NAFTA: The gift that keeps on giving

Photo by CP

Prime Minister Stephen Harper in Toronto recently.

Well, it's Friday and we're all in a good mood, so let's give this FreeTrade Fridays category a whirl.

Prime Minister Stephen Harper recently reminded the U.S. that tampering with NAFTA may not be such a fine idea for American consumers. His comments came after Democratic presidential candidates Hillary Clinton and Barack Obama warned they wouldn't shy away from renegotiating the deal to get a better deal for American workers. The PM's point is the United States has a pretty good energy deal in the North American Free Trade Agreement and might want to leave it alone

How good? Well, Canada can't reduce energy exports to the U.S. even in times of shortage, according to Article 605 of the agreement (scroll down). Merely one of a series of restrictive clauses, it commits Canada to continue exporting proportionally to the U.S. - no matter what.  Here's what it says:

Article 605: Other Export Measures

Subject to Annex 605, a Party may adopt or maintain a restriction otherwise justified under Article XI:2(a) or XX(g), (i) or (j) of the GATT with respect to the export of an energy or basic petrochemical good to the territory of another Party, only if:

a)the restriction does not reduce the proportion of the total export shipments of the specific energy or basic petrochemical good made available to that other Party relative to the total supply of that good of the Party maintaining the restriction as compared to the proportion prevailing in the most recent 36-month period for which data are available prior to the imposition of the measure, or in such other representative period on which the Parties may agree;

b) the Party does not impose a higher price for exports of an energy or basic petrochemical good to that other Party than the price charged for such good when consumed domestically, by means of any measure such as licenses, fees, taxation and minimum price requirements. The foregoing provision does not apply to a higher price that may result from a measure taken pursuant to subparagraph (a) that only restricts the volume of exports; and

c) The restriction does not require the disruption of normal channels of supply to that other Party or normal proportions among specific energy or basic petrochemical goods supplied to that other Party, such as, for example,between crude oil and refined products and among different categories of crude oil and of refined products.

In other words, the spigots must stay open. And there's more: Canadians aren't allowed to pay less for oil and gas than Americans pay for exports.

Did the third amigo go along with this section? Not on your life. No señor. And it's only one of the exemptions demanded - and retained - by Mexico when it negotiated the free trade deal with the U.S. and Canada.

Annex 605

Exception to Article 605

Notwithstanding any other provision of this Chapter, the provisions of Article 605 shall not apply as between the other Parties and Mexico.

The Ottawa-based Centre for Policy Alternatives says the energy provisions don't make sense for Canadians because, among other reasons, "we are running out of natural gas . . . and import 49 percent of the oil we consume," while shipping two-thirds of Canadian oil and 60 percent of Canadian gas to the U.S.  Earlier this week, the centre released a joint report with the University of Alberta's Parkland Institute that concluded the only solution for Canada is to pull out of the "proportionality" provisions.

I'll return to this subject in future posts, including the energy section, but if you are a free trade nerd like me, here's the entire NAFTA text for bedtime reading. Don't blame me if you can't sleep afterwards.

Good reading.

Comments

[koby]

I am surprised that the NDP have jumped on this.