THE CURRENT STATE OF NAFTA.

• Position: Proceedings of the 42nd Canada-United States Law Institute Annual Conference: Back to the Future: The Canada-United States Relationship at a Crossroads - Discussion

Moderator: Lawrence Herman

Speaker: Jeffrey Schott

Speaker: Peter Clark

Speaker: John Magnus

PROFESSOR PETRAS: Okay. All right. Everyone, as our panelists take their seats, our next panel is going to look at the current state of NAFTA, and moderating this panel is Larry Herman.

Larry has been active with the Canada-US Law Institute for many years. He has been on our CUSLI Executive Committee since 2009. He has a graduate degree from the University of Saskatchewan and has a law degree from the University of Toronto.

He is a well-recognized and well-known international trade lawyer in Canada, and if you follow the Canadian press at all on NAFTA, chances are you've read several articles written within the past year, past six months, by Larry about the current status of NAFTA and his thoughts about it and where it should go.

He is a regular writer for various newspapers, including The Globe and Mail in Canada. He has had a very distinguished career.

In fact, if you look at his bio, it is the longest in the materials, and we have known Larry for a very long time. He is an outstanding member of our Executive Committee. He always has great ideas on what the topics should be and what speaker should be, and we are happy to have him chair this panel.

MR. HERMAN: Thank you, and thank you all. We are missing a panelist, John Magnus. His flight may have been delayed, and I am hoping that he will arrive and take his place with us.

But we are going to start without John because we have two extremely well qualified panelists, people that I think will add some important views and comments on where we are going in the NAFTA.

I was very impressed with the first panel and the high tone of the discussion. It really was excellent and serves us well in embarking on this discussion.

It was an optimistic view, and of course, when you have Democrats and Liberals and Red Tories on a panel, you are going to get an optimistic view, which is fine. We are going to take it a little bit further this morning.

Now, here on the podium is--I am going to introduce the panelists here on the podium--is Peter Clark, who is the President of Grey, Clark, Shih, an Ottawa based trade consulting firm with global reach, and Peter has had broad experience going back many, many years.

In fact, he and I first met in the days when the GATT still existed, and we were both at the Canadian Mission [to GATT] in Geneva in the '70s. But Peter has provided advice and counsel on many issues in the international trade field, both as a consultant and advisor and a litigator you might say, and his knowledge is really very deep and extensive on all of the issues we are going to discuss this morning.

With him is Jeff Schott, another friend who I've known for many years, Senior Fellow at the eminent Washington think tank, the Peterson Institute. Jeff, as well, has brought experience as a commentator, as an author, as an analyst, very knowledgeable about all aspects of international trade and highly knowledgeable about the Canada-US dimension.

And we Canadians know that often in the U.S. and in Washington the Canadian dimension may not be as appreciated as it should be, and Jeff is one of those persons who has a high degree of knowledge of the importance of the Canada-US dimension.

So we are going to talk about scenarios I think, including the possibility of no NAFTA. I mean, it is one thing to say and important to say that the relationship between Canada and the United States is so strong, that NAFTA is so important it is going to continue, and it is going to be updated and modernized.

But what I would like the panel to address and comment on is what happens if it doesn't go that way. What are the possibilities under the current situation of an updated NAFTA? Where are these negotiations likely to go, and what would happen if the President decided that the United States would issue its intention to withdraw from the NAFTA? These are things I think we need to talk about in going forward.

Our plans were for John Magnus to go first. Obviously, he can't, and then to be followed by Peter and Jeff. So recognizing John is not here, why don't we start with Peter, and Peter, you are deeply involved--deeply involved in the NAFTA renegotiations.

I know there are things you can't talk about, but hopefully, there are things you can talk about, and I would like you to give your views on scenarios. Where are we going with this thing?

MR. CLARK: Well, Larry, I had one view when I woke up; went through the evening reports, and I had another view just before I got on the plane, and by the time I had got off the plane, it had changed again.

(Laughter.)

MR. CLARK: So I thought that the suggestion that we could come up with an agreement in principle by the end of this week first and by the end of the month was highly, highly ambitious. But I've been dealing with U.S. officials and U.S. Government for a long time, and I am never surprised at what they manage to do if they really want to do it.

At the present time, I don't think that we are going to finish up by the 1st of May. Mexico clearly wants to finish by the 1st of May for their own reasons. This was the first week that I actually didn't go to where the hearings or the meetings were because I thought it would be a waste of time after last week, because the schedule showed that there were a lot of tables sitting and negotiating and talking.

Everybody expected the activity to be in Lima, which it wasn't. It seemed towards the end of last week that the suggestion that Mexican president would go to Lima might be a bit delicate in view of moving troops to the border and yet another reference to the wall. They were very concerned that they might announce something and then have the President add his own editorial content, which would have made it very embarrassing for them.

Looking at what is supposed to happen next week, it is yet another series of tables trying to close. Now, they've only closed six minor chapters. I believe from my discussions with negotiators that they can probably fairly easily do another ten.

Now, do they mean anything? Well, they mean something to the people that are concerned, but they are not the really serious issues. I understand that Chrystia Freeland went through every chapter with Ambasador Lighthizer last week when she was there. Mexicans were particularly focused on automotive.

He spent three times as much time with the Mexicans as he did with the Canadians before the trilaterals. When they came out of the Winder Building, Chrystia had set up a scrum, a surprise scrum.

Everybody knew when she was coming out of the building, and at the same time, the Mexicans went out the side door. So that didn't send a very good signal on what had happened. And when we checked into it, basically, there is no six chapters that are done. The rest of the discussion has been on automotive, and the really important issues, some of the important issues for Canada weren't even checked.

Now, John Melle has supposed to have been putting papers in front of the negotiators, identifying landing zones, and my assessment is he couldn't even find the airport, nothing close.

So I think that the Canadian assessment is, if they can't get it done soon, it is going to have to go into 2019, and if I took it based on current state of play, I would say 2019.

MR. HERMAN: So just before we turn this over to Jeff, you are saying that the state of play will be suspended, frozen, and they will come back to the table having kind of captured those chapters that have been more or less, quote, closed, come back and try to address the real difficult issues in early 2019?

MR. CLARK: Well, Larry, it is like trying to predict the President's Twitter feed, nobody really knows. We have checked with the negotiators on whether they would continue to talk during the interim period or whether they would just put it on hold, and you can't find out. At least, I haven't. Maybe Jeff has been able to find out, but I haven't.

MR. HERMAN: So the message is, at least for the foreseeable future, for the business world where some of us operate, is uncertain, and if you are trading bonds or stocks, you have got to realize that it is an uncertain world for the foreseeable future.

You know, the trade agreement, NAFTA, and the stability of international trade has a direct impact on the business community, on the financial services community, and so there are major economic issues at stake here. Jeff, over to you.

MR. SCHOTT: Well, thanks, Larry, and thanks to the Canada-US Law Institute. This is my first time attending one of these conferences.

My partner in the law firm of Hufbauer and Schott, Gary Hufbauer, has been a recent participate here, and Gary and I have worked together for 40 years, including in the Tokyo Round and in the U.S. Treasury subsequently.

So when he couldn't come because he is out in New Mexico and he offered the baton to me, I grabbed it right away, and I am very grateful to be here with you. Gary is a lawyer as well as a Ph.D economist. So he would respond to some of these questions a little differently than I will. So I will just make a few comments on the state of play, which incredibly we are not well informed about.

I don't think there has been a trade negotiation in the past 40 years that you could say that of the three of us, and that's because the unpredictability, the incoherence of the U.S. policies and positions. Incoherence I think is the problem.

So you have an incoherent policy, and you know it is not sustainable, but you don't know how they are going to fix it or change it, and that's where we stand today.

About the most optimistic thing I can say is that NAFTA has always been controversial in all three countries. That's why we haven't fixed it before because the thought of the three countries getting together and trying to update it was too risky, raised too many political problems in our three countries.

And so we found a...