In his bid to make America great again, Donald Trump is intent on renegotiating the North American Free Trade Agreement.
While Trump’s motivation, such as it can be determined, is the trade imbalance with Mexico – and imports of other kinds, naturally – Canada is getting swept along for the ride.
That’s made some people nervous, particularly where agricultural supply management is concerned. Moreover, the list of aims includes the elimination of NAFTA’s Chapter 19 dispute resolution panels – a mechanism used by Canada for battles over softwood lumber, for instance.
On the consumer side, the U.S. goals include raising the duty-free threshold for shipping goods across the border to US$800. Canada currently has one of the globe’s lowest de minimis levels – the point where duties kick in – at just $20, so the NAFTA change favoured by the U.S. would be a big improvement, especially for online shopping.
The U.S. is also looking to protect “buy America” provisions, and to exempt all sub-federal governments from NAFTA commitments.
In that vein, trade deals have increasingly little to do with trade, fixated on the free movement of cash – tax avoidance a large plus – and so-called investor protection measures. We’re told there are long-term macroeconomic benefits, that the positives outweigh the negatives (job losses, in particular).
Outside the trade circle, critics say sweeping trade agreements have largely been harmful for our economy, encouraging the kind of globalization that has gutted the manufacturing sector in Ontario, as it has even in the U.S. heartland.
Trade agreements have failed the public time and time again. History has shown the free trade deal with the U.S. and later NAFTA have been hugely detrimental to the middle class in Canada and the U.S., while even further eroding Mexico’s economy in the case of the latter.
Look, for example, at the original deal with the U.S. penned by Brian Mulroney and Ronald Reagan. The numbers tell the story, say critics. Canada’s exports to the United States accounted for 19 per cent of Canadian GDP. Twenty-five years later, they accounted for 19 per cent of GDP. Where Canada once accounted for 19 per cent of all U.S. imports, after gaining “unprecedented” access to the market, we account for 14 per cent of imports.
In the mid-1980s, most of Canada’s exports to the U.S. consisted of relatively sophisticated manufactured goods (including automobiles, electronics and machinery). Today, most of our southbound exports consist of unprocessed or barely processed primary and resource products.
We’ve seen no productivity gains, no job growth and no increase in our incomes, which have stagnated for decades.
Calling them trade agreements is rather disingenuous. The real goal is the ability to move capital with the intent of securely off-shoring jobs, intellectual property rights, extending pharmaceutical patents to raise the cost of drugs and reduce oversight.
Trump’s take on NAFTA is motivated by his campaign rhetoric about putting America first. Hundreds of thousands of manufacturing jobs were lost as companies headed to Mexico, exploiting workers and destroying the environment in the name of increased profits, as goods could be shipped to the U.S. without tariffs.
As with everything, his stance is ego-driven and short on actual informed opinion, but it does resonate with likeminded Americans, to Canada’s chagrin.