Why we need to care about NAFTA
Many 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 of 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 President Donald Trump once threatened to do.
On Monday, lead U.S. trade negotiator Robert Lighthizer released a broad outline of what the Americans are looking for in negotiations set to start next month.
The U.S. wants better access for its agricultural exports — including dairy products, wine and grain. It also wants freer trade in telecommunications, and online purchases; new rules on currency manipulation; and an overhaul of the dispute-settlement system.
Of these, the thorniest promises to be supply management systems like the one Canada uses around dairy production. The truth is the system works for Canadians. Americans want more access to the market, but to give that will jeopardize the supply management status quo. The agriculture lobby in Canada is a powerful force, but not nearly as much as in the U.S. Still, the federal government will have to tread very carefully.
Freer trade in telecommunications sounds promising on the surface. Canadians pay too much for wireless services and the idea of more competition from the much larger U.S. field will appeal to many. But how much is too much? The U.S. dwarfs the Canadian market, with all the positives and negatives that implies.
What the Americans want around online shopping is less resistance. Canada has among the stiffest tariffs in the developing world, and again, consumers will be interested in anything that gives more selection and savings. But balancing that against the American tendency to take over markets will be a challenge.
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 Prime Minister Justin Trudeau’s desk.