NAFTA’s Fragile State – Remember To Buy Canadian

NAFTA came into effect in 1994, making it one of the world’s biggest free trade zones. This agreement established the framework for solid economic development and rising prosperity for the three countries involved – Canada, US, and Mexico. As a Canadian Consumer, it’s important to realize that you ultimately hold the power to decide which country’s goods and services are purchased domestically. Buying Canadian makes Canada stronger, and may never be more important than now, with the renegotiation of the NAFTA agreement looming.

Canada is using the continental platform of NAFTA as a way to assist Canadian businesses embrace commercial opportunities from around the world. It is important to note that NAFTA has helped Canada in several ways: NAFTA has increased trade vastly, lowered prices, increased economic growth, created jobs, increased foreign direct investment, and reduced government spending. As many are aware, Trump has repeatedly stated he wants to renegotiate NAFTA. If this happens, Canada will surely have to reshape its economy, since Canada sends three-quarters of its exports south. However, the United States will have the upper hand in any negotiations.

Below are some facts to consider when understanding the Canada-US relationship in NAFTA:

  • Canadian exports to the US increased at an annualized rate of 4.6% between 1993 and 2015. [1]
  • Canada sends 98% of its total energy exports to the US. This includes uranium and coal. [2]
  • Canada has also become the top destination for American crude oil.
    • 5 years ago, the US sent 50 million barrels of crude oil to refineries in various parts of Canada. Now, the US sends 400 million barrels of crude oil to Ontario, Quebec, New Brunswick, Newfoundland and Labrador. [3]

Regardless of Canada’s proclaimed willingness to revive NAFTA, the Trump administration will be looking not to enhance trade flows, but for Canada and Mexico to “pay” for access to the U.S. market.[4] For instance, while Canada might need to modernize NAFTA’s rules of origin – the determine which products fit the bill for duty-free treatment – to make them easier to utilize, the United States will need to make those rules more prohibitive. Additionally, Trump’s main reason to renegotiate NAFTA is because the free trade treaty has cost Americans thousands of jobs. Now, he wants to put a focus on cutting his country’s large trade deficit with Mexico.

In addition, if NAFTA is renegotiated, Canada will have to pay for importing and exporting goods from the United States and this will increase the price of goods and services in the Canadian market. For instance, a company like Campbell Group of Companies, a trusted moving and storage company specialized in moving properties from one Country to another will have to pay certain amounts or tax before they are able to move homes out of Canada to the United States resulting in over $100,000 taxes never paid before. [5] Nobody is sure of what the negotiation will look like; it is difficult to get a clear picture of what might happen when the talks on NAFTA begin – but there’s no reason to expect the worst.

Canada must be prepared with some bargaining chips, but remain diplomatic because U.S. trade is vital to Canada, and rewriting NAFTA could affect huge swaths of the country’s economy and labour market, as well as its global supply chains. In addition, there needs to be a strong campaign to consumers in Canada to patronize domestically produced goods and services because really, buying Canadian would make Canada stronger.


[1] Government of Canada, Foreign Affairs Trade and Development Canada, Deputy Minister of Foreign Affairs, Assistant Deputy Minister Public Affairs, Corporate Communications, E-Communications. (2017, February 14). North American Free Trade Agreement (NAFTA). Retrieved August 15, 2017, from http://international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/nafta-alena/fta-ale/info.aspx?lang=eng

[2] Barutciski, M. K. (2017, January 18). Trump, Canada and the future of NAFTA. Retrieved August 15, 2017, from https://www.theglobeandmail.com/report-on-business/trump-canada-and-the-future-of-nafta/article33664146/

[3] R. (2017, February 21). Sorry, President Trump: Canada says any talks to ‘tweak’ NAFTA will involve Mexico. Retrieved August 15, 2017, from http://business.financialpost.com/news/economy/sorry-president-trump-canada-says-any-talks-to-tweak-nafta-change-will-involve-mexico/wcm/1d44bd3f-9256-4036-b937-542ff0e8307a

[4] How a Trump presidency would affect Canada’s economy. (2016, July 26). Retrieved August 15, 2017, from https://www.theglobeandmail.com/report-on-business/economy/how-a-trump-presidency-would-impact-canadas-economy/article31115880/

[5] Press, T. C. (2016, November 10). 7 ways Donald Trump as U.S. president could affect Canada – Article. Retrieved August 15, 2017, from http://www.bnn.ca/ways-donald-trump-s-victory-could-impact-canada-1.603787

 

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