Former prime minister says the biggest blow to Canada and Mexico would be the potential loss of investment in those countries
RED DEER — Canada and Mexico will be the losers if negotiations to strike a new North American Free Trade Agreement fail, said former Prime Minister Stephen Harper
A collapse of NAFTA will not hurt the United States as much because no one will stop investing there but they may shy away from Canada or Mexico, said Harper.
Canada has a number of free trade agreements that open up opportunities but the U.S. is still the best trading partner, he said at the recent Alberta Beef Industry Conference held in Red Deer.
Canada’s mistake may have been siding with Mexico rather than embracing the U.S., he said.
“Let’s cross our fingers that the current government does not blow our negotiations with the Americans and we end up having NAFTA cancelled,” he said.
He has started an international consulting company, Harper and Associates, to help businesses make contacts and invest around the world. He sees big opportunities for agri-business and agriculture because people want access to Canadian food products.
“We have got to be in that game because it is a unique advantage for our country and for you,” he said.
He does not think President Donald Trump will pull out of NAFTA. During the presidential election campaign Trump did not mention Canada in his criticisms of the agreement. However, he acknowledged that Americans have some irritants over Canadian farm policies such as supply management, which protects the dairy and poultry sectors with high tariffs and limited foreign access.
“Supply management is always a tough issue for governments. This did not have to be the case but it is. The most important thing is we get a deal of some kind. We cannot have a situation where NAFTA gets cancelled and where our trade access with the United States is not on a secure basis,” he said.
The former chief negotiator in the original agreement is also confident a deal will be reached, although supply management is an ongoing irritant to the Americans, said John Weekes.
“The U.S. has proposed that all import barriers on supply-managed products should be completely eliminated. I don’t think that will be accepted by the government. The United States has not said it will do anything to eliminate trade distortions and subsidies in their dairy sector,” he said.
“I think there is a deal to be had on the NAFTA because there is fundamentally so much basic interest in the United States that would benefit from maintaining the NAFTA and would benefit them from an improved NAFTA,” he said.
It is important to convince Trump of the benefits, and more internal pressure in the U.S. is being exerted to accept a deal, he said.
“He just has to be convinced broadly speaking this is something he can espouse and stand in well with his base,” he said.
NAFTA is due for revision to make room for digital commerce. That part of the negotiations has moved along well but the other issues have arisen.
“I always thought a trade agreement was about establishing rules to provide opportunity for people to compete rather than guaranteeing anybody benefits. We are in a different world it would appear,” Weekes said.
The U.S. also wants to change the three types of dispute settlements so they are eliminated or not binding. It also advocated sunset proposals in which NAFTA would be terminated every five years, unless the parties agreed it should continue.
That does not provide the kind of certainty that investors and businesses need to make plans, said Weekes.
Joining the Trans-Pacific Partnership is good news for Canada. The U.S. used all its leverage to get the best possible deal and then Trump pulled out, so the remaining 11 nations could enjoy the benefits of what they were able to negotiate.
“We really need to thank Donald Trump for that as an unprecedented opportunity to get into the Japanese market and some of these other markets,” he said.
Annual exports from Canada to TPP partners are $6.9 billion currently of which $4.3 billion goes to Japan.
Canada also achieved a free trade deal with Europe but the exports are considerably less by comparison.
“Japan is a much more significant and current market for Canadian agriculture products than the EU,” he said.
Besides Japan, Vietnam and Malaysia are also significant growth markets.
The gradual reduction of Japan’s high tariffs should help Canadians save $338 million in tariff payments.
Tariffs on imported beef are currently 38.5 percent and will drop immediately to 27.5 percent. Eventually, the duties drop to nine percent.
The ministers of the 11 countries were expected to meet in Chile March 8 to sign the agreement. At that time other countries like Indonesia, Thailand and South Korea could also signal an interest in joining.
“As they join, it will put more pressure on the United States also to modify their trade policy,” he said.
After signing, Canada needs to ratify the agreement as quickly as possible so it can take advantage of tariff cuts.
“If we don’t get in there from the beginning, the dance card of all the potential partners is already full,” Weekes said.
As for the Comprehensive Economic and Trade Agreement with the EU, Canada has been offered a major opportunity. It exported about $2.3 billion there last year and this should improve as tariffs are reduced.
“We are going to have a tariff preference in the EU for quite a significant period of time. That gives a real opportunity for Canadians who are getting into that market,” he said.
The U.S. was also negotiating with Europe but that has fallen aside for now. To take advantage of improved access and lower duties, some U.S. companies may invest in Canada to get around this, said Weekes.