neglects that throughout this whole process, the U.S. kept its aggressive steel and aluminum tariffs on the Canadian economy while also threatening to add crippling tariffs on our auto sector. These steel and aluminum tariffs are still in place despite this new “free trade” agreement.

This deal has made one thing clear — Canada must diversify its economy and find trade partners beyond our southern neighbours. The U.S. policy stance has shifted to only emphasize their self-interests. The recent trade deals with the European Union and our Pacific partners were a good start and that process needs to continue.

However, even future trade opportunities were sacrificed when securing this deal. The new USMCA agreement dictates that each signatory must give six months’ notice before engaging in new free trade talks with a non-member country, giving the U.S. near-veto on what countries Canada can pursue trade deals with in the future. This deal isn’t just bad for Canadians: it may even mean we’ve signed away part of our sovereignty.

The USMCA, although not set in stone, is irresponsible. Trudeau enjoyed great support from the Canadians throughout the last few months. The public clearly told him that Trump pushed Canada too far and forced us into a bad deal and that we should walk away and resume negotiations in a more favourable climate. Yet here we are, with a deal that does nothing for Canadians.

Kayle Van’t Klooster is a fourth-year International Relations Major at the University of Calgary. He writes a column for the Gauntlet about Canadian national and international affairs called “For Your Consideration.”