Canada

Elections in Mexico and the U.S. could spell doom for any new agreement.

He isn’t negotiating. He’s stalling for time.

The North American Free Trade Agreement was the first in U.S. history to slash trade barriers between a wealthy country and a much poorer one. This week, the NAFTA will mark another first when officials from Mexico, Canada, and the United States sit down in Washington to begin renegotiating the deal. The two milestones are not unconnected—NAFTA was the most controversial trade deal ever negotiated by the United States, in part because of the incentives it created for companies to relocate to Mexico to take advantage of lower wages. The success or failure of the coming negotiations will largely determine whether U.S. trade policy can find a firmer footing for the future or continue to be handcuffed by a lack of political and popular support. Here’s the challenge in a nutshell: how to take a two-decade old agreement that President Trump has called “the worst trade deal ever negotiated,” and somehow alter it sufficiently that the president becomes its champion if and when it goes to Congress for ratification. Trump has many times called himself a great negotiator, and NAFTA will be the acid test of that boast. Here are the four challenges that must be overcome for a successful NAFTA renegotiation: 1)    Putting America first: Trump’s biggest objection to NAFTA is that it was a one-sided deal, pointing to the large increase in the U.S. trade deficit with Mexico since its enactment and the loss of manufacturing jobs to Mexico. Whether the economic benefits of NAFTA to the United States have outweighed those costs—my colleagues James McBride and Mohammed Aly Sergie have a good backgrounder weighing the arguments—is beside the point. Trump needs to show that he has changed the agreement not just in ways that may benefit all three countries, but in ways that will help the United States relative to Canada and Mexico. That is a much harder task. The “America first” issues in the U.S. negotiating objectives include eliminating the special dispute settlement provisions under Chapter 19 of NAFTA, strengthening “Buy America” and other procurement rules that benefit American companies, and tightening so-called “rules of origin” to encourage sourcing in the United States and North America. Each issue is fraught for different reasons. Canada will fight to its last breath to retain the Chapter 19 rules, which allow it to challenge U.S. antidumping and countervailing duty orders before a NAFTA tribunal rather than in U.S. courts. With the ongoing fight over softwood lumber, and a new case that could block sales of Bombardier aircraft in the United States, the issue is still a vital one for Canada. Both Canada and Mexico will object to restrictions on their access to government procurement in the United States, but may be willing to live with this concession. Rules of origin—which is largely an issue for the automotive industry—is a wild card. If they are renegotiated to require more “North American” content, then Mexico will cheer; indeed, it is the U.S. car companies that would object. But if the Trump administration tries to introduce an “American” content requirement, this would clearly violate the spirit of the deal. Of course, Trump could try out a more traditional “pro-America” argument for trade—that strengthening NAFTA rules for digital commerce, for intellectual property, for labor and environmental standards, would all help U.S. companies and the workers they employ. But since the U.S. negotiating proposals on these issues are borrowed almost entirely from the Trans-Pacific Partnership (TPP) agreement that Trump tore up on his first day in the Oval Office, this seems unlikely. 2)    Dealing without deadlines: All three countries are saying that they want to move quickly on the renegotiation to reduce uncertainty for investors in North America. The coming Mexican election next year, which could bring the populist Andrés Manuel López Obrador to power, is seen as an especially strong motivation to get the deal done early. But modern trade negotiations are difficult and complex. The TPP took nearly a decade to negotiate. The Trans-Atlantic Trade and Investment Partnership (TTIP) with Europe was supposed to be concluded last year and has barely made it past the preliminary issues. Mexico’s economy minister Ildefonso Guajardo said last week he sees a “60 percent chance” of the deal being done by the end of the year, which is another way of saying it likely won’t happen. The bigger problem for Trump is that Mexico and Canada have strong incentives to delay. The longer the talks drag out, the wearier the president is likely to become of the whole exercise, and the more likely he becomes to accept modest changes and try to call it victory. Or, more worrisome, it could force Trump to trigger the NAFTA withdrawal provisions that he came so close to invoking in April, which would be highly disruptive but would have the negotiating advantage of setting a hard, six-month deadline for the talks to succeed or fail. 3)    Holding back the wolves: American business and American farmers really like NAFTA. Except the trucking industry, which wants permission for foreign drivers to “reposition” empty trucks within the United States. And the textile industry, which wants to revisit the “tariff preference levels” agreed to under NAFTA that allow for foreign fabrics to be used in some clothing. And the California wine industry, which objects to the special treatment given to domestic wines in Canadian retail outlets. And the dairy industry, which has long chafed at Canada’s protectionist regime for milk and cheese.  In the testimony in June to the International Trade Commission, U.S. companies that were by and large supportive of NAFTA nonetheless raised dozens of issues they would like to see addressed in the negotiations. But the more issues that are thrown on to the negotiating table, the more difficult it will be to reach a deal in any sort of timely fashion. To get the agreement done, the Trump administration is going to have to get very good at saying no to a host of special interests, each of whom comes armed with influential political allies in Congress. 4)    Dealing with Democrats: Many congressional Democrats, who were frustrated with President Obama’s embrace of the TPP and Hillary Clinton’s lukewarm rejection of the deal, have been chomping at the bit to re-establish themselves as the anti-NAFTA, trade-skeptic party. Senate Democratic leader Charles Schumer (D-NY) earlier this month released the party’s “better deal” agenda, which tries to out-Trump Trump in its criticisms of U.S. trade deals. It can be said with confidence that whatever deal Trump can extract from Canada and Mexico will immediately be denounced as a sell-out and a give-away by the congressional Democrats. That will put the president is a position he would surely prefer to avoid—arguing the merits of NAFTA against vociferous opposition from Democrats, and needing pro-trade Republicans like Speaker Paul Ryan (R-WI) and House Ways and Means Committee Chairman Kevin Brady (R-TX) to carry the load for him in Congress. NAFTA was the beginning of an era, the first great experiment in freeing trade between high wage and low-wage countries. It set the basic template for many deals that followed, including the CAFTA with Central America and the Dominican Republic, and China’s entry into the World Trade Organization. None of those deals has become more popular with age. A successful renegotiation of NAFTA would be another milestone, demonstrating such deals can be living agreements that can be updated, improved, and continue to work in the interests of both wealthier and poorer countries. A failure, however, would continue to erode the already fading public confidence in trade.

This week: NotPetya, Canada orders Google to take down search results, and Facebook's algorithm for removing hate speech.

Canada's new defense policy acknowledges for the first time that the Canadian Forces will develop an offensive cyber capability, a process fraught with challenges.

Susan Aaronson is research professor of international affairs at George Washington University, and GWU cross-disciplinary scholar. Valeriya Denisova is a research assistant at GWU and a recent graduate of the Elliott School of International Affairs. The Obama administration makes big claims about how the Trans-Pacific Partnership (TPP) will affect the Internet. It argues that the TPP will promote a free and open Internet through binding language that limits data localization policies, bans taxes on information flows, promotes Internet interoperability (enables the Internet to work effectively around the world), and mandates civil society participation and transparency in the development of Internet regulations. The White House has also argued that the TPP “promotes E-Commerce, protects Digital Freedom, and preserves an Open Internet” because it allows the TPP signatories to challenge censorship and filtering as trade barriers. There’s no doubt that the TPP has the potential do all of these great things. But once ratified and implemented, it will do little to deliver on these promises because the TPP has a number of exceptions and loopholes allowing governments to justify their blocking, filtering, or censorship of information flows. The TPP will undoubtedly affect how the internet is governed. First, citizens in the twelve TPP parties comprise 11.4 percent of the Earth’s population—which was approximately 25 percent of all Internet users in 2015. Second, non-TPP nations engage in extensive cross-border information flows with individuals and firms in TPP countries, requiring them to comply with the TPP’s rules with respect to data flows. Third, the TPP includes important and growing markets for digital products and services in signatory countries such as Malaysia and Vietnam. Finally, China, Colombia, Indonesia, the Philippines, South Korea, Taiwan, and Thailand, have expressed interest in joining the TPP should it come into effect. The TPP covers online service providers and users, who may be both individuals and firms.  Although the agreement requires signatory states to create an effective enabling environment to protect the privacy of internet users (who are only mentioned in Article 14.8), the TPP does little to promote interoperability among different privacy regimes with different levels of protection. Hence, the TPP establishes a floor for privacy rights but offers little clarity on how to reconcile these twelve different regimes. Beyond privacy, the TPP says little about digital rights. Although the United States argues that the TPP promotes Internet freedom, it doesn’t delineate how governments should respect digital rights, such as freedom of association, speech, and due process as they engage in cross-border information flows. However, the TPP does state that regulations, including internet-related regulations, must be developed and applied in a transparent and accountable manner, allowing individuals and firms to challenge such policies if they violate trade norms. Moreover, the TPP’s ability to constrain censorship and filtering is limited. First, not all information flows are cross-border and hence subject to trade rules.  Therefore, policymakers can’t always rely on trade agreements to defend internet openness in countries that have a history of censorship like Malaysia and Vietnam. Second, trade agreements provide clear exceptions that allow governments to restrict information flows when they deem necessary. Government officials can use national security, privacy, or public morals rationales to restrict information flows as long as they do so in a non-trade distorting manner. For example, in May 2016, Vietnam blocked Facebook, after Vietnamese citizens used the social network to organize public protests over an environmental disaster. If the United States (or other TPP party) wanted to challenge Vietnam’s censorship of Facebook as a barrier to trade, Vietnam could claim that it acted under the exceptions. At the same time, the United States and other TPP parties would be unlikely to challenge these exceptions as discriminatory—trade diplomats recognize that they could also be challenged later if they took similar actions. The United States is a leading supporter of such broad exceptions, and argues that the TPP’s general exceptions chapter “ensures that the United States and the other TPP Parties” are guaranteed “the full right to regulate in the public interest, including for national security and other policy reasons.” Moreover, the United States pushed to expand the TPP’s national security exception beyond that delineated in earlier trade agreements, such as the General Agreement on Trade in Services. This exception, “applicable to the entire Agreement, makes it clear that a party may take any measure it considers necessary for the protection of its essential security interests.” The TPP is complicated and legalistic, easy to demagogue, and hard to understand. It could help promote an open internet because it encourages cross-border information flows, bans data localization policies, and offers a means to challenge censorship and filtering as barriers to trade. However, the TPP signatories can continue to block, filter, or censor cross-border information flows by relying on TPP’s broad exceptions. Moreover, the TPP says little about users or how to enhance their welfare online except to protect privacy. If the United States really wants to promote Internet freedom in its trade agreements, it should include language related to the regulatory context in which the Internet functions. By incorporating language to encourage interoperability, free expression online, the rule of law, and due process, trade diplomats can justifiably make a case that these rules safeguard digital rights.

A footnote to the May 2016 forest and brush fires in Alberta, Canada is the presence of three hundred South African professional firefighters. They had previously received training in the use of Canadian firefighting equipment. Air Canada transported the firefighters from South Africa to northern Alberta, a flight that lasted more than twenty hours. According to Canadian media, the flight was the first time Air Canada operated to South Africa. The South Africans are part of Working on Fire, a South African government-funded job creation program with a focus on the marginalized. According to its website, it has five thousand men and women trained in wildfire fighting with two hundred bases around the country. Almost one third are women, the highest percentage of any firefighting force in the world, according to the website of Working on Fire. Wildfires have always been a part of the ecology of South Africa, often used as a tool for the management of grasslands and some forests. There are two fire seasons: the summer in the Western Cape, and the winter almost everywhere else. As elsewhere, now most fires in South Africa are started by accident or through carelessness. Working on Fire would appear to be an effective program that directly addresses marginalized youth, especially in the rural areas, in addition to meeting the need for wildfire fighters. It is not clear from media sources whether the Alberta government compensated the South African organization for wildfire fighting services, or instead paid the firemen individually.

Alex Grigsby is the assistant director for the Digital and Cyberspace Policy program at the Council on Foreign Relations.  India and Brazil see themselves as power brokers in international cyber diplomacy. For years, the United States has courted both countries to promote its preferred norms for cyberspace, hoping that Brazil and India will bandwagon in support of the U.S. vision of an open, global, free and resilient cyberspace. Russia and China have been doing the same, hoping they can elicit Delhi’s and Brasilia’s support for greater UN control of the Internet and cyber issues writ large. Recognizing this, India and Brazil try to play a bridge-building role between the United States on one side and Russia and China on the other, hoping that they can moderate Moscow and Beijing all while reaping the influence-enhancing benefits that come with being honest brokers. But is this approach effective? Indian cyber experts Samir Saran and Arun Mohan Sukumar at the Observer Research Foundation seem to think so. Last week, the Indian, Russian, and Chinese foreign ministers issued a communiqué at the end of their annual meeting. It dedicates a section to cyber issues, outlining the foreign ministers’ views with respect to the applicability of international law to cyberspace, the use of the Internet for terrorist recruitment, and reducing the risk of conflict. It also includes a reference to multistakeholder Internet governance, which is unusual as Russia and China only tend to agree to such references in documents they negotiate with United States et al., not statements among BRICS partners. Saran and Sukumar argue that its inclusion is a testament to Indian diplomacy’s ability to inject western concepts such as multistakeholder Internet governance into a communiqué that Russia and China will support. They see India playing a strategic bridge-building role between the West and Russia and China on cyber issues, possibly reducing the animosity and mistrust between both camps. This line of thinking also applies to Brazil, and Brazilian officials do their best to ensure that they act as a moderator between both camps. At the acrimonious 2012 World Conference on International Telecommunications treaty conference, Brazilian officials chaired the cybersecurity working group that aimed to reconcile the position of the United States, which didn’t want a security reference in the final treaty, and Russia and China, which did. In 2014-15, Brazil chaired the United Nations Group of Governmental Experts and tried to reconcile the gap between both camps’ views on appropriate cyber norms. The same happens at the Internet Corporation for Assigned Names and Numbers and the United Nations General Assembly, where Brazil consistently argues that multilateral and multistakeholder approaches to Internet governance are not mutually exclusive, and can coexist. There are two significant problems with India’s and Brazil’s approaches. First, China and Russia are unlikely to ever moderate their position on certain cyber issues. Russia has long advocated that the Internet should be managed by the United Nations system and that the free flow of data can pose a threat to its information space. China sees the Great Firewall as paramount to regime stability and is even willing to export its net of censorship via its Great Cannon. Both wholeheartedly reject the U.S. approach to Internet governance, so there’s no way that India or Brazil can facilitate a rapprochement. Don Quixote has a better shot at defeating a windmill. Second, by attempting to moderate the Russian and Chinese positions, India or Brazil risk lending legitimacy to them. A statement that supports a multilateral role for the management of the Internet, even if watered-down thanks to Indian or Brazilian intervention, is still antithetical to supporting an open and global Internet. According to the Russia-China-India foreign ministers communiqué, ministers emphasized the need to ensure Internet governance based on multilateralism, democracy, transparency with multi-stakeholders in their respective roles and responsibilities. They noted the need to internationalize Internet governance and to enhance in this regard the role of International Telecommunication Union. A statement like that eventually leads the United States, European countries, Australia, Canada and others to constantly question where India really stands. Last year, Indian Communications and IT Minister Ravi Shankar Prasad expressed India’s support for the multistakeholder model. With the latest communiqué, western policymakers could easily interpret it as a reversal of India’s position, despite the awkward reference to "multi-stakeholders." Clunky attempts at moderation seem to dilute the India’s position while confusing everyone else. Brazil has done similar things in the past by endorsing BRICS foreign ministers statements with similar language. All of this isn’t to say that India and Brazil should not play a bridge-building role in the international cyber debate. They absolutely should. Policymakers in Delhi and Brazil should identify issue areas where their contributions can make the biggest impact. Internet governance is probably not a good choice given the polarizing nature of the discussion. Cyber norms offer more promise, as positions aren’t nearly as entrenched. Furthermore, there’s room for negotiation as all countries have an interest in avoiding escalatory state-sponsored cyber activity that leads to conflict. It may be time for the foreign ministries in Delhi and Brasilia to reassess their efforts.

The U.S. economic recovery and current strength reflect in large part advanced industries. As other sectors faltered, both employment and output in these businesses grew. In 2013, they employed 12.3 million workers (9 percent of the U.S. workforce), who made on average $90,000 (compared to the U.S. mean of $51,500). These industries generated $2.7 trillion in output (17 percent of U.S. GDP), and indirectly supported an additional 14.3 million jobs. Central to this classification, as developed in a recent Brookings report, is innovation. Participants stand out on two criteria—over 20 percent of their workers are science, technology, engineering, or math (STEM) professionals and all spend $450 or more in R&D per worker. The authors classify some fifty different industries—from aerospace to semiconductors, satellite telecommunications to software publishers—across manufacturing, energy, and services as advanced sectors. These companies—think Boeing, Sirius Satellite Radio, and Google among the thousands of lesser known names—cluster in cities. 70 percent of their jobs are in the 100 largest metropolitan areas. Here they can link to local universities, benefit from a skilled pool of labor, and learn from other nearby firms. Spillovers from this sector help support the broader local economy. Advanced industry supply chains purchase on average $236,000 in goods and services per worker from other businesses (compared to $67,000 in other industries). And the higher salaries and profits feed back through greater tax intakes. Nationally these industries help maintain the U.S. competitive edge—they account for 90 percent of private-sector R&D and 85 percent of all U.S. patents. And they dominate exports, producing 60 cents of every dollar of products sent abroad. Still, when measured against other countries, U.S. advanced industries are losing ground. Jobs and output as a share of GDP are down. This has potential knock on effects for innovation, given the dominance of these businesses in R&D spending, and for future long term economic competitiveness and growth. As with so many other economic challenges today, better education matters. The United States ranks 23rd among developed countries in terms of annual STEM graduates per capita, behind South Korea, Portugal, and Poland. As a result, U.S. advanced industry employers often struggle to find qualified workers. The authors recommend the United States expand early education, improve the quality of schools, and encourage more students to study STEM areas to diminish the deficit. Foreign policy issues too can make a difference, especially with regards to U.S. neighbors. According to the CFR-sponsored Independent Task Force report, North America: Time for a New Focus, stronger ties enhance the United States’ ability to compete in a dynamic and competitive world economy. Export data shows that of the over $1 trillion in advanced manufacturing industries exports (which doesn’t include energy and services), roughly one third head to Canada and Mexico. This number rises to more than half for motor vehicle, railroad, and computer parts. This back and forth between the three nations in the actual manufacturing process reflects a deepening of regional supply chains and the important, if often overlooked, role U.S. neighbors play in supporting “domestic” advanced industries. As Washington debates broader trade, immigration, and security issues, the economic ramifications of these policy choices for our most dynamic industries shouldn’t be forgotten.

Yesterday, I had the privilege to testify before the House Foreign Affairs Subcommittee on the Western Hemisphere at a hearing titled “The Strategic Importance of the Western Hemisphere: Defining U.S. Interests in the Region.” Also joining me before the subcommittee were Bonnie Glick, senior vice president at Meridian International Center, Evan Ellis, research professor at the U.S. Army War College Strategic Studies Institute, and Eric Farnsworth, vice president of Council of the Americas. Below is an excerpt of my written testimony in which I discussed the strategic importance of North America to U.S. interests and why “Made in North America” should be a foundation for U.S. policy: North America today is a global economic powerhouse, home to almost five hundred million people living in three vibrant democracies. Together the three nations account for over 26 percent of global GDP. Totaling roughly $20 trillion, their combined economies outpace the European Union in economic production. And though the United States makes up the majority of the economic weight (in terms of GDP and as the home to almost a third of the world’s largest companies), both Canada and Mexico rank among the top fifteen largest global economies. North America is also one of the most economically dynamic regions of the world today—the World Bank predicts the region will outperform average global GDP growth in 2015. Because of geography, markets, and the choices of millions of individuals and thousands of companies, North America has become one of the most integrated and interdependent regions in the world. Sharing 7,500 miles of peaceful borders, Canada and Mexico now play vital roles in the United States’ stability, security, and prosperity. It is time to build on past work and advance this partnership to a new stage. If the three North American countries deepen their integration and cooperation, they have the potential to improve the standards of living of their citizens and to shape world affairs for generations to come. Several recent developments make a North American vision particularly attractive. These include advantageous demographics, a shared skilled labor force, and recent economic reforms in Mexico. Today, I want to focus on two particular areas of opportunity: energy and economic competitiveness. You can read the rest of my written testimony here on CFR.org. You can read the written testimonies of my fellow witnesses here on the House Foreign Affairs Committee website. 

Alex Grigsby is the assistant director for the Digital and Cyberspace Policy program at the Council on Foreign Relations. Earlier this week, Canada’s parliament passed legislation that would allow it to finally ratify the Council of Europe’s Convention on Cybercrime, more commonly as the Budapest Convention. The Budapest Convention is the only legal instrument specifically designed to facilitate international cooperation to fight cyber crime. It provides: (1) common definitions and criminal prohibitions, (2) unified procedures and rules to ensure the preservation of evidence, and (3) a streamlined legal process to facilitate international cooperation, more formally known as mutual legal assistance, on cyber crime investigations. Canada was one of the countries that originally negotiated the treaty in the late 1990s and was one of the original signatories in 2001. Despite being one of its earliest promoters, it took over thirteen years for Canadian legislators to pass the necessary domestic legislative changes to allow Canada to ratify the treaty. The delay can be attributed to packaging the legislation with controversial lawful interception provisions and successive minority governments throughout the 2000s. The lag put Canada in a tough spot in international venues when working with the United States and European partners to repel BRIC-efforts to launch a negotiation of a new cyber crime treaty under UN auspices, something that could take another decade to negotiate. For Canada, it became hard to argue that a new treaty is premature when it had not ratified the existing one. Russia has long argued that the Budapest Convention is fatally flawed, arguing that particular provision violates state sovereignty, a claim that has been recently debunked by the committee that oversees the treaty. Brazil, China and India argue, in short, that a treaty negotiated by Europe is inherently inapplicable to non-European countries, despite the fact that non-European countries are party to the convention and that whole swaths of international law—still valid today—stem from negotiations amongst Europeans. No word yet as to when Canada will officially ratify the Convention. When it does and unless another country beats it to the punch, Canada will be the seventh non-European country to do so, joining Australia, the Dominican Republic, Japan, Mauritius, Panama, and the United States.