The NAFTA Negotiations — and Canada’s Priority Watch List Designation: It’s all about the Leverage

Negotiating tactics can often appear harsh, but when the United States Trade Representative (USTR) placed Canada on its Priority Watch List (PWL), the move went beyond the standard give-and-take of renegotiating the North American Free Trade Agreement. Canada – a nation that believes in the rule of law – joins China, Algeria, Kuwait and Venezuela, to name just a few, on the PWL list for its alleged “worst” record in intellectual property standards. Granted, Canada has room for improvement in this area, but for the USTR’s annual Special 301 report to place it on the PWL is hardly credible. It is no coincidence that Canada, the only G7 country—and virtually the only western country-- to make either the PWL and the USTR’s lesser Watch List (WL), is also in the midst of renegotiating NAFTA with the United States and Mexico. The 301 process has always been political to some degree, but using it as a negotiating hammer with which to hit Canada over the head risks devaluing its importance in identifying genuine shortcomings in the IP realm that affect U.S. and Canadian businesses. The report is on target in identifying several IP areas requiring more rigorous attention from Canada, including counterfeit goods in transit and copyright issues. However, the U.S. is also unhappy with changes to Canadian pharmaceutical patent regulations and protectionist matters arising from the Canada-EU Trade Agreement that have to do with European geographical indications. Still, although Canada is not alone in the latter area, no European country is on the WL. Ironically, the U.S. Chamber of Commerce’s own ranking of 50 world economies on their IP standards shows that Canada improved in four out of six categories, coming in 18th among the 50. Venezuela, with whom Canada shares the notoriety of being on the PWL, was 50th out of 50. Clearly, Canada’s new ranking does not reflect reality and is a blatant negotiating tool, but the USTR appears less interested in the collateral damage it may cause as long as the U.S. can get the concessions it wants at the table. This is a game that two can play, however, and Canada’s turn at hardball may come if the U.S. decides one day that it wants to rejoin the latest incarnation of the Trans-Pacific Partnership, from which it so hastily withdrew when Donald Trump was elected president.