TRADE WITH U.S. BACK ON TOP OF POLICY AGENDA
It’s annual meeting season in Calgary, but the subject that continues to be raised across the city is trade. More specifically, the likelihood of existing pacts, such as the North American Free Trade Agreement, being renegotiated or torn up.
Two trade-related discussions have been held here within the past week. The Alberta chapter of the Canadian Council of the Americas last week hosted a session focused on business opportunities in South America.
On Tuesday and Wednesday this week, a summit co-sponsored by the University of Calgary’s School of Public Policy and Calgary Economic Development discussed how Canada — and Alberta — should respond to the uncertainty surrounding trade flows with the United States.
The advice and insight has ranged from finding opportunities to diversify our trade in markets outside the U.S., to doubling down on efforts to reinforce relationships south of the border.
For governments and business, it’s about how to best manage risk associated with the widespread uncertainty created by an American president who continues to make up policy on the fly. One day NAFTA will be scrapped, the next it’s to be renegotiated.
Delegates at this week’s U.S.Canada trade summit were encouraged to engage with businesses and governments at the state and federal levels. The point was made many times that it should not be assumed the impacts of existing trade relationships with Canadian companies are well understood in terms of jobs and economic activity.
Trevor Tombe, a professor of economics at the University of Calgary, said Canadian trade with the U.S. comprises as much as 40 per cent of this country’s GDP. Conversely, American trade with Canada accounts for only three per cent of U.S. GDP.
There are only two states where trade with Canada accounts for more than 10 per cent of GDP — Vermont and Michigan, said Tombe.
“It’s not the same kind of issue for (the U.S.) as it is for us, so we have to make sure we approach it very, very carefully,” he said.
Tombe and his fellow panellists, Montana Sen. Sue Malek and Michael Reeves, president of the Ports-to-Plains Trade Corridor Coalition, agreed NAFTA would be strengthened if it was updated to reflect modern developments, including the privatization of Mexico’s energy industry.
NAFTA has been tweaked during the past 25 years, but those changes did not address aspects of the economy we now live with every day, such as e-commerce. It also does not have a chapter on energy.
When NAFTA was drafted, the issues involved security of supply, not security of demand, and Mexico was still a closed country for private-sector investment in its energy resources.
Because Canada is the proverbial fly on the elephant’s back when it comes to trade, a concerted effort is needed at the state and federal levels to illustrate the impact trade with Canada has in various jurisdictions.
“I think we need a lot more businesses and consumer groups to speak up for the benefits of trade. Congress is going to be critical here. Lobbying for trade needs to start and I haven’t seen a lot of it,” said Tombe.
There is nothing new in terms of what is being contested by the U.S. administration. This is the fifth softwood lumber dispute and there have long been complaints about Canada’s supplymanagement system for the dairy industry.
What’s different this time is the rhetoric and the uncertainty created by politics entering into trade policy discussions.
“Typically, when an issue comes up, it’s the result of companies making a complaint through the department of commerce, which in turn does an investigation,” said Tombe. “It’s very rare these are initiated from the White House. Politically motivated trade measures could be a challenge.”
There is no doubt Canada needs to work with the U.S., but the current situation yet again underscores the importance of market diversification — energy and beyond.
The now-defunct TransPacific Partnership was meant to modernize trading relationships and there are expectations elements from that framework will be borrowed for a possible NAFTA renegotiation.
Canada’s economic prosperity depends on its ability to trade openly and competitively.
The keynote address at this week’s trade summit was given by Washington State lieutenantgovernor Cyrus Habib, who spoke eloquently about the importance of the Canada-U. S. relationship — beyond the shared border.
“What makes the CanadianU.S. relationship so important, so essential, so critical, is that we share values — and those values are inclusion and opportunity,” said Habib, who later added he was concerned about the rhetoric of nationalism, protectionism and isolationism finding its way into the American political mainstream.
The uncertainty resident in the current environment is challenging for governments and not constructive for businesses that make long-term investment decisions.
It’s increasingly apparent the pivot elsewhere for Canadian companies — not just the energy sector — must be to Asia, South America and Europe. While economic linkages with the U.S. are important, and will survive the current administration, equally important is finding other customers for our goods and services and ensuring we’re attractive to new businesses from other countries and sectors of the economy.
Without diversity of markets, Canada and Alberta lack leverage at the bargaining table. The time has come for that to end.
Procrastination and complacency have not served us well, and procrastination — as Casey Eagle Speaker reminded those at Suncor’s annual meeting last week — is the thief of time.