NAFTA: Chameleon Canada's evolving role in trade with the US and Mexico
 As part of the North American Free Trade Agreement (NAFTA) Canada is the only G7 nation other than the United States in the pact as well being its biggest trading partner.
Culturally Canada is so much like the United States that it takes on the colouring and style of its southern neigbours like a chameleon. Thus it is difficult to isolate NAFTA as a Canadian variable in the dominion's economic growth and other than with key metrics due to the interwoven nature of the two economies.
Opinions differ on the impact of NAFTA on Canada. New York Times pundit-economist and Nobel laureate Paul Krugman has said NAFTA has had a near zero effect on the Canadian economy, whereas Republican economist Martin Anderson disagrees. NAFTA was the creation of American Republicans and Canadian Conservatives, thus not favoured by the left on either side of the border for that reason alone.
Papers supporting NAFTA as an engine of growth, highlight a trend towards lower unemployment and rising incomes from trade. Some 73 per cent of Canadian exports go to the United States. And since NAFTA Canada's unemployment rate decreased from 8.3 per cent to 6.8 per cent. Canadian GDP was up 42 per cent while inter-provincial trade increased 15.29 per cent. Not bad, some say.
As for the US the Journal of Economic Development said NAFTA has had comparatively little effect on American GDP, while Canada experienced significant increases. The journal said this was likely due to Canada's greater reliance on trade, especially trade between NAFTA members, particularly with its leading member.
But leftist Canadians felt this was a double-edged sword, that the risks were too high. Canada, they said, would become too dependent on trade, suffering the economic downturns caused by other countries. The most notable example of this would be the recent economic recession, which many argue is only affecting Canada because of lower demand stemming from the economic uncertainty in the United States. With globalisation, it appeared to this cautious school of thought, economies would be intertwined to the point where Canada would be unable to extricate itself from global downturns.
It was also been argued that NAFTA intertwines more than economies. Another leftist worry was Chapter 11 grants corporations the right to sue for compensation if investments are adversely affected through regulation, especially if those regulations favour rival Canadian interests.
The American Ethyl Corporation sued over Canada's federal ban over the gas additive MMT, which had been linked with neurotoxic effects. But Canada was forced to overturn the ban and pay Ethyl US$19 million in compensation. Fellow American Sun Belt Water filed a claim for $105 million arguing that Canadian legislation thwarted its plans to export bulk quantities of fresh water from Canada. Final outcome is still pending though the case is considered "inactive".
The recurring softwood lumber dispute seriously affects the British Columbia forestry sector, which accounts for more than 50 per cent of Canada's logging output. In 1982 the US lumber industry filed its first complaint. Tariffs have been fluctuating with duties on softwood lumber imported into the United States have reached as high as 27 per cent.
Both a NAFTA and the World Trade Organisation have issued non-binding resolutions siding with Canada against the United States. Unfortunately, the tariffs remain despite these rulings and it appears that NAFTA's ruling against the United States has not influenced its policy.
NAFTA has presented several environmental concerns to Canadians. As having one of the world's largest capacities of freshwater, Canada has been under pressure to allow it to be sold in trade. For the time being, legislation and political will has generally opposed the bulk sale of Canadian water.
There also is much talk of the impact of the US presidency of Donald Trump and his open advocacy of protectionism. But his advocacy is far more evident on the hustings than it is in trade negotiations. Sadly the media, ever anxious to blacken his name, has failed to report plainly, perhaps deliberately, that in talks with Canada, Mr Trump appears to be seeking greater and freer access to Canadian dairy markets than protectionist Canada was willing to provide.
Canada's relationship with China is equally contradictory. Prime Minister Justin Trudeau ostensibly came to China in December with hopes of leaving with a substantial trade deal in principle. But in his talks with Premier Li Keqiang, he demanded a lot of trendy strings attached, gender equality, environmental conditions, what he called "Canadian values". The upshot was China calling off the scheduled joint communique and diplomatically saying that exploratory talks would continue.
At a luncheon of the Canadian Chamber of Commerce in Hong Kong. Canada's ambassador to Hong Kong David McCallum, defended the man who personally appointed him to the post, saying trade deals take time.
But when asked what Canada's reaction would be if China made a trade deal conditional on Canada ending its "linguistic cleansing" (the removal of English from signs and the workplace in Quebec province), Mr McCallum said he did not know what the questioner was talking about, then explained difficulties in specific trade issues, after which he asked for a "more friendly question".
While China is an important Canadian trading partner, the United States is paramount. NAFTA is first and foremost an economic agreement between three member countries. Its primary goal is to remove trade barriers and subsidies for national industries in order to create a truly free North American market which would better foster competition, thus increasing wealth and productivity.
With those changes in effect, its effect was expected to be an increase income and a higher standard of living for the citizens of each country. At the same time, NAFTA would theoretically allow the member nations to use the advantages of a large free trade bloc to become more powerful internationally.
Essentially, NAFTA was created with the vision of making Canada, the United States, and Mexico, more competitive internationally and within their borders, for the benefit of their governments and citizens.
Looking specifically at the United States and Canada, there was previously an economic precursor to NAFTA - a bilateral agreement simply called the Free Trade Agreement (FTA). This agreement came into force in 1988.
It shared the same principle vision as the future NAFTA agreement; to reduce trade barriers such as government barriers to competition, and liberalise the climate for investment, allowing easier trade between the two countries.
Canada, with its head of state being the Queen of England, is linked politically to Britain and the British Commonwealth, while culturally it is more like the US than any other country. So much so that its citizens are routinely mistaken for Americans even by Americans themselves.
Thus, Canada is often forgotten in the media as a separate entity, except in the financial pages where it stands high because of its enormous capacity to produce goods and services. Its chameleon-like nature is mostly deliberate to gain US market share it would not otherwise have if its films were known to be Canadian and not American.
But in international economic statistics Canada stands out, showing itself as a major player and an independent force in arguably the world's most successful trading bloc. |
