“Dissolving NAFTA would turn back the clock on 23 years of predictability, openness and collaboration.”
– Chrystia Freeland, Minister of Foreign Affairs
Canada has always had reasonably good relationships with our only neighbour to the south despite their constant arrogance, but we have never seen the total lack of respect that we currently experience from the President of the United States. While this bullying appears to be mostly directed at Mexico, all three countries are tied together by NAFTA – the North American Free Trade Agreement.
When initially negotiated as an expanded Free Trade Agreement between Canada and the United States, NAFTA was a win-win-win contract that enriched all three countries. Since the trade pact was finalized some 23 years ago, U.S. trade with Canada and Mexico has tripled, growing faster than their trade with the rest of the world. Canada and Mexico are by far the largest importers of American goods.
Over the years however, the trade balance may have tipped somewhat in favour of Mexico in its relationship with the U.S.A. The U.S. however enjoys a slight trade surplus with respect to Canada. Trade balances like everything else have a pattern of shifting back and forth depending on changing circumstances that are often beyond the control of the partners.
When looked at in the broader perspective, it would appear that there are still major advantages for all three partners. Canada enjoys a market for our energy and is the top buyer of U.S. goods overall and is the top export market for 35 individual states. Mexico enjoys a market for 80 per cent of its exports to the U.S., and in exchange Mexico is the top export destination for American beef, rice and other products. Consumers in each country benefit from the joint manufacture of automobiles where Mexico can produce certain parts cheaper than either Canada or the U.S.
The whole philosophy of free trade is, or at least should be, that if one country can produce a product cheaper than another country, that market should prevail. Free trade should not be about imposing our labour or social standards on our trading partners. Each sovereign nation has every right to set their own standards, whether it be for labour, healthcare, or other social programs. One exception might be for environmental standards, which have global implications and need to be negotiated separately.
The current NAFTA negotiations appear to be getting more difficult because of the Donald Trump bullying tactics, but that is his style. Canada must be firm and not back down. If Trump remains adamant to scrap NAFTA, he appears to have that option. He is however getting considerable adverse feedback from his own business community.
Canada must remain firm, either in the NAFTA negotiations, or if we end up in a bilateral relationship, to ensure that the dispute resolution mechanism is preserved. The U.S. continues to be the bully in the room with regard to softwood lumber and more recently in the Boeing – Bombardier dispute. Our only saving grace has been an independent trade resolution panel.
Ken Allred is a former St. Albert alderman and MLA.