Canada won’t be bullied into a bad NAFTA deal

Tensions are rising in the trade war with our southern neighbours — and it’s not just because U.S. President Donald Trump can’t control his tweets. As leaders remain locked in battle, Canadians are holding their breath to see if we will be included in a new NAFTA deal, and are bracing for the economic impact.

Some industries, like e-commerce and artificial intelligence, won’t be hit hard. Others will feel a dramatic shift. For example, changes to supply management processes could upend the dairy industry, and heightened tariffs on auto parts could throw areas of the Canadian economy into a recession.

“If we fail to get a new NAFTA agreement, the potential impact on local industry will be huge. In British Columbia, 58.7 per cent of exports go across the border,” says Andrew Wynn-Williams, divisional vice-president for B.C. at Canadian Manufacturers and Exporters.

The negotiations are at a standstill and it’s tough to say how a new trade agreement will impact the North American economy. But every industry will need to pivot. Our continent’s nations aren’t going down without a fight.

The U.S. is pressuring Canada to fold to concessions that don’t serve our economy. Trump acts like he can strong-arm our government without recourse, but he may want to think again. Despite the fact that he wants a trilateral deal, Prime Minister Justin Trudeau would rather see no deal than a bad one.

With a foggy future ahead, the Canadian government has had no choice but to fight back. When Trump imposed tariffs on aluminum and steel, the Trudeau administration retaliated, dollar-for-dollar. But what’s important now is helping companies find ways to cope if NAFTA literally goes south.

Dan Kiselbach, a partner at Deloitte Tax Law LLP and an international trade and customs tax expert, says one workaround is a remissions program. “You can get a waiver of duty in certain circumstances if you can prove exceptional circumstances, such as that you really need a certain product in order to operate a business and employ workers, and that the product can’t be made in Canada . ... The U.S. has the same sort of thing, called an exemption program: you can be exempt from certain duties in specific situations, which allows you to climb out from under the tariffs.”

When it comes to trade, the U.S. has always had leverage over Canada. The question now is: Why do they want to use it over one of their best trading partners and, what’s going to happen next?

Trump seems to think he can present a U.S.-Mexico deal to Congress and get his way, but it’s not that simple.

All three nations would like to see a trilateral agreement. As much as he might like to believe it, Trump doesn’t have the final say.

But despite what the media tells us, Wynn-Williams says people have overlooked that we are, in fact, making headway. “People are too focused on the question of what will happen if NAFTA fails. We understand that progress has already been made, in areas such as regulatory policy, support for (small- and medium-sized businesses) in trade, e-commerce and more. That progress is being jeopardized by a few remaining roadblocks.”

I have reason to believe we will get a good deal. After all, the relationship between Canada and the U.S. is worth nearly $600 billion a year. There are two possible outcomes: governments will either reach a three-party agreement or they’ll have to make do with multiple bilateral deals. In other words, we would have one agreement between Canada and the U.S., and another between Canada and Mexico.

It’s a waiting game now, and we just have to grit our teeth until it all plays out. The good news is that governments are still in talks. The bad news? Common sense isn’t so common in heads of state.