Paranoia on the Frontier: NAFTA and the US Election

No other issue seeks to dominate the next few months than the troubles in the US economy. Besides the well documented mortgage lending scandal, the roots of the fragile US economy are the movement of large amounts of manufacturing jobs to China as well as the approximately one-third to one-half of US debt that is held by China, Japan and other foreign creditors in order to assist the US fund the wars in Iraq and Afghanistan. During the last week of campaigning a new nemesis has been created within the dialogue between Clinton and Obama, that is the NAFTA agreement and the threat Mexico and Canada pose to the US economy.

In reality the United States has often determined the course of NAFTA and its rulings since the agreement came into effect with Canada and Mexico in 1994. Until recently, Canada and Mexico have been the top trading partners with the United States, switching between Japan and the EU for top spot which has recently been adopted by China. Trade with the US and its neighbors is more than 92% with Canada and approximately 80-85% in Mexico and has increased more than 100 percent with both neighbors since 1994. The US's NAFTA partners do not only export to the US, but import the majority of their goods from the United States, becoming a net benefit to US exporters in the process, especially those in border states such as Texas, California, Michigan and New York.

Problems encountered by the Canadian and Mexican governments often had to deal with the reality of the US holding a lot more economic weight and power in commercial activities, political weight, and control in official NAFTA hearings which often did not have any real power in enforcing its decision inside the US. Of great concern was NAFTA Chapter 11 which details the rights of companies to have legal recourse over government policies if they believed harm was done to them. This was one of the first times in international law where a company was represented without the support of a country, as before Chapter 11 only states had legal rights of representation under international law. In case law, American companies and policymakers who for the first time promoted the ability for a private company to gain a legal reward often supported this policy. The results were cases such as Metalclad, where a Mexican municipality was denied the right to stop the creation of a waste management plant, despite its concerns that it would harm the local environment. In S.D Myers, a Canadian law preventing the ban of toxic waste to the US was challenged as well, despite the regulations being there to protect the health and safety of the environment in both jurisdictions. Change only came in recent appeals in the NAFTA appeals hearing regarding Methanex, which challenged California state policy to prevent environmental damage inside the United States itself, the first of a number of appeals limiting the rights of companies over governments, namely the governments of California and the US.

Despite the recent criticisms by Clinton and Obama, it was Bill Clinton who ratified NAFTA during his time as President with no opposition from his wife, as well Obama who did little to appease the passing of NAFTA until the United States opened trade relations with China upon its acceptance into the WTO. The effect of the Methanex appeal is that the US trade policy has moved towards fair and equitable treatment of companies. As seen in the newest version of the US Trade Act and new trade agreements with Singapore and others, public policy is paramount over a companies rights over its investment as long the treatment is fair and equitable with due process and just compensation. This turn around took place not for Chapter 11's negative effects on Mexico or Canada, but on the US itself. Policies from the US and American Labour Unions challenging Canadian softwood lumber, or taking the production of corn, a staple of Mexico, and limiting it through NAFTA rules was a power advantage of the United States over its greatest trading partners in many cases. As seen in NAFTA tribunal cases and trade policy, the US has nothing to fear from its neighbors, but more from its debt and poor leadership which has sent American jobs and money to China. Criticisms of Mexico and Canada have died out long ago, and do nothing but create scapegoats such as NAFTA in order to win votes in Ohio and Texas.

John McCain this week showed his prudency in this election campaign. Despite talk of referring to Mr. Obama as Barak Hussein Obama and actions by his opponents in defacing America's good trading partners in Canada and Mexico, McCain had tried to keep the election campaign free of issues which seek to rip apart the country and mire the election in issues which do nothing more than to create a false crisis and give the Presidency to someone who can create the most paranoia for the American people. Ironically this tactic that was used so effectively by Bush is being countered not by the Democrats, but by another Republican. In reality, the Democrats are creating a lot of political tensions for something which has been created by American companies themselves. American companies have moved to Mexico and put Mexican companies out of the agriculture business while solidifying their control over staple Mexican products. American Auto manufactuers have taken advantage of the state sponsored health care system in Ontario to set up auto manufacturing in Canada. While these moves do hurt American manufacturing, it is the policies of American companies which have taken employment across the border.  Companies such as Walmart and other retailers have created the most intense changes in the modern US economy by taking advantage of loose rules and laws in China who is slowly absorbing the world's manufacturing base without Labour Rights or accountability to its employees. Clinton and Obama would do well focusing on China as opposed to scapegoating Mexico and Canada. These two countries do more to purchase American goods than any other countries in the world. It is hard to manage a relationship with a giant, but it is impossible when that giant claims to be the victim of trade, when its certain the American people are being set up to be the victim of politics.

[kml_flashembed movie="http://www.youtube.com/v/jAJYMgX4JuU" width="425" height="350" wmode="transparent" /]