Small businesses urged to prepare for NAFTA change

Companies in Alberta should take steps now to prepare for possible changes to the North American Free Trade Agreement (NAFTA), a Canada West Foundation official warns.

Recent speculation suggests U.S. President Donald Trump will soon give notice he plans to end the deal that negotiators from the United States, Canada and Mexico are trying to rework.

Carlo Dade, director of the Canada West Foundation’s Centre on Trade and Investment Policy, gives 50-50 odds NAFTA will survive, but he said this doesn’t mean people in the province should be spooked.

“It’s simply good business practice to prepare for contingencies. Businesses need to think of this in terms of risk-mitigation and business planning.”

If NAFTA is cancelled, one possibility is that Canadian goods going south of the border will face tariffs outlined under the mostfavoured nation provisions of the World Trade Organization, Dade said.

These can be complex. There are 1,900 separate tariffs for agricultural products alone, ranging from zero to around six per cent, he said, advising firms to learn how to use the WTO database or consult a customs broker for more information.

Part of the impact of discarding NAFTA would depend on the relationship Alberta companies have with U.S. customers, Dade said.

“If your grandfather was a key supplier with a company in the States, are they going to drop you for a 1.5-per-cent rise in tariffs?”

Alberta is better-positioned than some other provinces because it has a trade representative in Washington, Dade said, although he hasn’t done the modelling required to determine exactly how the province will be affected if the deal is ripped up.

“Some things aren’t changing. We’re not moving further from the United States. … We will still have (common) language, we still have a great reputation,” he says.

“We know we will have access to the U.S. It’s not all doom and gloom.”

Dade, who plans to release a report for small businesses in Western Canada later this month on how to respond to NAFTA uncertainty, said firms should be talking now about the issue with their American customers and suppliers.

“The absolute worst time to have that conversation is when the proverbial hits the fan and the U.S. decides to withdraw. There will be panic.”