Is NAFTA Pushing Our Taxes Down?

Amantra frequently heard from those concerned with our growing integration with our powerful neighbours to the south is that the inevitable outcome of this process will be a downward spiral of Canada’s health and social policies to American levels. One reason this will happen, it is said, is because the size of the Canadian public sector will have to shrink as our taxes are lowered to American levels.

Is this argument correct? Does economic integration, and specifically Canada’s participation in the North American Free Trade Agreement, mean that Canada can no longer tax its citizens more heavily or in different ways than the United States? Is there anything in NAFTA itself that mandates this outcome? Or is it simply the greater openness to foreign trade and investment facilitated by NAFTA that leads to this result? Whether required by law or driven by economics, if there is a “clash between economic and sovereignty interests”— the subtitle of Arthur J. Cockfield’s...