Moving Beyond NAFTA

When U.S. President George W. Bush, Canadian Prime Minister Paul Martin and Mexican President Vicente Fox sit down together in Texas this week, their goal will be nothing short of laying the foundation for the next level of continental integration beyond the North American free-trade agreement. Problem is, what that means to each of them is quite different. Mr. Bush is pushing for a continent-wide security policy to help fight the war on terror. Mr. Fox wants an easing of U.S. restrictions on Mexican migrant workers. Mr. Martin is eyeing NAFTA's flawed dispute-resolution system, as Canada and the United States continue to quarrel over the contentious lumber and beef files. Each of these priorities is a political hot button, and could quickly test the limits of North American co-operation if pushed too aggressively. Canadian officials have said that ambitious proposals for continent-wide security and immigration policies and a trilateral customs union recommended last week by a task force co-chaired by former deputy prime minister John Manley -- are not on the Prime Minister's agenda. While his position might lack vision, it doesn't lack pragmatism. Trade diplomacy, as a subset of politics, is the art of the possible. The Manley proposals are the equivalent of an Olympic sprint for a continent barely beyond the crawling stage of integration. What might be possible? Regulatory harmonization -- something that is already on Ottawa's mind. Ottawa plans to unveil a proposal this week to streamline the Canadian business regulatory framework to improve efficiency, speed up approvals and, where practical, harmonize our regulations with . the United States. While Ottawa's plan could, in theory, be accomplished unilaterally, it would make more sense to co-ordinate these harmonization efforts with our NAFTA partners. The biggest gains -- in accelerating approvals, simplifying business practices and attracting investment -- would come as the countries recognized each other's regulatory structures and removed duplication of effort. This would be the next logical step in trade reform, removing another layer of barriers to the free flow of goods, services and business development across the borders of the NAFTA partners. It would also have the distinct advantage of being nowhere near the political time bomb that security, immigration and tariff policies are for the three leaders. Still, it would be a mistake to believe that regulatory reforms don't carry their own political sensitivities. Like other laws, they reflect our values as a society, and are in place to safeguard the interests of the Canadian public. There's a danger that in the pursuit of harmonization, there would be a tendency to adopt the least stringent regulations offered by our trading partners, something that would not serve Canadians well. For Canada, and indeed for its NAFTA partners, the goal in any negotiations on regulatory reform should be to streamline systems without watering them down, to improve efficiency without undermining effectiveness, and to harmonize rules while maintaining safeguards that would meet the needs of the individual nations. There's an opportunity for real progress here, and Canadian values needn't be jeopardized in the push to advance a continental trade agenda.

Nuisance Tariffs Targeted at Texas Summit Prime Minister Paul Martin and his U.S. and Mexican counterparts will launch trilateral efforts to whittle away small regulatory differences and "nuisance tariffs" that frustrate trade between their countries when they meet in Texas. A senior Canadian official close to the talks said the Texas trilateral process takes "some inspiration from the Smart Regulation agenda" that Ottawa is embarking on to cut red tape for business at home and abroad. "[There] is an interest in all three countries to see if we can remove regulatory barriers that don't make a difference while maintaining the highest standards," the official said. The chemical sector could benefit from regulatory co-ordination, a second senior official said. Canada is working with the United States, among other countries, to align their "new substances" regulatory regimes in order to streamline access to multiple markets for products. In tomorrow's meeting with U.S. President George W. Bush and Mexican President Vicente Fox, Mr. Martin will press Mr. Bush on cross-border conflicts such as softwood and beef, but officials don't expect announcements on these files in Texas. The three countries will also agree to reduce so-called nuisance tariffs that hamper trade without any benefit, said a senior official close to the talks. Canada, the United States and Mexico will agree to work on measures to permit the easier flow of professionals between countries, officials say, and also agree to increased co-operation in sectors "where we have a common North American interest, such as autos and steel." Other co-operative efforts to be tackled include: Efforts to increase the reliability of the North American electricity grid; Making energy efficiency standards more compatible across North America; And enhancing cross-border electronic access to stock exchanges in Canada. Canada and the United States will be free to tackle differences that only concern their two countries even though Mexico will be part of the trilateral process as well. Canadian officials played down the talks, saying they expect no "big bang" result in Texas but a work program of "very pragmatic, very practical work" on things such as easing trade barriers. Efforts to shrink regulatory differences between Canada and the United States come in the wake of research showing the benefits. An independent policy research group that does work for the federal government and deputy ministers recently completed a study showing that regulatory differences between Canada and the United States are costing this country. The Policy Research Initiative concluded in a December, 2004, report that if Canada's regulatory burden had fallen over the past 25 years to match a similar decline of the burden in the United States, then investment over the period could have been 30 per cent higher in this country.

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