President Carlos Salinas, President George H.W. Bush and Prime Minister Brian Mulroney look on as their trade ministers initial the NAFTA agreement in San Antonio Tx, on October 7, 1992. —George H.W. Bush Presidential Library.

The following is the full text of remarks delivered by Former NAFTA Chief Negotiator for Canada John M. Weekes marking the 30th anniversary of NAFTA at El Colegio, Mexico City, on November 12, 2024. 

By John M. Weekes

November 25, 2024

I would like to thank and congratulate El Colegio for organizing this event to commemorate the 30th anniversary of the NAFTA. I remember well the excitement and the challenges of those days in the early 1990s when the negotiators worked together to produce a trade agreement among the three North American countries which became the gold standard for modern trade agreements. It is particularly fortuitous that this seminar is taking place a week after the American presidential elections in which Donald Trump was elected for a second time as president of the United States. We can expect trade to be a prominent feature of relations among the three countries in the light of president-elect Trump’s approach to it.

So, as we contemplate the prospect of a new negotiation over the NAFTA [now named the USMCA (United States-Mexico-Canada Agreement) or in Canada the CUSMA] it is important to consider some of the history of this North American agreement. I think it is useful to bear in mind some major factors in the United States, Mexico, and Canada that encouraged the three leaders to embark on a very ambitious trade negotiation that resulted in the NAFTA. Also important to bear in mind is how the subject matter of trade negotiations has evolved, and how various nontrade issues have become not only relevant to the conduct of trade negotiations but have also become part of the content of trade agreements.

A quick refresher on NAFTA history

On February 5, 1991, President Salinas, President Bush and Prime Minister Mulroney issued a joint statement committing to “proceed as soon as possible, in accordance with each country’s domestic procedures, with trilateral negotiations aimed at a comprehensive North American free trade agreement. The goal would be to progressively eliminate obstacles to the flow of goods and services and to investment, provide for the protection of intellectual property rights, and establish a fair and expeditious dispute settlement mechanism.” This short, clear and powerful statement provided inspiration to ministers and officials to get down to work and to focus on how to achieve an ambitious outcome in a short timeframe.

The North American framework of regional trade agreements, including the original Canada-US FTA and the NAFTA proved to be extraordinarily successful. Trade expanded rapidly as did cross-border investment. Production, notably of automobiles and parts, became integrated on a North American basis. As the saying goes, Canada, the United States and Mexico went from selling goods and services to each other, to making things together.

The actual provisions of the NAFTA were remarkably progressive and far-reaching. This was the first trade agreement to include broad, across-the-board obligations on trade in services and investment, as well as provisions protecting intellectual property. However, the most important benefit from a Canadian perspective was psychological. For the first time, Canadian businesspeople had the confidence to believe that they could do business in the North American marketplace on an equal footing with Americans.

Unfortunately, the NAFTA very nearly became the victim of its own success. The private sectors in the three countries used the NAFTA’s provisions, and the domestic legal frameworks set up to implement the agreement, to develop very successful North American business operations. While business took the new reality for granted, opposition to globalization and labor dissatisfaction with free trade led to growing opposition to the NAFTA. The political management of the agreement was neglected; there was no political prize for touting the NAFTA’s success and little interest in more ambitious approaches to North American trade. In fact, Barack Obama and Hillary Clinton owed some of their political success to taking pot shots at the NAFTA. This erosion of support opened the door for Donald Trump to call NAFTA the worst trade agreement ever negotiated, and to call for it to be renegotiated or terminated.

Forces shaping the negotiation

Let’s take a step back.

Powerful forces in the three North American countries helped shape the approach to the negotiation of the original NAFTA.

In Canada the proposal to negotiate a free trade agreement with the US was a bold response to the challenges the country faced in the mid-1980s. The Macdonald Royal Commission on the Economic Union and Development Prospects for Canada was established in 1982 by Prime Minister Pierre Trudeau and reported its findings to the new Mulroney government in 1985. Its call for free trade with the United States had a major influence on the new prime minister. The threat to Canadian access to the US market from protectionist pressures and a plethora of protectionist bills in Congress strengthened the rationale for strong action on the trade front.

In Mexico the interest in negotiating NAFTA was driven in important measure by the efforts of the Salinas administration to modernize the Mexican economy. Achieving a good agreement would facilitate major domestic changes, and the subsequent framework of the NAFTA would anchor many of the reforms and provide a bulwark against backsliding.

In the United States President Reagan was a strong supporter of free trade. Indeed, he proposed free trade with Mexico in his 1980 election campaign. This vision was strongly supported by the US business community, but perhaps even more important, an agreement with Mexico was seen as a way to help transform Mexico into a more prosperous and more stable country. It was hoped that a free trade agreement would contribute to reducing migratory pressures at the border and fostering an environment which would assist reduction of drug trafficking.

The NAFTA was an important agreement shaped by realities in North America and the challenges faced by its three countries. In turn, the NAFTA influenced the evolution of relations among these countries.

Trade and other issues

By the mid 1980s, there was a growing international consensus that in addition to trade in goods and agricultural products, trade agreements needed to cover other matters. Foremost among these “new issues” were trade in services and trade related intellectual property matters. There was also a growing view that trade agreements should provide a framework of rules for international investment. When the NAFTA negotiations began the Uruguay Round of GATT negotiations was already well underway and had made substantial progress in negotiations on trade in services and intellectual property. Both of these issues were of course picked up in the NAFTA negotiations which, when completed, became the first major trade agreement to incorporate international rules on these matters. In addition, with strong leadership from the United States the NAFTA agreement included a chapter dealing with investment and providing among other things for a vigorous, high quality, system for investor state dispute settlement.

The NAFTA negotiators were conscious of the increased attention that was being paid to the relationship between trade and labour rights and trade and environment. Some of the provisions in the original NAFTA showed that these matters were very much under consideration. However, as became clear, they did not go far enough for important elements of opinion in the United States and Canada. By the time the NAFTA agreement had been signed by the three leaders in December 1993, President-elect Clinton had made clear that he would only submit the agreement to ratification by Congress if it were adjusted to include binding provisions dealing specifically with labour and environment. This decision by Clinton led to the NAFTA side agreements dealing with labour and environment. This was the first time that these matters were incorporated in the framework of a trade agreement.

Many other bilateral and regional trade agreements subsequently negotiated have incorporated provisions dealing with trade in services, intellectual property matters, investment, environment and labour.

John Weekes, former Mexican Commerce Secretary Jaime
Sera, and former US Deputy USTR Rufus Yerxa/El Colegio

By the time the renegotiation of the NAFTA began in 2017, thinking had evolved. The United States under the leadership of USTR Robert Lighthizer had turned its back on support for provisions on investor state dispute settlement and the CUSMA does not have provisions dealing with this form of dispute settlement. In addition, the Democrats in Congress made clear that their support for the revised agreement would require the negotiation of stronger provisions dealing with environment and labour, as well as incorporation of these matters within the agreement itself and subjecting them to stronger dispute settlement provisions. The CUSMA also took up new issues not previously included in trade agreements, such as disciplines for digital trade.

Increasingly, trade is being looked at by governments in conjunction with other policy areas.

Economic development has been the focus of such attention for a long time. The World Bank has noted:

Since 1990, global trade has increased incomes by 24 percent worldwide, and by 50 percent for the poorest 40 percent of the population. This growth has lifted more than 1 billion people out of poverty. Trade has also played a pivotal role in shaping the global economy and promoting positive socioeconomic outcomes.

Another policy area is climate change, where efforts to reduce carbon emissions differ as between countries. Concerns have been expressed that these differences create unfair advantages for businesses in countries with less strict regulations. Proposals have now emerged for how to “level the playing field”.

As frictions mount among countries, notably between China and the United States, trade has been seen as posing a risk to national security and has resulted in the imposition of trade restrictions.

In recent years, major governments have resorted to the use of subsidies as a tool of industrial policy in a manner that has significant impacts on trade.

Another example is the threats issued to Mexico that if it doesn’t control the flow of migrants to the U.S., the U.S. would impose tariffs on Mexican imports.

Finally, defense spending is now seen by some as a factor which may be relevant in the assessment of reciprocity in a trade negotiation. In August 2024 Global Affairs Canada invited interested parties to submit their views and experiences regarding the operation of the CUSMA and on how to potentially improve the Agreement. The Business Council of Canada responded to this request. Part of their brief argues:

[one] irritant between Canada and the U.S. which has the potential to frustrate a successful review of the CUSMA is not a market access issue but, rather, the government’s continued refusal to honour Canada’s commitment to invest the equivalent of two per cent of our GDP on defence.

These developments make the management of trade relations more complicated. Trade has always been important in the international relations sphere, but it is increasingly seen as a tool for the pursuit of various foreign policy objectives. Trade can no longer be treated just on its own merits but must be looked at in a broader context. Whether these developments are good or bad doesn’t really matter. There is a new reality which must be borne in mind, as the three governments approach the 2026 review of the CUSMA.

Positive economic effects of the NAFTA

Let me conclude with a few statistics.

According to data from Global Affairs Canada, trilateral merchandise trade among Canada, the U.S., and Mexico reached 1.93 trillion Canadian dollars in 2022. That more than tripled goods trade in 1993 between Canada and the U.S., while goods trade between Canada and Mexico increased 11 fold. Total trilateral trade increased nearly five-fold over that period.

On the investment front in 2023, US FDI in Canada stood at $697.3 billion, while Canadian FDI in the U.S. stood at $1.1 trillion. Mexican FDI in Canada was $2.8 billion, while Canadian FDI in Mexico was $40.4 billion.

According to USTR information for 2022[2], US exports to Canada were US$356.5 billion while imports from Canada were US$436.6 billion. For Mexico-U.S. trade US exports were US$324.3 while US imports were US$454.8. Of course, President-elect Trump is a keen observer of trade deficits. With Canada, the US deficit in goods trade was US$ 80.1 billion while the deficit with Mexico was US$130.5 billion. Significantly, Canada is the largest purchaser of US goods exceeding the EU 27, Mexico, and China.

Conclusion

The trade world in which the CUSMA will be reviewed in 2026 is much different from the one in which the original NAFTA was negotiated in 1992-93. Perhaps the key to a successful outcome will be to strive to establish ambitious goals which will strengthen all three countries and make North America an even more competitive force in a very challenging global environment. The success of the original NAFTA was achieved with ambitious objectives. A similar approach should be tried now.

John Weekes, who was Canada’s chief negotiator for the original NAFTA, is a member of the Expert Group on Canada-U.S. Relations, and a fellow of the Canadian Global Affairs Institute.