By Max Singh
Ever since Donald Trump’s election victory, questions have been asked about how his anti-free trade policies could affect the economy of British Columbia. Critics point to Trumps much-publicized rants against NAFTA (North American Free Trade Agreement) that comprises the economies of the US, Mexico, and Canada. Negotiated more than 20 years ago, Trump reiterated throughout his campaign that the agreements were unfavorable to the U.S. costing American jobs and business. One of Trumps key election campaign promises- was to re-negotiate NAFA its elected president. Trump also has plans to rescind or pull out of the Trans-Pacific Partnership agreement with its focus on trade with Asia. Now, the hyperbole is over as U.S. Trade Representative Robert Lighthizer is to begin negotiations for a new NAFTA trade deal with Canada and later Mexico. For Canada, a 90-day window has been enacted that ends on August 16th, 2017 that should see some changes in regards to Canada’s trade.
So why is Trump hell-bent it seems on tearing up the current NAFTA treaty? Well, first a little history. NAFTA was negotiated in the heady days of the 1990’s and finally signed by then President Bill Clinton in 1993. Before NAFTA was a looser Canada-U.S. free-trade deal from 1988 – that was planned to simplify, the flow of goods and labor between Canada, the United States, and Mexico. Disputes and agreements were then to be arbitrated in an independent process. In short since 1993, economist say NAFTA gave both Canada and Mexico huge trade surpluses with the U.S, Canada is, in fact, the number one trading partner in almost every American state but two.
In 2016, the B.C. Liberal government estimated that approximately 52 per cent of B.C.’s goods and services are exported to U.S. So there reason to be concerned with any renegotiation of NAFTA. However, British Columbia is not as dependent on the US economy as Ontario, which exports 80 percent of its products to the U.S. or even Alberta, which drives 86% of its energy exports to the Americans. Still, the Canadian government and businesses are worried just how any changes to NAFTA will impact the economy.
So why does The Trump administration want to change NAFTA? In 2017, the world is a remarkably different place regarding finance, trade, and business. The rise of China, the financial meltdown of 2008 and a gradual shifting of the global economics power and a host of other factors led to Donald Trump’s amusing, but divisive “Let’s make America great again” campaign. Aligned with his “America First” rhetoric that combined a bluntly forceful a protectionist attitude to trade, immigration, and foreign affairs, and there is a reason to be concerned.
To zero in on specific industries that President Trump says are unfavorable to the US economy because of NAFTA, one industry currently in the news is the ongoing softwood lumber trade feud between Canada and the US since the 1980’s that is of particular interest to B.C. The U.S. maintains that Canada unfairly subsidizes its lumber by providing wood from public land as opposed to more expensive private forests. In April 2017, U.S. Commerce Secretary Wilbur Ross said his department would move to impose new anti-subsidy duties averaging 20 percent on Canadian softwood imports. The cost estimated to be almost $1 billion in tariffs to Canadian exporters in a $7.5 billion dollar export industry (2015 figures.) And its is not only the wood industry that is in the sights of the NAFTA snipers. Canada also imposes heavy tariffs on the import of dairy product from the US, that has been an issue that Trump picked on in his campaign, also asking why Canada’s fixed prices, production quotas and tariffs protect Canadian producers from allowing foreign competition. Trump is also demanding new talks aimed at redressing the trade imbalance and what he calls “unfair practice by the Canadian Dairy Farming industry.”
Lately, President Trump speaks of “tweaking” NAFTA regarding Canada. This suggests that perhaps he may renegotiate the elements of the existing deals to appease certain items such as the U.S Softwood Industry, U.S Dairy farmers, and the American auto industry auto workers. The situation with Mexico looks much bleaker. Trump’s promise to build a wall across the southern border with Mexico and his administration’s far more draconian stance against illegal immigrants from Mexico do not bode well for the future. The next three months as we move into a period where we will see how the new if any NAFTA agreement with Canada shapes up, will be interesting. Regarding NAFTA, Canada’s Prime Minister, Justin Trudeau said in a recent statement, “Canada has no closer friend, partner, and ally than the United States. We look forward to working very closely with President-elect Trump, his administration, and with the United States Congress in the years ahead, including on issues such as trade, investment, and international peace and security.” With the mercurial Trump in charge, anything seems possible.