Why we need to care about NAFTA

Average Canadians love to hate trade, and that probably includes editorials about trade. It’s not well understood. It’s a dense topic. The poster child is the North American Free Trade Agreement, and in the minds of many NAFTA hasn’t delivered what it promised. But here’s the reality: It matters.

NAFTA created the world’s largest free trade area, with 450 million people. Global Affairs Canada reports merchandise trade between Canada, Mexico and the U.S. tripled - to $1 trillion - between 1993 and 2015.

More significantly, Canadian exports to the U.S. have grown at an annualized rate of nearly five per cent. That doesn’t mean that everyone has won under NAFTA, but it means it is a net benefit to Canada, and the country would be worse off if it was torn up, as Donald Trump has threatened to do.

There is good reason to be apprehensive. Regardless of what lead U.S. trade negotiator Robert Lighthizer says about the objectives of the Trump administration, there has been mixed messaging from the president himself.

First he pledged wholesale changes. Wholesale changes became tweaks when Prime Minister Justin Trudeau visited Washington. Then Trump swung back to heavy-handed. On the question of NAFTA, Trump has held true to his dominant characteristic - inconsistency.

But it’s not just Trump we should be concerned about. The powerful U.S. dairy lobby and has pledged to put Canada’s dairy supply management system on trial during renegotiation. Calls for outright dismantlement have diminished, but we should still expect pressure to be exerted in areas like excess supply distribution, which the U.S. says amounts to dumping in the case of skim milk.

Then there’s the auto sector, critically important in Ontario. Most expect the Americans will take a run at regional content rules, tightening countryof-origin requirements to protect jobs in priority areas. That could spell trouble for automakers and parts manufacturers. Fred Bergsten, founding director of the Washington-based Peterson Institute for International Economics, reflects what Canadian and Mexican industries are saying: ‘Don’t rock the boat.’

Then, there’s the perennial problem of softwood lumber, which negotiators hope to have a deal on prior to negotiations starting next month.

The good news? The White House, and its negotiation team, cannot do this alone. They have to work with Congress, home to representatives from many states where Canada is the main trading partner. Thousands of jobs and millions of dollars are at stake in the U.S. and even more in Canada.

NAFTA’s health and survival are critical. There are few more important jobs on Justin Trudeau’s desk.