Salient Features and Discussion of Proposed Canada-U.S.-Mexico Agreement

The Canada-U.S.-Mexico Agreement (CUSMA) to supplant the current North American Free Trade Agreement (NAFTA) was signed by the three respective government representatives on November 30, 2018 and signed again on December 10, 2019 after certain changes were included. The governments of the three countries must officially pass CUSMA into legislation for it to come into effect. Meanwhile NAFTA remains in force. NAFTA was signed in 1992 by the leaders of the U.S., Mexico and Canada, and activated on January 1, 1994.

The official stated goal of NAFTA, which was used for propaganda purposes to push the anti-social offensive, was to grant each country the best possible tariffs on certain goods -- an arrangement called Most-Favoured-Nation status, eliminate trade barriers and facilitate the trade of goods and services, promote fair competition, increase investment opportunities, and ultimately, establish a framework for future cooperation regarding trade among the three countries.

The resulting reality was to accelerate a trend already evident: the integration of the economies of North America into a Fortress under the control and direction of the most dominant factions of the ruling financial oligarchy and their conglomerates and cartels. The control of the ruling oligarchs is so extensive they have politicized their private interests and integrated them with the government and state. Most regulations and restrictions on the operations and investments of big business have been removed, watered down, ignored or slated for elimination.

This means that the power of government consists mainly of channeling publicly collected social wealth to various factions of the financial oligarchy, restricting the actions of the working class in defence of its interests and using the combined military, human and natural resources and produced social wealth of Fortress North America in war and other actions to attain hegemony over the entire world.

The direct power of the financial oligarchy aligned with the U.S. imperialists, over the economic, political, military and social affairs of North America and their striving for global hegemony drives the changes to NAFTA to create CUSMA. The World Trade Organization (WTO) and its dispute resolution mechanism, for example, is also being superceded, as it puts fetters on the ability of the U.S. imperialists to do as they please. Similarly, the principles of international relations to uphold peace that the United Nations is supposed to embody and uphold have been systematically undermined.

The politicized private interests of the financial oligarchy mean anarchy and violence on a global scale without an international business law to keep competitors from destroying or killing each other. In some ways, politicized private interests reflect the lawlessness of the Wild West on a global scale. The arbitrariness of politicized private interests is seen with President Trump wielding tariffs as weapons to gain advantages over China and others identified as hostile competitors, and imposing sanctions and boycotts on any country that does not submit to U.S. domination.

The softwood lumber tariffs attacking Canadian production and sales in the United States are but one example. The tariffs are seen as an advantage for the private interests of the big softwood producers as retail prices have increased exponentially. The five biggest so-called Canadian softwood lumber producers have profited from the higher prices, shut mills in Canada and invested heavily in the United States and Europe.

However, the conditions for agreements such as CUSMA and bodies such as the WTO to provide order or sort out contradictions no longer exist. Anarchy and violence in international relations and the dictate of supranational powers prevails. Under such conditions of anarchy and violence, adherence to rules to enforce agreements and arrangements no longer exists, except in circumstances where a powerful faction of the financial oligarchy may want to opportunistically use them. Needless to say, the time has arrived for a new direction for the economy that favours the working class of all three countries in North America, restricts the activities of the financial oligarchy and takes actions to eliminate the anarchy and violence that now prevails in international relations.

Proposed Changes from NAFTA to CUSMA, Including
December 2019 Revisions

Specific arrangements identified for change with the adoption of CUSMA include those in the agricultural, vehicle and pharmaceutical industries, and regulations that affect the three countries' economic relations with others in the world.

Attack on Canadian Farmers

The financial oligarchy is particularly keen on eliminating Canada's and Quebec's traditional supply management in the dairy sector. Farmers have waged a determined struggle to defend their rights within a sovereign Canada and its economy. By granting tariff-free access to the Canadian dairy market for the other two countries and vice versa, CUSMA seeks to destroy farmers' sovereign right to organize their sector. The U.S. agricultural sector is well-known for its dominance in size of operations and integration with the financial oligarchy. The conglomerates in the sector will be able to sell below prices of production to wipe out competitors in the dairy sector as they have done in the United States.[1]

Vehicle Industry

In 1965, the big three vehicle producers at the time (Ford, GM and Chrysler) established a state-organized cartel with the Canada-United States Automotive Products Agreement. The auto pact effectively integrated the U.S.-Canada vehicle industry under the control of the big three U.S. monopolies and various auto parts manufacturers. For the auto cartel, trade between Canada and the U.S. became mostly an internal tariff-free movement of products within the production process that became known as "just in time."

In most sectors, including energy, internal trade among the divisions of giant, mostly U.S.-controlled private enterprises, with goods moving between Canada and the U.S., became a dominant feature of Canada's integration into the U.S. economy during the later decades of the twentieth century. Canada does not trade with the U.S. as a sovereign country in control of its economic affairs but as a captured and integrated economy within Fortress North America dominated by a financial oligarchy.

With the auto pact, the vehicle cartel gained access to an educated, healthy and disciplined Canadian human productive force. Two important social programs made the price of the capacity to work of Canadians cheaper than workers in the United States: the Canadian National Health Insurance Program and Unemployment Insurance (UI) now called Employment Insurance. The U.S. auto monopolies did not have to pay for private health insurance for their workers in Canada as they did in the U.S., and could organize irregular large layoffs with workers receiving UI payments almost equivalent to their regular pay. This meant workers remained in touch as experienced on-call autoworkers even during extended layoffs.[2]

With the gradual extension of the auto sector worldwide in the final decades of the twentieth century, including large global investments in auto production in East Asia, the auto pact lost its relevance for the financial oligarchy and in fact became an irritant for the surging Japanese and south Korean producers who had extensive connections with big investors in the United States. The U.S.-Canada Free Trade Agreement and NAFTA in 1994 replaced the auto pact, integrating all auto production in North America beyond the original big three as tariff free.

The uneven development of imperialism, changes in production technique and a rapid increase in international transportation of goods via ships have seen vehicle production expand in importance in Asia and Mexico and decline in the U.S. and Canada. NAFTA subsequently lost its relevance on this front.

The financial oligarchy always seeks to strengthen its control in opposition to its competitors and the working class. Under its control and to favour the private interests of the oligarchs, the U.S. and Canadian vehicle sector is undergoing radical change with autoworkers bearing the burden of permanent job losses with little prospect of similar employment. Communities such as Oshawa, Oakville, Windsor and many in the U.S., are suffering grave consequences as their economies shrink. The proposed changes within CUSMA regarding vehicles are meant to favour the financial oligarchy while the working class is under attack, has no say or control over what is happening in their lives and economy, and has certainly not given its consent.

Under CUSMA, to receive tariff-free status within the North American market, a minimum of 75 per cent of the price of production of a vehicle must have been generated within Fortress North America. This brings no guarantee that production will continue in plants already established, as those in control are rapidly introducing new production technique and shifting production sites according to their narrow private interests, outlook and criteria. The aims of those in control do not include ensuring the well-being of the human factor, nor the development of a diverse sustainable economy to ease the burden from the introduction of new technique and moving away from the car culture and its environmental pollution and other negative factors.

CUSMA seeks to standardize the price paid for the capacity to work for North American autoworkers at $16 per hour, which is well below the current price in the U.S. and Canada. With this manoeuvre, CUSMA seeks to eliminate the auto trade unions as independent organizations of the working class, which bargain collectively with the financial oligarchy for terms of employment acceptable to autoworkers themselves in the three countries.

Mexico has agreed to establish new bilateral mechanisms with both the U.S. and Canada to allow direct interference in its relations of production in the auto sector, and to further integrate its economy into Fortress North America under the control of the financial oligarchy. A Government of Canada press release detailing the changes finalized in December says, "Under the dispute settlement chapter of CUSMA with respect to specific labour obligations [... a] facility-specific rapid-response mechanism will provide Canada with an enhanced process to ensure the effective implementation of specific labour obligations in covered facilities. If a signatory has concerns [...] it can request an investigation by an independent panel of labour experts and, subject to a positive finding, it can take measures to impose penalties on exports from those facilitates."

Rules on Steel and None for Aluminum

The CUSMA automotive rules of origin contain a requirement that 70 per cent of the steel purchased by vehicle assemblers must qualify as originating in the CUSMA region. The revised new NAFTA calls for rules on steel to be implemented over seven years.

No such rule is included for aluminum. The Canadian delegation had reportedly been pushing a requirement that a certain percentage of aluminum used in autos should be smelted in North America but the U.S. and Mexico refused to agree. Canada is by far the largest producer of aluminum within Fortress North America. The oligopolies in control of aluminum production have facilities throughout the world and use their global production to attack workers in Quebec and BC and to demand concessions from governments on the price of electricity, which is a major factor in production.

The lack of any agreement on rules of origin for aluminum may be a sticking point when CUSMA arrives to be ratified in the Canadian Parliament. The Bloc Québécois has already indicated its disappointment with this deficiency in the agreement.

"Intellectual Property"

Under a section called "Intellectual Property," the copyright length of such content as sound recordings will increase from life plus 70 years, to life plus 75 years. With the December changes, biological goods, such as vaccines, shall receive patent protection in accordance with existing agreements in each country, with Canada's being eight years. This empowers Big Pharma to sell drugs at high costs for at least eight years, including to government agencies under pharmacare programs. Off-brand or generic pharmaceuticals, a cheaper alternative to many commonly used drugs, will not be available for the period of the patent protection.[3]

Government Abdicates Its Social Responsibilities

CUSMA includes regulatory cooperation provisions that limit each government's ability to regulate the production and sale of goods in fields such as chemicals, food safety, and the environment. This directly benefits the conglomerates of the financial oligarchy as governments are left with little power to control what is produced and sold within North America.

CUSMA gives the financial oligarchy extraordinary power to control regulations covering all manner of economic affairs, negating the government's ability to fulfil its social responsibilities. Under CUSMA, governments must allow big business to review any proposed regulations governing their particular sector or industry in advance of their enactment. In effect, this politicizes the private interests and activities of the conglomerates of the financial oligarchy in very specific ways.

Also explicitly, no public participation or oversight is allowed in shaping regulations. CUSMA gives corporations advance notice of new regulations. So-called interested persons are notified in advance of planned government regulations and are allowed a consultation process before any regulation proceeds to legislation.

All regulations are required to be "science based." The politics of nation-building are not considered "science based" under the imperialist definition nor are social or other considerations to deal with problems and challenges such as poverty, climate change, regional development or the imperialist tendency towards a war economy and the necessity to make Canada a zone for peace. The conglomerates can reject regulations they consider non-"science based."

The government must prove a proposed regulation is backed by science while the private interests of the conglomerates do not have to prove their production or other activities are not harmful to the collective life of the nation, the well-being of the people or health of Mother Earth. CUSMA overturns the "precautionary principle" of civil society whereby private interests were supposed to prove their activities would cause no harm to the common good. In precluding the precautionary principle, CUSMA puts the burden on those shaping regulations to defend their rules when challenged by powerful private interests.

Under CUSMA, the Council of Canadians notes, "Regulators have to vigorously defend proposed regulations and are even required to suggest alternatives that don't involve regulating. They have to provide extensive analysis, including cost-benefits to industry."

In practice, under civil society, the precautionary principle often proved a fraud when confronted with the private interests of the financial oligarchy, where social responsibility for consequences are ignored and evidence suppressed. Examples are numerous, such as with big tobacco and the health risks from smoking; the car culture and the attendant slaughter on the roads, congestion and air pollution; the energy sector and pollution leading to climate change; big pharma and the pushing of opiates resulting in addiction and mass deaths; and the use of violence to settle differences in international relations expanding the war economy, which in turn promotes the sale and use of its produced weapons.

Standardizing Regulations

CUSMA insists the three countries harmonize regulations or at least have similar ones. Many commentators remark that this standardization will bring standards down to the lowest common denominator and deny any independence of action according to the concrete conditions within the three countries.

Corporations can contest regulations in one country if they are not standard or similar to regulations of either one or both of the others. This regulatory cooperation is subject to dispute resolution, meaning the big corporations can directly challenge government actions before a non-government agency.

CUSMA allows, and in some ways encourages, the conglomerates of the financial oligarchy to defend their private interests and push for changes in regulations dealing with such issues as genetically modified organisms, glyphosates such as Monsanto/Bayer's Roundup herbicide, health and cigarette labelling, rules on food inspections and those dealing generally with public safety. Much of this activity would be carried out in private behind closed doors.

Dispute Resolution

The NAFTA Chapter 19, the anti-dumping/countervailing duty dispute resolution mechanism, and Chapter 20, country-to-country dispute resolution mechanism, are maintained. Many consider that both these mechanisms infringe on the sovereign right of nations to regulate imports, as they hand over resolution of disputes to a non-government panel. In keeping with most free trade agreements, such mechanisms create a supranational body to deal with complaints. The U.S. has long opposed their use and in fact has scaled back Chapter 19 in a side agreement with Mexico. The only significant use of Chapter 19 saw Canada challenge softwood lumber duties. Although Canada won the case within the panel, the U.S. authorities simply came back with new tariffs and arguments.

The U.S. financial oligarchy opposes these panels as they infringe on their private power. It currently is waging a fight to eliminate the WTO dispute settlement process by blocking appointments and reappointments of judges. Because three judges are needed on each appeal, the system looks set to break down when two judges' terms expire in December 2019.

Similarly with NAFTA Chapter 20, the U.S. authorities have blocked its use since 2000 when they refused to appoint members to a panel to deal with a Mexican complaint of U.S. tariffs on its sugar. No NAFTA Chapter 20 panel has been established since then.

In an apparent contradiction with the retention of Chapters 19 and 20, CUSMA eliminates NAFTA Chapter 11, the investor-state dispute resolution mechanism between Canada and the United States (ISDS) but maintains it for certain instances between the United States and Mexico. The elimination of Chapter 11 has been hailed by some as a popular victory but closer examination suggests it has become irrelevant in the face of the broadening of the supranational powers of the financial oligarchy within Fortress North America.

The ISDS was a mechanism that allowed private corporations to take legal action against a foreign government if it believed that a foreign government's policies infringed on the corporation's rights to engage in commerce in that country in accordance with the terms of NAFTA. With the standardization of regulations and other powers the financial oligarchy can force its way in most instances unless the people mount a determined resistance. The oligarchs may feel that ISDS had become a lightning rod for opposition and more trouble than it's worth. Besides, the neo-liberals are able to portray its demise as a victory for the people and sovereignty and a centrepiece of the new NAFTA.

Restrictions on Negotiations with a Designated
"Non-Market Country"

CUSMA states, "At least three months prior to commencing negotiations, a Party shall inform the other Parties of its intention to commence free trade agreement negotiations with a non-market country. For purposes of this Article, a non-market country is a country that on the date of signature of this agreement at least one Party has determined to be a non-market economy for purposes of its trade remedy laws and is a country with which no Party has a free trade agreement...

"Entry by any Party into a free trade agreement with a non-market country, shall allow the other Parties to terminate this Agreement on six-month notice and replace this Agreement with an agreement as between them (bilateral agreement)."

The Canadian Press, at the time of the public release of the contents of the CUSMA, reported Conservative MP Michael Chong accused the Liberal government of giving up a significant degree of sovereignty in the deal. "We now have to ask for Washington's permission to enter into trade negotiations with certain countries that the U.S will designate as non-market countries," Chong said. "It literally makes us a vassal state of the Americans."

In an interview with Reuters, U.S. Commerce Secretary Wilbur Ross defended the non-market clause within CUSMA calling it a "poison pill provision to deter deals with China." Ross said the clause tries "to close loopholes in trade agreements that have served to legitimize China's trade, intellectual property and industrial subsidy practices."[4]

Sunset Clause

The terms of CUSMA will remain in effect for a period of 16 years, at which time the parties can choose to revisit and/or renegotiate those terms, or withdraw from the agreement altogether. After six years, the sunset clause of 16 years can be revisited and potentially extended.

Section 232 Tariffs

In March 2018, the United States imposed tariffs of 25 per cent on imported steel and 10 per cent on imported aluminum under Section 232 of the Trade Expansion Act of 1962, which allows the U.S. President to impose tariffs on the grounds of national security. President Trump reportedly used the tariffs to extort certain features within CUSMA that his faction wanted. The Section 232 tariffs on Canadian and Mexican produced steel and aluminum were eventually withdrawn.

Also being considered under Section 232 are tariffs of 25 per cent on all auto imports. The CUSMA provides side letters stating that if the U.S. were to impose tariffs on automobile imports, Canada and Mexico would have a two-month tariff-free period to make alternate arrangements.

Section 232 tariffs and the softwood lumber tariffs are examples of how relations within Fortress North America and beyond are precarious and uncertain, one could even say lawless, and subject to the pragmatic demands of competing factions of the financial oligarchy and their fight for control of the U.S. Presidency.

Online Purchases and Movement of Data

CUSMA increases the duty-free limit for Canadians purchasing U.S. goods online from $20 to $150.

CUSMA allows companies to transfer data across borders without encountering barriers. In an Associated Press report, Jason Oxman, president of the tech trade group ITI, said the pact's digital provisions set "a new and important precedent for modern trade rules." The details in the pact do not clarify the significance of these "modern trade rules" for data or what this means for Canadians, for example, in the realm of privacy or politics.

Background on NAFTA and Its Renegotiation

The North American Free Trade Agreement (NAFTA) went into effect on January 1, 1994. Since then, trade between the three nations has grown exponentially due in part to the establishment of continental supply chains of the largest conglomerates. Each day, the United States conducts more than U.S.$3.6 billion in trade with Canada and Mexico. The combined annual GDP of Fortress North America is more than U.S.$22 trillion.

NAFTA has allowed the financial oligarchy to move its enterprises wherever it suits their narrow private interests and where public funds and infrastructure are most generously offered in pay-the-rich schemes. Advances in production and transportation technique have been introduced to benefit the financial oligarchy without consideration for the well-being of the working class, the stability and security of the national and regional economies, or the negative consequences on the social and natural environment.

Enterprises of the financial oligarchy have established networks of manufacturers, vendors, suppliers and distributors that rely heavily on the free movement of goods across North America's borders. Transportation corridors to this effect are being considered to maximize the advantages and profits for the oligarchs.

CUSMA focuses on what the U.S. administration calls modernization in areas of intellectual property rights, regulatory practices, workers, the environment, government procurement and a number of other key areas.

Notes

1. Supply management is a system in which the Canadian government provides licences that allow farmers certain production quotas of dairy, poultry and eggs. It also controls the price of imports into Canada of those commodities. This process guarantees a sustainable living for farmers and ensures that small local farms are not flooded by agriculture produce from mega farms in the U.S. and Europe.

The changes in the new NAFTA will lead to an influx of agricultural products from the U.S., including U.S. dairy that may come from cows that have been injected with genetically engineered recombinant bovine growth hormone (rBGH) to increase their milk production. No labelling requirements for milk coming from rBGH cows are currently in existence, so consumers will not know what they are drinking.

The U.S. industrialized farming industry is heavily subsidized from public funds and integrated with the financial oligarchy. Allowing more market access for U.S. corporate farms would mean Canadian small farmers would be in competition with much bigger producers capable of manipulating prices to their advantage.

"The Council of Canadians opposes ratification of a new NAFTA that erodes our supply management system and puts our food sovereignty at risk."

With files and direct quotation from here.

2. "In 1964, only seven per cent of vehicles made in Canada were sent south of the border, but by 1968 (with the introduction of the auto pact in 1965), the figure was 60 per cent. By the same date, 40 per cent of cars purchased in Canada were made in the United States. Automobile and parts production soon surpassed pulp and paper to become Canada's largest industry. From 1965 to 1982, Canada's total automotive trade deficit with the U.S. was $12.1 billion; this combined a surplus of around $28 billion worth of assembled vehicles and a deficit of around $40.5 billion in auto parts...

"The jobs created by the new market conditions under the auto pact were almost exclusively blue collar; administration, research and development remained in the United States. This transfer of control of Canadian automaking operations to their U.S. parent corporations substantially reduced the autonomy of the Canadian operations with respect to vehicle and component specification, design, and sourcing, manufacturing and production, branding and marketing, and corporate policy. ...

"The agreement also prevented Canada pursuing free trade in automobiles elsewhere internationally, and this North American exclusivity led Transport Canada to adopt the Federal Motor Vehicle Safety Standards (FMVSS) of the U.S. National Highway Traffic Safety Administration rather than participating in the European-based development of international consensus on auto safety and emissions regulations...

"The Auto Pact was abolished in 2001 after a WTO ruling declared it illegal, though by that time the North American Free Trade Agreement had effectively superseded it." (Wikipedia)

"In 1966, Canadian vehicle and parts exports to the U.S. totalled $886 million. In 1977, exports were $9.9 billion. Similarly, Canadian imports from the U.S. grew from $1.5 billion in 1966 to $10.9 billion in 1977.

"Overall, the Auto Pact achieved its goal of an integrated Canada-U.S. production network. In 1965, Canada exported 48,000 vehicles to the United States, representing just six per cent of Canadian production while the U.S. exported just 64,000 vehicles to Canada, or just 0.6 per cent of U.S. production of North American type vehicles. A decade later, in 1975, Canada exported 849,000 vehicles to the U.S., representing 59 per cent of Canadian production while the U.S. exported 698,000 vehicles to Canada, representing eight per cent of U.S. production." (The Canadian Encyclopedia)

Note that the overall growth in production of vehicles must be assessed in light of the enormous promotion of the car culture in films and TV, especially among the youth. This pressure on people to use and buy cars included urban design in the largest cities that forced many working people to buy cars to travel to work and for recreation.

3. The new NAFTA gives U.S. Big Pharma confirmation of the existing length of their patents, which in Canada is eight years of exclusivity. The deal includes biologics, a new class of drugs made out of human or animal tissue. Biologics include drugs such as insulin, and drugs that treat cancer, rheumatoid arthritis, Crohn's disease and ulcerative colitis.

In 2016, Canadians spent $30 billion to fill more than 600 million prescriptions. Canadians already pay the second highest costs of OECD countries for prescription drugs. Studies have found that many people cannot afford the medications they are prescribed.

(With files from the Council of Canadians)

4. Text of CUSMA Article 32.10: Non-Market Country FTA

"1. At least three months prior to commencing negotiations, a Party shall inform the other Parties of its intention to commence free trade agreement negotiations with a non-market country. For purposes of this Article, a non-market country is a country that on the date of signature of this agreement at least one Party has determined to be a non-market economy for purposes of its trade remedy laws and is a country with which no Party has a free trade agreement.

"2. Upon request, the Party shall provide as much information as possible regarding the objectives for those negotiations.

"3. As early as possible, and no later than 30 days before the date of signature, that Party shall provide the other Parties with an opportunity to review the full text of the agreement, including any annexes and side instruments, in order for the Parties to be able to review the agreement and assess its potential impact on this Agreement. If the Party involved requests that the text be treated as confidential, the other Parties shall maintain the confidentiality of the text.

"4. Entry by any Party into a free trade agreement with a non-market country, shall allow the other Parties to terminate this Agreement on six-month notice and replace this Agreement with an agreement as between them (bilateral agreement).

"5. The bilateral agreement shall be comprised of all the provisions of this Agreement, except those provisions the relevant Parties decide are not applicable as between them.

"6. The relevant Parties shall utilize the six-month notice period to review the Agreement and determine whether any amendments should be made in order to ensure the proper operation of the bilateral agreement.

"7. The bilateral agreement enters into force 60 days after the date on which the parties to the bilateral agreement have notified each other that they have completed their respective applicable legal procedures."

(Photos: TML, J. Raedle, B. Proulx)

This article was published in

Volume 49 Number 31 - December 14, 2019