Renegotiating or tearing up NAFTA raising worries about Canadian economy with 75% of exports going to U.S.
Canada should come to the renegotiation of the North American Free Trade Agreement (NAFTA) with five key objectives to update and enhance trade and investment across the continent, according to a new Conference Board of Canada report.
“Canada faces a delicate balancing act between defending current market access provided in the existing NAFTA and updating the agreement to meet the requirements of a 21st century economy,” said Michael Burt, director, Industrial Economic Trends, The Conference Board of Canada.
“Even in areas where Canada may be seeking to maintain provisions, our negotiators should still come to the table with the objective of expanding, improving, and strengthening NAFTA.”
Freer trade in North America led to significant benefits for Canada in the form of increased trade, output and productivity gains in the manufacturing sector, and a greater variety of products available to Canadians.
Canada’s energy sector could find itself more favoured than other industries when it comes time to renegotiating the North American Free Trade Agreement (NAFTA), according to Canadian Minister of Natural Resources Jim Carr.
“I think the energy sector is one of those where the integration argument and the mutual benefit can be well advanced by Canada,” said Carr.
“What’s good for one country is good for the other.”
The prospect of renegotiating or tearing up NAFTA has raised worries about the Canadian economy because 75 per cent of its exports go to the United States.
Matthew Kronby, Partner, international trade and investment lawyer at Bennet Jones in Toronto, said in an interview that he thinks Trump will push a more protectionist approach.
“What we do know generally is that this is an administration that is focused on protectionism as a way of enhancing the US’ economic position. You look at Trumps inaugural address, his exact words were ‘protection will lead to great prosperity and strength,'” said Kronby.
Though NAFTA was also positive for the US, with American exports to Canada and Mexico supporting nearly three million jobs in the United States.
The importance of NAFTA for the Canadian economy and for the well-functioning of North American supply chains means that governments, business leaders, and stakeholders (such as labour unions and civil society interests) need to develop a strategy to protect Canadian interests while addressing the concerns of our NAFTA partners.
The Conference Board report NAFTA 2.0 and Canada: Upgrading a 20th Century Deal for a 21st Century World, outlines key objectives for Canada:
- maintain a trilateral agreement with the U.S. and Mexico, and commit to comprehensive consultation with the Canadian public and stakeholders;
- facilitate the cross-border mobility of business people to support trade in services; maintain and enhance access for traded goods, by pressing to maintain North American content rules in the auto sector, obtaining a permanent waiver from Buy America provisions, and negotiating stable and predictable access to the U.S. market for Canada’s softwood lumber exports, while being prepared to ease protections in supply-managed sectors;
- encourage innovation and digital trade through the creation of a chapter in the agreement dedicated to e-commerce, while maintaining cultural exceptions provisions from the existing NAFTA; and
- modernize the agreement to today’s business realities and standards, including revising the NAFTA rules of origin to help smaller businesses comply, reviewing investor-state dispute settlement mechanisms, updating labour and environmental standards, and eliminating the energy proportionality clause in NAFTA.
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