Be careful what you wish for…….

The Canadian Skippy provides some great insight into the rhetoric of NAFTA and the US election and contrasts it with the reality of the treaty-namely that the US would take it in the shorts worse than Ohio has taken it in the shorts due to NAFTA.

The whole article can be found here. However I’d just like to pass along a couple of his major points:

Having said that, maybe it is time to renegotiate NAFTA.When the FTA was first being negotiated in the mid-1980s, Canada was an economic basket case. The government was spending $1.23 cents for every dollar that it took in. Over a third of government revenues were devoted just to servicing the massive debt accumulated by sixteen years of the Trudeau government. Since there was no political will to cut spending in a serious way, the only alternative was to increase GDP, and free trade was the best way to accomplish that.Circumstances, as you may have noticed, have changed somewhat. As I write this, Canada is the only G8 country not operating at a deficit. The Alberta oilsands have made us the largest supplier of crude oil to the United States, with reserves roughly equal to those of Saudi Arabia.As a consequence of President Bush’s insane spending and tax policies, the United States is a fiscal mess. The American dollar is well on its way to being worthless, and because of the collapse of the housing market and rising energy costs, it could very well be facing a resurgent “stagflation” unseen since the 1970s. For the first time, more cars are produced in Ontario than in Michigan. We have the largest supply of fresh water in the world, which is something something the U.S will only need more of in the future as its population increasingly moves to the Southwest.

And the United States under Presidents Clinton and Bush haven’t been the most reliable trade partners in the world. The softwood lumber dispute, which the U.S essentially stole $5 billion from Canada, is the most prominent example of this. Despite two rulings against it by the NAFTA arbitration panel and one by the World Trade Organization against the United States, the Bush administration pointedly refused to keep its word and abide by its own agreements. This story wasn’t widely reported in America because President Bush was also pointedly ignoring the fact that one his major cities was under water at the time.

Besides the economic issues-there may also be a constitutional issue as well-can the President pull out of a treaty the Senate ratified?

There’s another issue that might prove problematic for the Clinton – Obama position. That would be whether the Executive Branch can unilaterally withdraw from a treaty that the Senate has ratified pursuant to Article 2, Section 2 of the Constitution. Unless and until the Supreme Court clears up the ambiguities of Goldwater v. Carter, I’ll take the word of an American president less seriously than I already do.

Which brings to mind the reality of the US’s current trade imbalances-you can threaten all you want, but you better be prepared for the consequences.

As soon as an Obama administration threatens withdrawal pending renegotiation, Canada can (and probably should) preempt it by withdrawing immediately without renegotiation. We can sign unilateral deals with the European Union, China and India and Australia to make up what we lose from the abrogation of NAFTA. Besides, we can make a small fortune on the tariffs we impose on American bound oil. If the United States doesn’t like $3 a gallon gas, let’s see how they like it at five or six dollars. Or they can just buy more from their greats friends, Hugo Chavez and the House of Saud. After the latest round of anti-Mexican rhetoric in American political circles, I can’t imagine they’d be rushing to do the United States any favors either. By the way, Canada and Mexico would still have a free trade agreement, we’d just cut out the greedy and self-defeating middle man.As things currently stand, Canada is bound to continuing the oil and water supplies to the U.S at preferred rates, even if our own market faces shortages. The same is true of electricity, which is largely generated by Canadian hydroelectric dams. I’d sure like to see cheaper gas and electricity, stopping the below market subsidization to American consumption would certainly accomplish that.

And lets not forget the problem of mutually assured destruction:

Upon abrogation of NAFTA, Canada should immediately support the European Union in any and all WTO disputes regarding agricultural subsidies. Sure, Canadians will pay more for oranges, but we’ll make the money back in what we’ll charge you for heating oil, electricity and water.Upon abrogation of NAFTA, Canada should impose a tariff of three dollars a barrel on oil exported to the United States.Just for fun, we could cut the export price of wheat, thereby singlehandedly destroying the American farm belt forever. Sure, we’d lose money in the short term, but we’d annihilate our only real competition in the process and win in the end.

And you know what? American companies will continue to do business in Canada because what they save in health care benefits to their employees will be a greater saving than any retaliatory tariffs by the United States would cost them. President Obama would very quickly find himself in the Vietnam of trade wars.

Be careful what you wish for. Hillary and Obama are on better ground talking about Iraq. Because there is not upside there……….Just a long hard slog. With questionable results. More on that some other time.