Chapter 6 also raises the thorny issue as to the degree of economic integration that can be achieved in the NAFTA without a major loss of political (national) sovereignty in Canada or the United States, an issue that Canadians may have to be prepared to answer. As the effects of economic integration increase, there may be renewed pressure placed on those areas that the Canadian government specifically negotiated exclusions from during the original Canada-U.S. FTA and then NAFTA. Therefore, it must be asked whether Canada will be able to maintain complete sovereignty in those excluded areas over the long run. Chapter 6 also provides an overview of the changes made to Chapters Eighteen and Nineteen in their replacement NAFTA Chapters Twenty and Nineteen respectively.
Chapter 7 examines how subsidies and CVDs are to be applied in the future by Members to the 1994 GATT Subsidies Code. Any solutions found in the 1994 GATT which overcome the present problems with the 1979 GATT Subsidies Code will be a step forward to maintaining freer world markets. If the changes are also substantive enough, this would raise a serious question as to whether the DSM systems negotiated by Canada and the United States, and since extended with modifications to Mexico under the NAFTA negotiations, were really necessary.
Finally, Chapter 8 provides a summary of the analysis, as well as a number of policy suggestions, regarding the direction that Canadian and U.S. trade policy might take with respect to continuing the process of eliminating the application of any protectionist sheltering practices by their firms or governments using the GATT-based AD and CVD domestic trade law procedures to their own benefits.
An initial analysis of the political economy of the Canada-U.S. FTA involves outcomes that have appeared in at least two of the quadrants previously described in Figure 1.1. First, firms in both Canada and the United States have been accused of abusing their nation's trade law systems in order to seek shelter, a quadrant 4 strategy. Second, in order to overcome the resulting welfare reducing policies, the two nations eventually negotiated what on the surface should be a quadrant 1 effect -- a free-trade agreement. There are still, however, a number of issues that have to be resolved through further negotiations between Canada and the United States. As well, the implementation of the Canada-U.S. FTA DSMs and subsequently the NAFTA DSMs that were intended to overcome the effects represented in quadrant 4 are still developing. Further, in Canada's case there are inefficient quadrant 2 business and government activities that still have to be overcome through an increase in North American competition. 27 These and other issues will need to be monitored for their effects in the years to come. This book will help to provide an early overview of the implementation of parts of the original Canada-U.S. FTA by examining how some of the DSM processes contained in