Why Canada needs NAFTA
The NAFTA talks began six months ago in Washington. It was brutally hot and the only people who wanted to be outside were Chrystia Freeland’s handlers. They staged a late afternoon press conference with the minister on an east- facing, uncovered terrace at the Canadian Embassy, which sits on Pennsylvania Avenue. Nothing was stopping Freeland’s staff from taking full symbolic advantage of a shot with the Capitol in the background.
Ten or so journalists endured the heat, as did a similar number of officials, who gathered to sweat in solidarity while their boss faced the television cameras. And there were a couple of middle- aged men who probably had no business attending an official press conference, but who had decided it was in their interest to be there. Those men were Jerry Dias, the head of Unifor, which represents more than 23,000 Canadian auto workers, and Flavio Volpe, president of the Automotive Parts Manufacturers’ Association.
Freeland didn’t seem to mind their presence; she acknowledged them as examples of the Team Canada approach Prime Minister Justin Trudeau’s government was taking to the renegotiation of the North American Free Trade Agreement.
The commitment of Dias and Volpe to the gruelling negotiation process is paying off. They are omnipresent in the coverage of the NAFTA talks because they are intelligent, earnest, quotable, and, above all, present. I have no idea how much sway they have over the negotiators, but Dias and Volpe have achieved outsized influence over the way the trade debate is framed by the press.
There is nothing evil about that; it’s the way the game is played. It does matter, though, when the leading sources for perspective on trade are leaders of specialinterest groups. We end up talking only about the potential losers, and not at all about why Canada and so many other countries embraced freer trade in the first place.
Neither Dias nor Volpe has much good to say about the Trans-Pacific Partnership ( TPP), and both were among the first voices you would have heard after the news broke that Japan, Canada and nine other Pacific nations had ( finally) agreed to proceed without the United States.
Volpe was especially entertaining, accusing Trudeau of selling out the automotive industry in order to, “sell more products that grow on four legs.” Dias and Volpe each said separately that the TPP announcement would harm Canada at the NAFTA talks by upsetting U. S. President Donald Trump, who quit the TPP a year ago.
“In one fell swoop, they cut off the legs of the NAFTA negotiating committee,” Dias told the Financial Post’s Alicja Siekierska. “This shows that we have no strategic vision. It makes absolutely no sense.”
Actually, i t makes all kinds of sense.
The American negotiating strategy is about as basic as it gets. Trump assumes countries such as Canada and Mexico need the U. S. more than it needs them; therefore, he reckons that he can squeeze them to win better terms.
By securing the TPP, Canada and the others have reset the parameters for their dealings with Washington. To the extent that Canada or any other country can show its future doesn’t revolve entirely around the United States, the better its chances of limiting its losses in a negotiation with Trump. It may not make a great deal of difference, but it certainly isn’t going to hurt.
Anyway, Canada needs trade agreements in Asia regardless of what happens with NAFTA.
Volpe doesn’t speak for the entire parts industry when it comes to the TPP. I read in passing that Guelph, Ont.,- based Linamar Corp. was a backer, so I sent an email to confirm that was true. “I am in support of TPP as I think that bigger markets to sell to and buy from are better,” chief executive Linda Hasenfratz said in a lengthy response. “It simply creates more opportunities for more growth.”
Some will argue there is a cult around economic growth, and that is fair. Still, what Hasenfratz’s comment highlights is the power of trade to boost innovation and productivity.
Imports reduce prices, sometimes unfairly so.
But t he c ompetition forces executives to improve their games. Those that do find themselves leading enterprises that are capable of doing more than supplying their local markets. Trade agreements therefore give those companies a chance to thrive, and the rest of us benefit because the economy is populated by ambitious firms that desire to grow.
That’s what we need to keep in mind when assessing the arguments of those who oppose trade agreements such as the TPP.
Opponents who would block those initiatives are putting their own interests ahead of policies that would benefit a greater number. The fastest growing economies in the world are in Asia, but that’s not enough to attract most Canadian executives. Research by Global Affairs Canada shows that we are too dependent on a small number of large companies to drive international commerce; among rich countries, only Finland derives a greater share of its exports from its 500 largest exporters.
Canada’s risk-averse business managers are only really interested in trading with the United States. Their minds can be changed, but only by creating a path to new markets. That will require trade agreements. Yes, jobs will be lost. But as Canada’s experience with NAFTA shows, those losses will be outweighed by gains as stronger companies emerge.
“Perhaps those opposing TPP are afraid of global competition,” Hasenfratz said. “I am not.”