De-Institutionalizing North America:1 NAFTA’s Committees and Working Groups2 Stephen Clarkson, Sarah Davidson Ladly, and Carlton Thorne Third EnviReform Conference, November 8, 2002

The EnviReform project has tackled various aspects of citizen mobilization in North America around issues of concern to civil society organizations (CSOs) such as environmental sustainability and labour standards in the context of the North American Free Trade Agreement. Originality for NAFTA was claimed as being the first trade and investment agreement not only to

1 Author’s Notes: We would like to thank the Department of Political Science and Dean Carl Amrheim of the Faculty of Arts and Science at the University of Toronto for their generous financial support in providing the research travel grant that allowed us to conduct our research in Washington, D.C. We would also like to thank the Woodrow Wilson International Center for Scholars for their hospitality during the week of April 6-12th. Thank you to all of the professionals who agreed to be interviewed —(David Decarme of the Department of Transportation, Professor Charles Doran of Johns Hopkins University, Jeffrey Dutton of the Office of NAFTA and Inter-American Affairs and the United States Department of Commerce, Carl Hartill of the Canadian Embassy, Carlos Rico of the Mexican Embassy, Kent Shigetomi of the Office of the United States Trade Representative, and Sidney Weintraub of the Centre for Strategic and International Studies). To all of the Canadian civil servants at the Department of Foreign Affairs and International Trade who took the time to complete our exploratory questionnaire, thank you. Thanks to Ricardo Del Castillo and Claude Carrière of DFAIT for their administrative support. 2 Our investigation of the NAFTA Committees and Working Groups was first conducted through reading secondary sources related to NAFTA and continental governance, as there was no secondary literature that addressed the significance of the NAFTA Committees and Working Groups themselves. In regard to primary source materials, we read all of the published reports listed on government websites such as the Canadian Department of Foreign Affairs and International Trade and the United States Trade Representative. In January-March, 2002, we sent out several questionnaires pertaining to the tasks and responsibilities undertaken by the Canadian representatives of the NAFTA Committees and Working Groups. This material was primarily used in an exploratory sense to help frame our subsequent interviews. In April 2002, we interviewed several prominent academics in Washington D.C. and American government officials that had either worked on the NAFTA Committees and Working Groups or had extensive experience with NAFTA issues.

1 endorse environmental sustainability but to create an institution – the Commission for Environmental Co-operation (CEC) – that would increase the weight of environmental considerations in trade policy matters within the continent. A similar claim was made for the North American Agreement on Labour Co-operation (NAALC). Considerable research efforts have been devoted –- including in EnviReform’s conferences in 2000 and 2001 – to the CEC and the NAALC’s effectiveness as vehicles for citizen participation in the governance of North America. On the whole, the scholarly consensus is that the labour side agreement has not increased the muscle of organized labour vis-à-vis the market forces unleashed by NAFTA. Assessments of the CEC have been more nuanced. Almost entirely ignored in discussions of the citizen side of North American governance has been the committee structure set up by NAFTA. to complete the agreement’s unfinished business or to pursue its agenda. Observers inspired by the European Union’s heavily institutionalized model tended to assume that the committees and working groups established by NAFTA would evolve, whether as more substantial structures for continental governance or as access points allowing CSOs to participate in the process of North America’s development. On January 1, 1994, the United States, Canada, and Mexico signed NAFTA and so created what was touted as the world’s largest free trade area. NAFTA was a comprehensive agreement that provided for the elimination of tariffs and reduction of non-tariff barriers and further established disciplines for governments in the areas of investment, services, competition policy and the temporary entry of business persons.3 NAFTA was proclaimed to be an “economic constitution” 4 for North America as it effectively created a supranational framework for all continental economic activity. It embodied a vision of continentalism insofar as the agreement was to exert significant control over the level and manner of economic integration between its member states and in this regard set the parameters for what would constitute legitimate policy in North America. A continentalist agenda was further signaled by both a formal and informal shift from the dual-bilateralism of the past to an envisioned trilateralism of the future. This emerging trilateralism was a product of the more general desire to both foster and formalize the ‘North American’ relationship. NAFTA goes further than any previous free trade agreement in that its reach extends “beyond the border.” In addition to tariff elimination, the agreement contains provisions on potential non-tariff barriers such as standards and includes new ‘deep integration’ issues such as

3 NAFTA Overview, Department of Foreign Affairs and International Trade, 2001. http://www.dfait-maeci.gc.ca/nafta-alena/over-e.asp 4 Stephen Clarkson, “Apples and Oranges” Prospects for the Comparative Analysis of the EU and NAFTA as Continental Systems, (Italy: European University Institute, 2000), 51.

2 investment and intellectual property. As a result, the agreement exerts extensive control over member states’ domestic policy and regulatory schemes. The far-reaching scope of the agreement led the signatory governments to anticipate challenges stemming from the corollary need for high levels of integration in many areas. While there was marked resistance on the part of all three states for corresponding political institutionalization, given the challenges presented by the scope of the agreement, some institutionalization was unavoidable. The resulting compromise was a meager and highly decentralized institutional structure designed to deal with a range of sector and policy-specific subjects, which were likely to arise from the complexity of this increased integration, and further to foster the co-operation necessary for implementation and administration.5 The permanent institutions created to oversee NAFTA’s functioning consist of the Free Trade Commission (ministerial level meetings), the NAFTA Secretariat (three national sections) and approximately 30 committees and working groups. The committees and working groups (CWGs), which make up the underbelly of NAFTA’s institutional structure, are concerned with a wide range of issues and were generally mandated to facilitate trade and investment. These institutions were intended to monitor and promote the successful administration of the North American Free Trade Agreement by establishing that a committee or working group oversee the implementation of a specific chapter of the agreement. The CWGs were, in essence, organized trilateral forums where civil servants from the three countries could exchange relevant information, resolve minor disputes, and discuss future liberalization. The structure and composition of the committees and working groups were intended to favour objective analysis and resolution of conflicts. The intent was to create institutions which were somewhat ‘de-politicized’ insofar as they would encourage the formation of epistemic communities of technical and sectoral experts who might be more inclined to favour long-term benefits over politically dangerous short-term costs.6 The CWGs fulfilled these criteria as they were seen to be conducive to the formation of small networks of working relationships and the consolidation of bodies of experts.7 They were mostly mandated within the text of the agreement to meet on average from one to four times yearly, or as issues arose, and to produce reports for the Free Trade Commission according to particular schedules established within the agreement.

5 Joseph McKinney, “NAFTA-Related Institutions in the Context of Theory” in Created From NAFTA: The Structure, Function, and Significance of The Treaty’s Related Institutions, (Armonk, New York: M.E. Sharpe Inc., 2000), 14. 6 McKinney, 22. 7 McKinney, 17.

3 The structure and mandates of these groups was significant insofar as they were trilaterally staffed institutions composed of government, and occasionally private sector, experts with mandates to evaluate and even help direct public policy within the member states. Despite the historical ‘hub and spokes’ configuration of Canada-U.S.-Mexico relations (Canada-U.S. and U.S.-Mexico) the NAFTA committees and working groups, in the spirit of a new continentalism, were created with a view to trilateralize relations, both acknowledging this new dynamic and hoping to foster its long-term developments. We will argue that in the eight years since the signing of the agreement, the committees and working groups have, on the most part, been under-utilized. As relatively insignificant continental institutions, they have little potential to serve as entry points into North American governance for civil society. This, weakness is largely due to the considerable incongruity between the working group’s trilateral and professional nature and the bilateral and political realities which continue to characterize the relations between Canada, the U.S. and Mexico. This is because so-called continental issues are generally bilateral issues, either U.S.-Canada or U.S.-Mexico, and as such, are of little interest to the uninvolved party. Further, these relations have not yet reached a stage where discussions and disputes may be channeled towards de-politicized institutions built on a groundwork of formal legal equality. The bilateral realities of the North American relationship render the formal trilateral structure of the working groups an unnecessary and largely inefficient mechanism through which to resolve disputes and discuss emerging issues. Moreover, the political realities of North American relations are less than amenable to groups of professional/neutral experts empowered to act as arbiters of trade and commercial disputes. It appears that the formula embodied in the committees and working groups is only workable for low-level, low-interest disputes, as more politically sensitive controversies require a political arena with less strict objectivity, more flexibility and more room for compromise. Such bilateral and political realities constitute a serious impediment to the formation of active and effective continental institutions. The following analysis will consist of three sections. The first includes a brief summation of the history of economic and political relations between Canada, the United States and Mexico. This is followed by a discussion of the theory behind, and the ideals embodied within the committees and working groups, specifically in regard to fostering trilateral co-operation and towards encouraging the professional resolution of technical and commercial disputes. The second section presents and analyses our research on the past and current status, activities and dynamics of the NAFTA Committees and Working Groups. We will examine, in detail, two cases (energy and trucking) that appropriately illustrate the general trends affecting the CWGs. This will be followed, in the third section, by a discussion of the factors contributing to the significant disjuncture between the ideals out of which the committees and working groups were borne and

4 the continuing bilateralism of the North American relationship and the continuing existence of political sensitivities and constraints which necessitate political negotiation and compromise.

Section One : Ideals of Trilateralism and Professionalization

Historical Context of Political and Economic Continental Relations: NAFTA has been described as an “after-the-fact acknowledgement”8 of the realities of the intense economic integration occurring between the United States, Canada and Mexico. However, while NAFTA is a trilateral agreement, historically the pattern of North American integration is best described in terms of a ‘hub and spokes’ dynamic; a term which broadly designates a series of bilateral relationships which exist between the core power (the U.S.) and its two neighbours (Mexico and Canada).9 This concept most accurately describes the pre-NAFTA relations between the three countries when a combination of market forces, state policies and demographic and cultural patterns fostered and maintained two bilateral relationships rather than generate an integrated or trilateral continentalism.10 While both Canada and Mexico have at different times tried various third-way policies and nationalization programs in the hopes of lessening their economic dependence on the United States,11 both countries’ economies have become increasingly dependent on the U.S., which for the last century has been the largest trading partner of both Canada and Mexico as well as each country’s largest foreign investor.12 In 1984, ten years before NAFTA, 77.2% of Canadian foreign direct investment inflows came from the U.S. as did 63% of Mexican inflows.13

8 Mexican Embassy Official. Interview by authors. Washington, D.C. 10 April, 2002. 9 Eden, Lorraine and Maureen Appel Molot, “The View from the Spokes: Canada and Mexico Face the United States.” In North America Without Borders? Integrating Canada, the United States, and Mexico, edited by Stephen J. Randall with Herman Konrad and Sheldon Silverman, (Calgary, Alberta: University of Calgary Press, 1992), 67. 10 Ibid, 71. 11 Brunelle, Dorval and Christian Deblock, “Economic Blocs and the Challenge of the North American Free Trade Agreement.” In North America Without Borders? Integrating Canada, the United States, and Mexico, edited by Stephen J. Randall with Herman Konrad and Sheldon Silverman, (Calgary, Alberta: University of Calgary Press, 1992), 126. 12 Clarkson, “Apples and Oranges”, 13. 13 Smith, Murray G, “Consolidating and Deepening Economic Relations in North America.” In North America Without Borders? Integrating Canada, the United States, and Mexico, edited

5 In contrast, Canadian-Mexican interaction has been relatively insignificant.14 In 1990 Canada was Mexico’s sixth largest trading partner while Mexico ranked only 17th on Canada’s list.15 Canada and Mexico have further lacked the significant historical and political ties found between both Canada and the U.S. and the U.S. and Mexico, chiefly because of their geographic separation and significant income disparity.16 The continental relationship is made even more complex by the United States’ hegemonic status and the ensuing asymmetries in power between the three states. The U.S. is the continent’s economic engine as it is the source of by far the largest share of all economic activity. In 1987, the U.S. was responsible for 85% of the region’s exports and 91% of its imports.17 Moreover, at the time of NAFTA’s signing the U.S. economy was twenty times larger than that of Mexico’s and twelve times the size of Canada’s.18 Despite these realities, the committees and working groups established to oversee and implement NAFTA were a step in the direction of a new continental identity founded on ideals such as legal equality, trilateralism and the anticipated benefits of an increased professionalization of trading and commercial relationships. The working groups were generally mandated to act as trilateral forums where the three signatory parties could foster trilateral cooperation and communication, encourage the professional resolution of disputes and generally promote the adherence of all parties to the text of the agreement. There was to be approximately equal representation of the three countries within the membership of each group and all groups were to be co-chaired by an official from each member state. Meetings of the groups were to take place, in turn, in Canada, the U.S., and Mexico.19 The officials sitting on these groups were to be drawn from various agencies and ministries and selected for their detailed knowledge of the issue at hand – be it pesticides, trucking standards or customs issues.20 Thus, the trilateral and semi-

by Stephen J. Randall with Herman Konrad and Sheldon Silverman, (Calgary, Alberta: University of Calgary Press, 1992), 71. 14 Eden and Appel Molot, 68. 15 Smith, 69. 16 Eden and Appel Molot, 78. 17 Brunelle and Deblock, 125. 18 Salvatore, Dominick, “NAFTA and the EC: Similarities and Differences.” In The North American Free Trade Agreement, edited by Khosrow Fatemi and Dominick Salvatore, (Great Britain: The Alden Press, 1994), 23. 19 Claude Carrière – Director General, Trade Policy Bureau 20 Ibid.

6 professional nature of the NAFTA institutions marked a significant departure from the past nature of North American relations. While it appears that some of the groups were created in order to give the appearance of action on issues the parties were unable to resolve during the negotiations,21 the majority of groups were genuinely intended to be functional and effective forums for discussion and the oversight of the administration of the agreement. The working groups’ trilateral and professional natures were seen as being key contributing factors to their anticipated level of effectiveness.

Trilateralism: The trilateral nature of the NAFTA committees and working groups was grounded in a desire to create forums where all three parties could voice and transmit their interests in a relatively de- politicized arena. Trilateral forums appeared to be not only appropriate and efficient, but also more likely to defuse bilateral conflicts and provide a means to depart from the traditional bilateralism of North American trade negotiations. The formation of trilaterally staffed working groups was significant insofar as it created institutions where foreign actors, with specialized knowledge, were explicitly encouraged to lend their voice to discussions on domestic policy. In this respect the groups could be described as emerging structures of continental governance. By fostering trilateral co-operation, the signatory parties hoped to mitigate each party’s ability to unilaterally interpret and administer NAFTA. The groups were to be a mechanism whereby member-states could be held accountable at a relatively low level, allowing the other parties a chance to intervene before policies were entrenched and beyond contestation. The existence of such trilateral institutions also lent itself to offsetting somewhat the immense asymmetries in power that exist between Canada, the U.S. and Mexico. The groups could, in theory, decrease this asymmetry simply by ensuring that the two less powerful states – Mexico and Canada – were never left to negotiate one-on-one with the U.S. Additionally, participation in these groups would allow Canada and Mexico influence over some aspects of U.S. regulatory policy and generally ensure that all three states were given “voice opportunities” with which to make their views known and to possibly give them effect. 22 If the committees and working groups were to be actively establishing norms, regulations or policy, then by affording Canada and Mexico the opportunity to participate equally in the deliberative process the groups could, in

21 Doran, Charles. Andrew W. Mellon Professor of International Relations, director of Centre for Canadian Studies and director of international relations at the Nitze School of Advanced International Studies, Johns Hopkins University. Interview by authors. Washington, D.C. 11 April, 2002. 22 McKinney, 14.

7 theory, increase the likelihood that the implementation of the agreement would not be distorted by U.S. hegemony.

Professionalization: To achieve an effective and objective interpretation and implementation of the agreement, the CWGs were created with an eye towards increased professionalization and de-politicization of the relations between the three countries, as pertaining to their trade/commercial relationships. Although, membership of these groups was drawn almost entirely from the civil services of the respective states and “political direction for the NAFTA work program [was to be] provided by Ministers through the Free Trade Commission”23, the groups were nevertheless intended to be relatively insulated from direct political pressures in their day-to-day activities. The establishment of NAFTA CWGs can be seen in the context of a shift towards the de- politicization of some forms of public authority insofar as they ensure that decision-making is diffused along a highly decentralized institutional structure and is vested in the hands of professional policy-makers. It appears that the signatory countries sought to create this web of relatively autonomous and insular bodies with highly specialized mandates in the hope of increasing the likelihood of a fair and consistent implementation of the Agreement. The decision to structure these institutions as fragmented groups staffed by civil servants with technical expertise came out of a belief that the interpretation and implementation of NAFTA was more likely to operate in a rules-based fashion if at least partly removed from the sphere of domestic politics. 24 The parties sought to create effective trilateral institutions which would be likely to treat issues objectively and favour long-term benefits over politically dangerous short-term costs, 25 engender trust and decrease deception between member states, create favourable conditions for the generation of objective solutions to policy conflicts, 26 and generally increase the chances that member countries would live up to their commitments and act according to the principles of the agreement. The committees and working groups were thus appropriate as they were seen to be conducive to the formation of small networks of working relationships and the consolidation of bodies of experts.27 Furthermore, all of these outcomes associated with trilateral institutions and the general de-politicization of the implementation process would be likely to benefit Canada and

23 Carrière. 24 McKinney, 22. 25 McKinney, 22. 26 McKinney, 19. 27 McKinney, 17.

8 Mexico as the outcomes associated with a rules-based systems tend to benefit the less powerful peripheral states. The creation of the NAFTA CWGs was a testament to the desire of the three governments to work towards de-politicizing commercial disputes out of an acknowledgement that, to a large extent, these issues were not national issues arising between states, but rather issues arising between national and increasingly multinational firms.28 When viewed in this light, it is in the interests of a national government to distance itself from these disputes both because these firms represent narrow commercial, rather than national, interests and because these issues have a tendency to act as constant irritants in inter-state relations.29 The creation of groups intended to serve as “an apolitical arena for the discussion of issues and, through early dialogue on contentious points, the possible avoidance of disputes.”30 spoke to this gradual shift towards an increasing consensus on the part of governments that disputes and discussions surrounding largely commercial transactions and relationships ought to be dealt with by professionals acting in forums that were relatively free of political power-dynamics. It was through the creation of such environments that these issues could be resolved on the merits of the arguments and claims being judged upon stable legal and economic criteria.31 Under this new direction, efficiency and merit were to prevail over politics. 32 While no one expected high-level issues to be easily passed over to institutions such as the committees and working groups, there was a general consensus that over time, as issues were resolved effectively, these types of processes would gain more legitimacy which would in turn lead to more important issues being directed towards these forums. 33

Section Two: The Status of the NAFTA Working Groups

Composition: The NAFTA Committees and Working Groups are staffed by civil servant representatives drawn from each of the three NAFTA countries. These officials come from a range of departments and agencies. One civil servant is designated as the national lead or contact of each committee or working group. Typically a member state will have between two to ten members representing

28 Doran 29 Doran 30 Carrière. 31 Doran 32 Doran 33 Doran

9 their interests on any committee or working group. While there is approximate equity in representation, the United States does tend to have the largest contingent of civil servants working on any specific committee or working group. Where there is a discrepancy, Canada’s and Mexico’s lesser resources usually explain the imbalance. In regard to frequency of rotation of membership within the committees and working groups, the highest turnover rate tends to be found among the Canadians. This is because the majority of Canada’s representatives are foreign service officials who are by nature subject to periodic rotation.34 In many cases, one civil servant will be responsible for the activities of more than one committee or working group. The time required to service each NAFTA committee and working group varies, but generally, the portfolio takes up a very small portion of a civil servant’s time.35 One NAFTA working group official noted that he spends only about 3% of his time working on his particular working group portfolio. By contrast, the majority of his time is spent working on the FTAA.36 Naturally, in the event that a trilateral meeting of the working group is about to take place, the representatives will likely devote more time than normal to their working group-related assignments.37 Relations within the CWGs tend to be informal and bilateral. Much work is done over the phone or via e-mail rather than by convening an official meeting of the group. Furthermore, civil servants who staff the committees do not appear to think of themselves as members of a cohesive and stable group. The national members of the various working groups are likely to deal with their international counterparts on a frequent and informal basis for a variety of non-NAFTA issues, and as such, the communication style does not change when the issue falls under the ambit of a NAFTA committee or working group. 38 In all three countries, there appears to be an overlap between membership on the NAFTA committees and working groups and involvement in the negotiations surrounding the Free Trade Area of the Americas. This overlap suggests a high level of involvement by a small number of officials who represent their department’s interests in all trade-related spheres. The CWGs may also have as members “volunteers from the private sector who offer particular expertise on an

34 Shigetomi, Kent. Director for Mexico and NAFTA Affairs—Office of the United States Trade Representative. Interviews by authors. Washington, D.C. 10 April, 2002. 35 Dutton, Jeffrey. Office of NAFTA and Inter-American Affairs, United States Department of Commerce. Interview by authors. 12 April 2002. 36 Ibid 37 Dutton. 38 Dutton

10 issue and represent a variety of non-governmental interests” 39 as well as representatives from non-governmental standards organizations, scientists and other technical experts. 40 The national sections of each NAFTA committee or working group are ultimately accountable to their national government’s trade-coordinating agency or department (DFAIT, U.S.T.R., Secretaria de la Economia) but decisions made by the groups must also be cleared by the various departments and agencies represented within the group. While the CWGs are mandated to produce regular reports for review by the Free Trade Commission, this is not, by any means, the primary way in which they are held accountable.41

Activities and Processes A Committee or working group was established for virtually every chapter detailed in NAFTA. Just as the mandates of the CWGs vary, so to do the actual processes and functions of the individual groups, which fall into the general categories of: Implementing or overseeing the implementation of the NAFTA; Acting as forums for the exchange of information between the three member countries; Acting as forums for the resolution of minor conflicts; Harmonizing regulations; and Acting as forums for the relay of information and ideas between the member governments and any interested non-governmental organizations. Notwithstanding the above, the majority of groups investigated are engaged in a combination of these activities.

1) Implementing or overseeing the implementation of the agreement: The majority of groups investigated are involved to some extent in the oversight of NAFTA’s implementation insofar as they are mandated to deal with any issues that arise during that process and to address ambiguities in the text as they appear. The group most directly involved in the implementation of NAFTA is the Committee on Trade in Goods. This working group has been quite successful. It has now completed all four rounds of its tariff acceleration mandate. As a result, the group no longer meets regularly. 42

39 NAFTA Organizations, United States Trade Representative Website, 2001. http://www.ustr.gov/regions/whemisphere/organizations.shtml 40 NAFTA - Trade Compliance Centre, Market Access and Compliance – U.S. Department of Commerce, 2001. http://www.mac.doc.gov/tcc/e-guides/eg_naf09.html 41 Dutton 42 Shigetomi.

11 2) Exchange of information: An activity common to all groups is acting as a forum for the exchange of data between member countries. This information-sharing takes on many forms, including: tracking each country’s administration or implementation of the agreement, formulating understandings around different sectors, laying the necessary groundwork for further generation of ideas regarding deeper integration and, more generally, understanding the needs and concerns of each country. This exchange of information ideally results in the generation of trilateral statements or reports. Collectively, information sharing has become the primary function of the working groups. 43

3) Resolution of Conflicts: Another widespread function of the CWGs is to resolve low-intensity disputes. This is intended to limit the number and the nature of the conflicts that must be dealt with by the Free Trade Commission, or by NAFTA dispute panels. The CWGs were intended to act as a first line of defense insofar as they seek to resolve conflicts quickly and quietly before they burgeon into larger problems. The groups investigated have worked on, or resolved low-level disputes concerning, for example, the appropriate classification of goods44 (Customs Subgroup), increased Mexican duties on the importation of frozen Canadian geese and U.S. ducks (Trade in Goods) and the application of a merchandise-processing fee by the U.S. on importations of some Canadian textile products45 (Trade in Goods).

4) Harmonization of Regulations: Some of the groups investigated have explicit mandates to harmonize, or to generate new, regulations that directly affect how the Agreement is implemented and administered. The most notable example of this is the Working Group on Rules of Origin. This group was established to “develop common regulations to govern the detailed interpretation, application and administration of the Rules of Origin” 46 which are essential to the accumulation of economic benefits insofar as they protect against direct and indirect trade deflection. This working group is presently one of the most active. It recently reconfigured and realigned seven NAFTA rules of

43 43 SICE – NAFTA Reports, http://www.sice.oas.org/trade/nafta/reports/goods_e.asp 44 NAFTA Reports – Committee on Rules of Origin, SICE, 2001. http://www.sice.oas.org/trade/nafta/reports/origi_e.asp 45 SICE – NAFTA Reports, http://www.sice.oas.org/trade/nafta/reports/goods_e.asp 46 Government of Canada, NAFTA: What’s It All About?, 39.

12 origin, bringing them into conformity with changes in the Worldwide Harmonized System announced by the WTO in January, 2001.47

5) Forums for the Relay of Information Between the Governments and Interested Parties: A final function of the committees and working groups is the facilitation of the exchange of information and ideas between those responsible for the implementation of the NAFTA (member governments) and any interested non-governmental parties (private sector interests). Certain CWGs appear to engage in a fairly large amount of private sector consultation. One of the key responsibilities of members of the Telecommunications Standards Sub-Committee (TSSC) is the coordination of efforts and the exchange of information with the Consultative Committee for Telecommunications (CCT), a body that represents the telecommunications industry. The recent reconfiguration of the TSSC’s membership clearly illustrates how closely government officials and non-governmental actors can work together within the working group structure. The TSSC’s membership consists of two to three government officials from each of the NAFTA nations, but for the last three years, the chair and the vice-chairs of the CCT have additionally been invited to all of the committee’s meetings. The goal behind such actions is to enhance the degree of feedback coming directly from the industrial sectors of the three countries. While the degree of private sector consultation in the TSSC is particularly “extensive,”48 the degree of private sector participation and consultation varies from group to group. 49 The relatively high frequency and level of interaction between the CWGs and the private sector is, however, not surprising given the time-honoured approach of extensive private sector participation in regard to foreign economic policy decisions established by the U.S. As confirmed by one working group official, the level of consultation is “nothing beyond the usual day-to-day interaction” for a department such as the U.S. Department of Commerce.50

Current Levels of Activity At present, approximately 60% of the CWGs are inactive. Several factors have contributed to this inactivity, the most obvious of which being a working group, such as the Committee on Trade in Goods, essentially fulfilling its mandate. This group recently completed its final round of tariff

47 Shigetomi. 48 Response from a civil servant questionnaire, Land Transportation SubCommittee. 49 Dutton 50 Dutton

13 acceleration ahead of schedule, and thus, no longer has a clear agenda to complete. 51 The Committee on Trade in Goods stands out as the only example of a group that appears to have completed, to the acceptance of all three parties, the mission set out for it by NAFTA which specified the items requiring tariff removal. A more common cause of inactivity is a lack of political motivation and direction regarding the future of a particular working group. The Advisory Committee on Private Commercial Disputes Regarding Agricultural Goods, the Government Procurement and Committee on Small Business, and the Working Group on Trade and Competition Policy fit into this category. In these cases, the groups are inactive largely because the three nations are unsure about what benefits future work by these groups will garner. Owing to the often disparate agendas and concerns amongst the three nations, finding trilateral agreement on the direction the group ought to pursue has been a major sticking point. Concerning the Working Group of Trade and Competition Policy, the Director for Mexico and NAFTA affairs within the United States Trade Representative notes, “The U.S. feels it has completed its work [but] we have some disagreements with Canada, I believe, on what the future work in competition would be.”52 Furthermore many issues within their mandate are too politically sensitive to be dealt with in the working group forum. Owing to their highly politicized nature, certain issues are unsuitable for a group of professional experts to resolve. They instead require bilateral negotiations. In regard to the Chapter 19 Working Group on Trade Remedies, Kent Shigetomi (U.S.T.R.) confirms this understanding; “Again, a lot of the time it’s because some of these things are so polarized and bilateral that they move out of this working group thing, to just bilateral negotiations.” 53 There is another category of inactive working groups. These are groups such as the Committee on Trade in Worn Clothing and the Working Group on Emergency Action, which, in fact, have never met. These groups were born out of the inability of the negotiating parties to reach consensus on certain controversial issues during the NAFTA negotiations. Rather than delay the signing of the Agreement, many unresolved and contentious issues were assigned to the working groups as a way to “soften the failure of a lack of resolution.” 54 In these cases it seems that such working groups were simply a “graceful way of pretending there would be more discussion.” 55 The reality of the situation has, however, posed considerable difficulties for these

51 Shigetomi. 52 Ibid. 53 Shigetomi. 54 Ibid. 55 Doran.

14 working groups as issues considered contentious prior to 1994 are not, at present, any easier to navigate. Among the groups that are still active, several factors are also at play. One factor contributing to high levels of activity among some groups is that certain working groups have been revitalized as a result of increased political will and energy in related areas of government policy. An example of this is the Customs Subgroup which, since September 11th, has been largely concerned with issues of border security. This group, particularly in the six months following September 11th, has been reasonably active. 56 The Working Group on Rules of Origin appears to have been reinvigorated by post September 11th events. 57 A key catalyst propelling this new activity has been the negotiation and implementation of smart border initiatives between the United States and Canada and Mexico. It does need to be noted, however, that while the activities of the smart border initiatives have contributed to increased activity in the associated NAFTA working groups, this is only because the determinations of the political negotiations between the three states have trickled down to the Customs Subgroup as a last effect. The Customs Subgroup was not utilized in the development of the aforementioned initiatives. This illustrates again that important political issues are not handled within the working group context. 58 Thus, the increased activity levels found within this category of working groups must not be deemed an institutional triumph of NAFTA. Rather, extraneous political motivations can recharge working group mandates. A final set of factors contributing to higher levels of working group activity involve the extent to which the particular working group reflects the continued bilateralism of North American relations. An example of this is the Working Group on Agricultural Grading and Marketing standards. This productive group was not initially created as a trilateral working group, rather it consisted of “two bilateral committees provided for in the NAFTA, with a mandate to review and resolve issues regarding the operation of grade and quality standards.”59 Only recently has this group begun to discuss issues in a trilateral fashion.60 Upon examination of the NAFTA Operational Review, 61 it seems that some of the more active trilateral committees are those that deal specifically with a certain issues on a bilateral basis. Examples of such groups include the

56 Shigetomi. 57 Ibid. 58 Dutton. 59 NAFTA Operational Review, http://www.dfait-maeci.gc.ca/nafta-alena/revchart-e.asp 60 NAFTA Committee On Agricultural Trade Report to the Commission, http://dfait- maeci.gc.ca/nafta-alena/report4-e.asp 61 NAFTA Operational Review, http://www.dfait-maeci.gc.ca/nafta-alena/revchart-e.asp

15 Committee on Standards Related Measures, the Temporary Entry Working Group, the Committee on Sanitary and Phytosanitary Measures, as well as the technical working groups recently set up in this area (Pesticides, Animal Health, etc.). That these groups maintain fruitful information exchange and meet more regularly than some of their more exclusively trilateral counterparts is consistent with our conviction that the bilateral realities of the North American relationship are more efficiently handled on a bilateral basis.

The Mexico-U.S. Trucking Dispute

In the North American Free Trade Agreement, the U.S. agreed to end its restrictions against Mexican trucking companies travelling through the United States. The restrictions were maintained, however, throughout the Clinton administration, in large part because of strong domestic political pressure stemming from special interest groups benefiting from the status quo. American trucking unions opposed the abolition of the restrictions, arguing that Mexican trucks would not sufficiently adhere to American safety standards. Financial considerations were more probably the real issue, however, as the cross-border-trucking industry carried $250 billion in Mexican-United States trade at the time. Such financial considerations catalyzed the U.S. insurance companies as well. If American truckers were to be transporting fewer goods, its market share and profits would decrease. It also feared that Mexican truckers would not be able to handle the financial payouts that might be required for accident claims, which was argued, would rise dramatically because of the increase in use of Mexican trucks.62 Until the early 1980s, the United States gave equal treatment to U.S., Canadian, and Mexican trucks seeking permission to operate in America. Indeed, in 1980, the Motor Carrier Act virtually removed all regulatory barriers to entry. Canada, in turn, reciprocated allowing access to American truckers travelling through Canada. However, Mexico did not afford American truckers the same privilege. In retaliation, 1982 marked the end of equal treatment for Mexican applicants by the United States. While the 1982 Bus Regulatory Reform Act also imposed a two-year moratorium against Canadian truckers, a presidential MOU quickly lifted the restriction against Canada. This was in response to Canada’s guarantee that U.S. carriers would continue to have unhindered access within the Canadian market. It is interesting to note that the same presidential memorandum explicitly cited that U.S. truckers had continued to be denied access to the Mexican market. This state of affairs persisted until 1995, as the presidential moratorium against Mexico

62 Condon, Bradly, and Sinha, T. (2001). An Analysis of an Alliance: NAFTA Trucking and the U.S. Insurance Industry. The Estey Centre Journal of International Law and Trade Policy. Vol. 2 (2), 235-236, 240.

16 was extended every two years. While the moratorium did provide exemptions to certain categories of Mexican trucking companies and businesses, most prospective applicants were restricted by the moratorium. 63 In 1994, with the signing of the NAFTA, it appeared that a compromise had been struck between the three nations over the issue of cross border trucking. The Canadian and Mexican Ministers of Transportation signed three MOUs permitting Canadian and Mexican truckers equal access within both countries. For the United States, a MOU between the three countries allowed American truckers to carry cargo from Canada to within 20 kilometres inside of Mexico. However, Mexico and the United States did not grant full access to the other country’s truck drivers. 64 In 1995, the Mexican government requested that a NAFTA dispute resolution panel rule upon whether the U.S. was in violation of the trade agreement. (Under NAFTA, the U.S. had agreed to phase out the moratorium. The intent was to progressively allow Mexican trucks to obtain operating authority. This process was to have begun on December 16th, 1995 and to have been completed by January 1, 2000.65) In February 2001, the panel ruled that “it was against the North American Free Trade Agreement to put a moratorium on free movement of trucks between the United States and Mexico.” 66 This decision required the Department of Transportation to begin considering all Mexican applications on their merit, as opposed to the broad-blanketed refusal of all Mexican companies. The decision was in keeping with NAFTA articles 1202 and 1203, regarding national treatment and Most-Favoured-Nation treatment, respectively. 67 In regard to the outcome, Condon and Sinha (2001) comment that, “In the trucking case, the United States placed a reservation in an annex to permit the moratorium on Mexican trucks to continue, but also included dates when specific aspects of the moratorium would be phased out. Once the reservation expired…the moratorium did not pass muster. Had it been consistent with the NAFTA rules, no reservation would have been required in the first place. Thus, by using the reservation, the United States virtually admitted a violation of the rules” (Ibid, p. 239).

63 Ibid, 236-237. 64 Ibid, 237. 65 Ibid, 238. 66 Ibid, 236. 67 Ibid, 238.

17 The Working Groups and the Mexican-U.S. Trucking Dispute

The Land Transportation Sub-Committee was established under Chapter Nine of the NAFTA

to address developments of more compatible standards related to truck, bus, and rail operations and the transport of hazardous materials among the United States, Mexico and Canada. The NAFTA agreement provided for the LTSS to implement a work program in accordance with the timetable established in Annex 913.5 a-1. (Emphasis Added). 68

Within this general mandate, the Land Transportation Subcommittee significantly established a Cross-border Operations and Facilitation {TCG #1} Consultative Working Group to deal with the Mexican-U.S. border issue. Since its inception, however, the group’s most significant activity has been to arrange “for a meeting of the trilateral ad hoc government-industry insurance group formed by TCG #1 two years ago” 69 Thus, the Land Transportation Subcommittee has primarily functioned to exchange information and study national regulatory systems. This is despite the fact that Annex 913.5.a-1 explicitly states that,

The Subcommittee shall implement the following work program for making compatible the Parties’ relevant standards-related measures. No later than three years after the date of entry into force of the Agreement, for standards-related measures respecting vehicles, including measures relating to weights and dimensions, tires, brakes, parts and accessories, securement of cargo, maintenance and repair, inspections, and emissions and environmental pollution levels. 70

These issues fuelled many of the safety concerns expressed by the United States. The task of harmonizing weight standards for bus and truck operations fell within the mandate of the Land Transportation Subcommittee, as it was an issue that was meant to be resolved in a trilateral, professional fashion by a group of experts. The group, however, was unable to touch upon this challenging issue in any real way because of its politically-charged nature. As a result, it floundered within this institutional framework. The bilateral nature of the dispute, a primarily United States-Mexico issue, is one reason why it did not function well in the trilateral framework. Canada remained involved in this issue only to the extent that it desired to be kept informed of

68 Meeting of the NAFTA Land Transportation Standards Subcommittee Baltimore, October 25- 28, 1999 http://www.dfait-maeci.gc.ca/nafta-alena/report13-e.asp 69 Ibid. 70 North American Free Trade Agreement, Ch. 9. Annex 913.5.a-1, 2 (a) iii.

18 developments, and that it wanted to see the dispute resolved. Despite being formally a NAFTA issue, it remained primarily a bilateral dispute.71 The most important barrier to the working group’s success, however, was the highly politicized nature of the dispute. Eventually, the increasing importance of Mexico in U.S. presidential and congressional politics, necessitated a politically negotiated solution. As the issue was, in truth, about the U.S. government’s refusal to act in the face of powerful domestic interests opposed to granting national treatment to Mexican trucks, a solution was required which would allow Mexican trucks into the U.S. while also taking into account the domestic political realities which had, up until that point, prevented the U.S. administration’s compliance with NAFTA. This issue was resolved, and could only be resolved, by high-level negotiations between Presidents Bush and Fox.72 The Land Transportation Subcommittee has since become reinvigorated as a result of the Bush Administration’s decision to honour the panel’s decision. Prior to this decision, it was noted that,

the motivation, if you will, for that committee to really do a lot of work has kind of stagnated…the problem with gaining some momentum for that group’s work has been, basically, in a practical sense, tied to an ability to foresee that we’re actually going to implement these provisions of the agreement, because no one, up until about two months ago, had a real clear vision that we were actually going to do that. 73

In regard to the actual procedures surrounding the implementation of the dispute panel’s ruling, the U.S. Congress set out specific guidelines that the Department of Transportation had to comply with in order to implement those provisions. The DOT hopes to be able, by the end of June 2002, to be issuing new grants of operating authority to Mexican carriers. The onus lies entirely on the Americans to satisfy the NAFTA’s provisions. 74 The Working Groups had little to do with the resolution of the dispute. The United States’ shift in policy was primarily a result of a change in the administration and other political considerations.

71 Decarme, David. Chief – Surface, Maritime and Facilitation Division, United States Department of Transportation. Interview by author. Washington, D.C. 11 April 2002. 72 Dutton. 73 Decarme. 74 Ibid.

19 The North American Energy Working Group With the specific details surrounding the North American energy relationship not fully hammered out in NAFTA, efforts continue towards building a deeper continental understanding regarding energy. In the 2000 presidential campaign, the Bush team began talking about building a more comprehensive and compatible North American energy framework. The idea of setting up a working group to look at North American energy issues first appeared around February 2001 as a result of the Bush Administration’s desire to factor in a more international element in its overall policy on energy. On April 22nd, 2001, in Quebec City the creation of a North American Energy Working Group was announced. 75 NAEWG was set up by the Energy Ministers of the three countries to help

foster communication and co-operation among the governments and energy sectors of the three countries on energy-related matters of common interest, and to enhance North American energy trade and interconnections consistent with the goal of sustainable development, for the benefit of all. 76

In terms of activity level, The NAEWG has been very active and has further been very successful in accomplishing meaningful tasks at an early stage. While there is no set number of meetings the group has met frequently. 77 As with NAFTA CWGs, decisions within the NAEWG are made informally and on a consensus basis. Most of the Canadian members come from the Ministry of Natural Resources, although a few work for the Department of Foreign Affairs and International Trade and some also serve on the National Energy Board.78 The NAEWG performs a wide range of functions, one of which, as noted by Carl Hartill, concerns information exchange and the harmonization of statistical methods between the three countries.

One good example is that the United States Energy Information Administration does not count Canada’s Oil Sands as a reserve…They have definitional difficulties in terms of whether that’s a conventional reserve. A conventional reserve in Saudi Arabia means you stick your finger in the ground and the oil comes up. A conventional reserve in Canada, with advances in technology, the way they extract the oil out of the oil sands and so on means at

75 Hartill, Carl. Economic and Trade Policy – Canadian Embassy. Interview by authors. Washington, D.C. 12 April 2002. 76 North America – The Energy Picture, http://www.nrcan-rncan.gc.ca/es/energypicture/index.html 77 Ibid. 78 Hartill (equivalent data for the U.S. and Mexico not given).

20 this point that those reserves are economically and technologically recoverable…When the American focus is out on Saudi Arabia, and Venezuela, or Iraq in terms of energy supply and so on, and we’re next door with reliable energy supply, abundant energy supply, market access guarantees both for Canada and the United States, we need to make that point…We have a great difficulty trying to get on the U.S. energy radar screen. 79

The NAEWG, therefore, in cases such as the one above, does serve an important function and can be an effective tool towards promoting significant bilateral goals (i.e. Canada is using it as an additional forum whereby it can advance its definitional concerns surrounding the United States’ classification of oil sands). It is interesting to note that while NAEWG is officially a trilateral forum, it, too, appears to reflect the bilateral realities of the North American energy relationship.

In early 2001, U.S. President Bush, Canadian Prime Minister Chrétien, and Mexican President Fox recognized that, as neighbors, their energy issues merited regional attention and agreed there would be great benefit to all three nations from enhanced cooperation in this area. 80

The question is: why was the North American Energy Working Group not set up under the aegis of NAFTA? NAFTA has an energy chapter (Chapter 6) and the North American Energy Working Group is exploring issues around continental energy supply and the harmonization of the energy infrastructure and practices, among other things. The North American Energy Working Group’s mandate is in the same spirit as the mandates of the NAFTA working groups, and it is, like the NAFTA committees and working groups, a trilateral forum. The non-NAFTA treatment of energy suggests that energy is a very important and a very controversial issue for the three governments. Although there exists a NAFTA energy chapter, it is clear that it was not meant to facilitate the same degree of open and secure access as many of the other chapters of the Agreement. One reason why Chapter 6 is not particularly demanding is because energy is not just a trade issue. It is a multi-dimensional issue for all three countries, for which social and environmental factors play a great part.81 This is especially the case with Mexico and it is for this reason that the Energy Chapter in NAFTA consists largely of Mexican reservations concerning market access.

79 Ibid. 80 North America – The Energy Picture, http://www.nrcan-rncan.gc.ca/es/energypicture/index.html 81 Hartill.

21 NAFTA’s Chapter 6 shows that not all three countries shared the same degree of enthusiasm for opening up this area of the economy. What the Mexican reservations hint at in the actual text of the agreement is tangibly revealed in the day-to-day understandings among government officials. While energy is an active issue, it is not handled under the ambit of NAFTA to any extent. As a Canadian official remarks, “Yes, we have a NAFTA energy chapter, yes it provides for national treatment, and so on and so forth, but look through the system, look through the market, and you will find that, you know, five or six years on, not everyone has sort of taken this jargon into their daily workings, the way they carry out business. I was actually in a meeting [recently]82 where I heard a FERC specialist [federal energy regulatory commission] say, because we were taking about NAFTA and national treatment, ‘What is all this NAFTA talk?’ …this is not like shoes, this is not like autos, this is not like even wheat, or other sectors that are covered by the trade agreement where people operate on the same basis, trade with the same play-rules that we’ve put through the system for the last fifty-five years…” 83 The North American energy relationship remains a highly political issue, with billions of dollars at stake. The fact that the NAEWG was created outside of NAFTA supports our contention that issues of political significance, with considerable money and powerful interests do not get channeled through NAFTA institutions. To work within NAFTA on energy would constrain the governments’ policy options. Trilateral discussions on energy are more suited to forums where there is still room for political compromise and negotiation, rather than forums in which the parties are subjected to a legalistic interpretation of each countries’ commitments made in an international agreement. It appears to be the case that energy continues to be an issue that, because of the political realities faced by each nation, cannot be assigned to relatively de- politicized institutional mechanisms.

Section Three: The Disjuncture between Theory and Reality

The Continuing Bilateralism of North American Relationships: Despite some of the claims suggesting the creation of an economic North American community similar to the European Union, the trilateral nature of NAFTA was the ancillary effect of a convergence of differing interests and motivations among Canada, the U.S. and Mexico. Each state entered into the negotiations with specific bilateral goals and with little regard for the party outside the scope of these direct interests.

82 Date unspecified. 83 Ibid.

22 Given the primary objectives of the three countries in signing NAFTA, it is not surprising that integration has, to a large extent, continued to evolve bilaterally, between the U.S. and Canada and the U.S. and Mexico. 84 While it is indisputable that significant changes have occurred within the North American relationship as a result of NAFTA, both subtly, insofar as there is increased trilateral communication and consciousness, and formally, insofar as there have been dramatic tariff reductions and moves towards the harmonization of policy and standards, it nevertheless remains true that the ‘North American’ dynamic is two separate bilateral relationships. 85 This is the case both economically, as is clear upon comparison of levels of integration and interaction between the three relationships, and also socially and politically inasmuch as the relationship between Mexico and Canada has remained marginal. Further, in both the U.S. and Canada, there is considerably more public support for bilateral North American free-trade than there is for continental or trilateral free trade involving all three countries. 86

U.S.-Canada In the eight years since the signing of NAFTA, the Canada-U.S. economic relationship has become extremely integrated, to such an extent that for many businesses the border is little more than a line on a map. The Canadian economy is extremely dependent on the U.S. market, so Ottawa devotes considerable energy to ensuring the stability of that relationship. Close to two- thirds of Canada’s industrial output is exported to the United States, up from one-fifth in 1989 when Canada and the U.S. signed their first free-trade agreement. 87 Furthermore, it is generally acknowledged that the significance of Canada’s economic ties with the U.S. now exceed the

84 The New Dynamics of North America: US – Mexico Relations and the Border Economy. Report from the U.S. – Mexico Public Policy Forum Executive Study Tour, May 10 – 17, 2002. South United States and Northern Mexico, Public Policy Forum http://www.ppforum.com/english/publications/presentations/StudyTourReportFINAL.pdf 85 Weintraub, Sidney. Director, Americas Program – Center for Strategic and International Studies. Interview by authors. Washington, D.C. 11 April 2002. 86 EKOS/PPF Symposium – Rethinking North American Integration. The Sheraton Center Toronto Hotel, 123 Queen Street W., Toronto ON . June 18 2002. http://www.ppforum.com/english/publications/rethinkingprtl.pdf 87 Fagan, Drew. “Nationalism, bilateralism. Both make sense for Canada” In the Globe and Mail. 17 June 2002. B9.

23 country’s degree of political influence in Washington.88 The level of vulnerability generated by this disparity leads to an increasingly singular focus, on the part of Canada, on accessing and securing access to the immensely lucrative market to the south. As noted by an official from DFAIT, this “is a very, very key point…Our relationship under the NAFTA with the United States is very much a bilaterally focussed relationship.” 89

U.S.-Mexico Since the signing of NAFTA, U.S.-Mexico trade has skyrocketed, as has more generally the two countries’ level of economic integration. Mexican exports to the U.S. have increased from roughly 50 billion (U.S.) in 1994 to just over 100 billion (U.S.) in 2001.90 Mexico’s many economic initiatives along the U.S.-Mexico border, including employment programs for migrant workers and its border industry program, have driven the country’s growth rates over the past eight years. Mexico’s Maquiladora program (low-value added manufacturing sites primarily along the U.S.-Mexico border) now accounts for 8% of Mexico’s total employment and 52% of its exports.91 All of these are in essence, U.S.-Mexico initiatives. Their considerable significance to the Mexican economy makes the U.S.-Mexico relationship of central importance to the Mexican government. Mexico City further aims to play the role of strategic ally to the U.S. in its relations with Central and South America and has quite successfully used its gains from NAFTA to increase its political weight both in terms of foreign economic policy and with regard to increasing its leverage on the U.S. domestic agenda. The U.S.-Mexico relationship is becoming more and more significant not only to Mexico but also to the United States. Although domestic opposition to free-trade with Mexico remains, Mexico has become increasingly significant to the current administration because of increased levels of trade as well as a variety of domestic concerns. First and foremost of these are the issues around U.S.-Mexican migration and the growing size and political weight of the Mexican- American community within the U.S, which as of 2001 accounted for more than 10% of the U.S. population. 92

88 Ibid. 89 Hartill. 90 U.S.-Mexico Chamber of Commerce, http://www.usmcoc.org/eco2.html 91 The New Dynamics of North America, 18. 92 Weintraub

24 Canada-Mexico: Although trade and investment levels between Canada and Mexico have increased considerably in the post-NAFTA years, at best, this can be described as a shift from a relationship which was virtually non-existent to one which is still quite modest. Canada’s level of direct investment in Mexico has increased to approximately 4% of Mexico’s total FDI inflows, compared to the U.S.’s share of 60%.93 Canada-Mexico trade exceeded $C18 billion in 2001, up from roughly $C6 billion at the time of NAFTA’s signing.94 Again, however this is dramatically less than the approximately 230 billion in trade between the U.S. and Mexico. In sum, although there have been significant increases in the level and range of interaction between Canada and Mexico, to a large extent both countries are still obsessed with their respective relationships with the U.S. Canada and Mexico also compete for U.S. market share. Although, in truth, they directly compete in very few sectors, as Mexico seeks to re-orient itself as a more high-skilled economy, the extent of their competition may increase.95 Beyond the shipment of mainly primary goods to Mexico, Canada has not really capitalized on its access to the Mexican market and continues to have a relatively low profile in the border region.96 Beyond economic integration, Canada and Mexico have also largely failed to capitalize on the possibilities for strategic alliances in their dealings with the U.S. One significant exception to this trend was Canada and Mexico’s joint efforts to prevent the implementation of Section 110 in the 1996 Illegal Immigration Reform and Immigrant Responsibility Act. If implemented, Section 110 would have required “relevant U.S. agencies to put in place, by June 2000, a system to register all entrants into the United States and… to keep a record of all people exiting the country.” 97 This was, of course, intended to increase border security but it would have had the corollary effect of virtually paralyzing movement, and thus trade, along the two borders. In reaction to this proposal, Canada and Mexico formed a ‘U.S. Business Alliance’ aimed at encouraging domestic opposition to the proposition. This alliance proved to be quite effective and as of 2002, the provision has yet to be implemented.98 This example of co-operation is the exception rather than the rule. 99

93 The New Dynamics of North America, 30. 94 Canada-Mexico Trade and Investment Relations, http://www.dfait-maeci.gc.ca/mexico/mexicotraderelations-e.asp 95 The New Dynamics of North America, 32. 96 Ibid. 97 Ibid, 23. 98 The New Dynamics of North America, 23. 99 Ibid, 35.

25 This failure to harness opportunities for strategic linkages, and more generally to create a more trilateral dynamic in North America, appears to be at least partly the result of Canada’s hesitancy towards working with, or even being associated with, Mexico in its dealings with the United States. This is partially the result of Mexico having a more controversial relationship with the U.S. and ongoing tensions in areas around narcotics, migration and treatment of illegal immigrants. It has been noted that to some extent in the U.S., while Mexico is a foreign country, Canada is more just “the part up there” and in that respect increased trade and integration with Canada is far less contentious among the U.S. population.100 For reasons such as these, Canada is reluctant to work with Mexico as it prefers to avoid getting involved in controversies with which it has no significant interest, and is quite insistent on trying to maintain its ‘special’ relationship with the U.S.

Effect on the Working Groups: As discussed in Section Two, the NAFTA CWGs have been under utilized and generally have not presented themselves as effective continental mechanisms for dealing with issues that arise between the U.S., Canada and Mexico under the ambit of NAFTA. This phenomenon appears to be, at least partly, related to problems which have arisen from the incongruity between the working groups’ trilateral nature and the continuation of a strong dual-bilateralism in North America. The disjuncture between the theory behind the working groups and the reality of North American relations has manifested itself within the committees and working groups in two general ways. It has resulted in the institutions being circumvented and under-utilized. This has, in turn, reduced the activity level of the majority of the groups; and it has limited the scope of the committees and working groups agendas’. As noted, amongst all three states there appears to be a marked lack of interest in utilizing NAFTA’s institutional channels to resolve conflicts around implementation, day-to-day issues, and even as forums for discussion and information exchange. This stems primarily from the fact that although these groups deal with ostensibly trilateral concerns, in fact, the majority of issues which arise are of a distinctly bilateral nature and, as such, are more appropriately dealt with in a forum involving two rather than three parties. In some respects, this simply involves questions of efficiency as it is, in the words of a member from the Committee on Trade in Goods, “logistically easier to just pick up the phone” and deal with the relevant party as opposed to coordinating and organizing a meeting of the NAFTA working group.101

100 Weintraub. 101 Dutton

26 Furthermore, when the topic of discussion is of a bilateral nature, it tends to end up being handled through traditional bilateral channels. In practice this means that, as a result of the long history of bilateral relations, especially between the U.S. and Canada, these relations tend to be less formal and handled more as part of a day-to-day interaction. Consequently, as a result of most issues involving either the U.S. and Canada exclusively, or the U.S. and Mexico exclusively, much of the communication around NAFTA issues is handled informally and via older established relationships – in essence, the way things were carried out pre-NAFTA. This continued bilateralism lends itself more to the informal and pragmatic bottom-up approach that defines much of Canada-U.S. interaction and which is becoming the norm between the U.S. and Mexico. This clear preference for dealing with these issues on a one-to-one basis102 is not simply the result of a general aversion to institutions. As one American committee member stated, “multilateral institutions are better - you just have to get the institutions right.”103 Clearly the trilateral NAFTA committees and working groups are not sufficiently reflective of the North American reality. It becomes even more apparent that the groups’ trilateral structure acts as an impediment to their use. A wide range of bilateral institutions and consultative mechanisms already exist, both between the U.S. and Canada and the U.S. and Mexico, which are extremely active and are, in fact, in many cases dealing with issues that also fall within the ambit of the NAFTA committees and working groups.104 These bilateral mechanisms exist in a variety of sectors, from energy to agriculture to customs, and are, according to U.S. officials, far more active than the NAFTA groups. When questioned on the reasons why changes in Port Restrictions made in the early 1990s were not dealt with by a NAFTA working group, an official from the Office of NAFTA and Inter-American Affairs stated simply, “these things just get worked out bilaterally.”105 In addition to creating incentives for the avoidance and circumvention of the committees and working groups, the incongruity between the groups’ trilateral nature and the continuing bilateral reality of North American relations has further limited the purposes for which the groups may be used. Some bilateral issues simply cannot be handled effectively in a trilateral forum and as a result, the member governments do not consider the NAFTA committees and working groups as viable on these issues. Recent examples of this are the two separate bilateral border agreements that were negotiated between the U.S. and Canada and the U.S. and Mexico this past year in the

102 Ibid. 103 Ibid. 104 Dutton 105 Dutton.

27 wake of September 11th. Although there is a Customs Subgroup set up under the NAFTA, which has been fairly active and of which all three countries are members, this group was not chosen to develop further plans for co-operation and security along the two borders. The NAFTA group was not chosen to tackle these issues as the dramatically different issues surrounding the U.S.- Mexico border and the U.S.-Canada border rendered a trilateral group an inefficient and inappropriate mechanism. Another example of the NAFTA working groups’ agendas being limited by the lack of a true ‘continentalism’ is the three governments’ failure to use these groups as a forum for the development of a common North American position to present at the negotiations for the Free- Trade Area of the Americas in Panama. As one U.S. working group member noted, it is “unfortunate” that the working groups have not been used to coordinate positions similar to the strategic blocks maintained by Mercusor and the Andean community.106

The Continuing Need for Political Negotiation and Compromise: In addition to the problems generated by the continuing bilateralism of North American relations, the NAFTA committees and working groups have further been hindered by the political realities which continue to characterize the relations between Canada, the U.S. and Mexico. The nature, and much of the content of these relations, are not yet at a stage where discussions and disputes may be successfully navigated within de-politicized institutions which are built on a groundwork of formal legal equality. Many issues that fall within the ambit of NAFTA are difficult for the national governments to navigate as they are politically sensitive or involve a severe asymmetry in power between the member states.

Domestic Sensitivities and Constraints: Within North America, politically sensitive disputes, which one can loosely define as those involving either large amounts of money or jobs, many jurisdictions, or questions which touch upon national sovereignty, are in many cases very difficult to handle formally. The most political issues, which arise under NAFTA, are rarely, if ever, dealt with within the more professional/technical CWGs. Rather, they are generally diverted to forums that are considerably more political and provide more room for compromise and negotiation. Although beneficial for many other reasons, institutions which are too professional and/or legalistic are incapable of dealing with diplomatic sensitivities and are further unable to provide the space needed to

106 Ibid.

28 accommodate, where necessary, the political realities faced by the non-compliant state.107 This was highlighted in our examination of the NAFTA Trucking dispute, where a resolution was only able to be reached when a compromise was struck which, while it did not force strict compliance with the agreement, was mutually satisfying to both parties. This speaks to the fact that when implementation issues are politically sensitive and face well-mobilized and powerful domestic interests, these cases must be handled in a forum which has the flexibility to take such considerations into account. 108 As often said, ‘all politics are local’ - and frequently, despite what a country may have committed to within the text of an international agreement, it is unable, or unwilling, to carry out these commitments in the face of domestic pressure. 109 All three of the NAFTA signatory states are, at times, subject to such constraints for a variety of reasons. The U.S. is especially vulnerable in this respect because of its government’s division between the executive and legislative branches and the strong power held within the hands of individual senators and congressman for whom constituency interests are paramount. However, as noted, it is not just an American aversion to formal institutions, both Canada and Mexico are also subject to pressures which produce a similar result. While it may be true that to some extent Canada and Mexico would be better served under hard and fast trilateral and professional institutions insofar as their rules-based nature would lessen the impact of power disparities, all nations face these sorts of political constraints. At different times and for different reasons, it is also in the interests of Canada and Mexico to maintain a less formal system that possesses escape routes for sensitive political issues. This became clear when Canada faced challenges to its laws protecting its cultural industries and likewise when Mexico is challenged over its reservations on trade in energy.110 In sum, it appears that issues of political significance, which involve considerable amounts of money and powerful interests do not get channeled through NAFTA institutions because of the three countries’ aversion to passing sensitive issues over to technical, professional bodies. Because of the constraints these governments face domestically they are more amenable to forums where there is still room for political compromise and negotiation rather than simply a legalistic interpretation of each countries’ commitments made in an international agreement. This acts as an impediment to the constructive use of the NAFTA CWGs.

107 Weintraub 108 Dutton 109 Dutton. 110 Weintraub

29 Asymmetries in Economic and Political Power The challenges presented in channeling controversial issues through de-politicized institutions are made more serious by the gross imbalances in economic and political power within North America. The incongruity between the vast differences in power between Canada, Mexico and the U.S. and the formal equality possessed by each state within the NAFTA institutions becomes an issue because, in the words of one commentator, “the institutional structure of NAFTA is not terribly deep or complex.” As such the NAFTA institutions are by no means able to assert their will in the face of contestation. 111 This relatively weak institutional structure was no doubt intentional as all three countries were reluctant to cede sovereignty to continental institutions when negotiating the agreement. While the reduction of political asymmetry is of course the goal of rules-based institutions, this formal equality becomes more and more untenable in the face of larger and larger disparities in power. An extreme example of this phenomenon,112 the North American relationship is particularly ill-suited to institutional mechanisms, as their inflexibility creates a strong reluctance, on the part of the U.S., to deal with issues at that level.113 While groups within both Mexico and Canada fear the usurpation of their national sovereignty by the U.S., in many respects the loss of sovereignty is in fact more of an issue for larger powers – it is harder to get big powers to yield sovereignty because there is less incentive for them to do so.114 Consequently, although a central tenet of NAFTA, these power dynamics make it more difficult for Canada and Mexico to “demand and obtain [from the U.S.] equality in decision-making.” 115 Although there is a general consensus on the part of Canadian and Mexican officials that NAFTA has been an equalizing agent,116 it is also understood that the formal legal equality granted under the agreement will never do away with the gross imbalance in economic and political power between the three states. This formal equality created incentives for Canada and Mexico as the agreement could only make an already asymmetrical relationship more manageable. For example, upon signing NAFTA Mexico was, in theory, immediately given 33% of the influence, although it represented 3% of the NAFTA market. 117 However, rules-based institutions only benefit the peripheral players if the core power agrees to abide by and subject

111 North American Integration, Ekos 112 Ibid. 113 Dutton 114 Doran 115 Ibid. 116 Carlos Rico, Mexican Embassy. Interview by Authors. Washington, D.C. 10 April 2002. 117 Ibid.

30 itself to the decisions of those institutions. The chances of this diminish the wider the disparity between the formal equality granted under the law and the actual political and economic inequality. In essence, therefore, this disparity in power and economic size seriously limits the possibilities for political integration in the form of continental institutions in North America.118

Effect on the Working Groups: Despite the apparent consensus on the part of the NAFTA governments that disputes and discussions surrounding largely commercial transactions and relationships ought to be dealt with by professionals acting in forums which were relatively free of political power-dynamics, the political realities of North American relations have proven to be an obstacle to these ideals. The direct result of the disjuncture between the professional and technical nature of the groups and the politicized reality of North American relations is that politically charged issues are not able to be dealt within the NAFTA committees and working groups. This results in either the circumvention of such a group, as we saw earlier in the energy case study, or in the groups becoming deadlocked and eventually inactive, and as such, the issue then having to be resolved in other, more political, forums. Three examples of the later outcome are the Chapter 19 Working Group on Trade Remedies, the Government Procurement and Small Business Committee and the Working Group on Services and Investment. The Chapter 19 Working Group on Trade Remedies was established in 1993 and was mandated “to seek solutions that reduce the possibility of disputes concerning the issues of subsidies, dumping, and the operation of trade remedy laws regarding such practices.” 119 The exceptionally controversial nature of these issues ensured that the group would be unable to even approach these sensitive topics. Not surprisingly, an official at U.S.TR described the situation with the working group as “Inactive…. It’s dumping. Again, a lot of the times it’s because some of these things are so polarized and bilateral that they move out of this working group thing, to just bilateral negotiations.” 120 Similarly the Committee on Government Procurement and Small Business, which was established “to resolve issues related to government procurement, to provide a forum for future negotiations, and to facilitate technical co-operation between the Parties,” 121 ….” has been unable to proceed with its work since 1999, although it has a mandate for future negotiation from the Free Trade Commission. This has apparently, been caused by the inability of

118 Weintraub 119 SICE – NAFTA Reports, http://www.sice.oas.org/trade/nafta/reports/remed_e.asp 120 Shigetomi 121 1994-1996 Report On the NAFTA Government Procurement Working Group, http://dfait- maeci.gc.ca/nafta-alena/report6-e.asp

31 the group to “reach trilateral agreement on how to proceed” given the controversial nature of regulations surrounding government procurement for the three parties. 122 Another example is the Working Group on Services and Investment, which has in its mandate the notoriously controversial Chapter 11. NAFTA’s Chapter 11 creates the means whereby a foreign corporation may take legal action against a member state in the event that this state expropriates their assets. While these types of clauses on investments are not unusual in trade agreements, NAFTA’s chapter 11 has been widely criticized as a usurpation of national sovereignty by multinational firms. The Working Group on Services and Investment was established to “monitor implementation of Chapter 11 and 12; develop procedures for consultation and notification on relevant matters; and focus initially on actions required by the Parties to implement commitments in Chapters 11, 12, and their Annexes.” 123 However, the working group has been inactive since 1999 and the politically charged discussions relating to investment under Chapter 11 have instead been assigned to special groups set up outside of the working group system.124 As noted by an official from U.S.T.R. when questioned on the reasons for the original working group’s inactivity, “…a lot of the talk about investment has focused specifically on NAFTA Chapter 11 and that has taken place in special negotiating groups on Chapter 11 that only meets to discuss Chapter 11.”125 As is demonstrated by the examples above, the structures created under NAFTA, particularly the committees and working groups, have not been capable of dealing with controversial or politically sensitive issues. This has resulted in a situation where, while the CWGs are able to deal with relatively low-level, low-interest disputes and discussions, more politically sensitive controversies must be dealt with in a more political arena with less strict objectivity, more flexibility and generally more room for compromise. In this respect, the disjuncture between the political realities of North American relations and the professional and technical nature of the committees and working groups acts as an effective obstacle to their use.

Conclusion

While it is true that the North American relationship is still young, it nevertheless appears to be charting its own unique course towards a high level of economic integration. It remains to be seen whether political integration will follow this increasing economic integration. The experience of

122 Shigetomi 123 NAFTA Operational Review, http://www.dfait-maeci.gc.ca/nafta-alena/revchart-e.asp 124 Shigetomi 125 Shigetomi

32 the NAFTA committees and working groups demonstrates the presence of significant obstacles hindering the establishment of valuable continental institutions. As one committee member noted, “the biggest lesson to be learned from NAFTA… is that there must be clear instructions in the agreement that would provide for a strong institutional structure.” 126 Without strong institutions with clear mandates, the natural dynamic of North American relations will hinder the use and potential of such groups. The considerable incongruity between the working groups’ trilateral and professional nature and the bilateral and political realities that continue to characterize the North American relationship continues to both limit their use and effectiveness. One can argue that effective continental institutions cannot be created if a continental community does not yet exist. But if adequate political structures do not exist, those civil society organizations whose mandate touches on North-America-wide issues will continue to be deprived of legitimate channels through which to gain access to the policy- and decision-making that is moulding the continent in forums inaccessible to the public. There is, in sum, good reason for the scholarly silence surrounding NAFTA’s committees and working groups: they have acted to de- institutionalize North American governance and so maintain its resistance to democratic practice. Comments, corrections and any suggestions for further research would be gratefully received: [email protected] [email protected] [email protected]

126 Dutton

33