Seldom, if ever, has there been so much trade uncertainty on so many fronts.
Ever since U.S. President Donald Trump’s election, the future of NAFTA has been an open question. Can the trade deal between Canada, the U.S. and Mexico be renegotiated or will Trump pull out of the agreement?
Carlo Dade of the Canada West Foundation has an interesting take on the NAFTA negotiations. Dade spoke to the recent meeting of the Prairie Grain Development Committee, the large group of farmers, industry, scientists and regulators who recommend new crop varieties for registration.
It’s Dade’s view that the Americans will continue to drag out the NAFTA negotiations because it meets their needs.
First of all, regularly talking about NAFTA being a bad deal keeps the American rust belt happy. American manufacturers that are no longer competitive can hope for an end to NAFTA or at least for significantly different rules to change their economic fortunes.
Meanwhile, American farmers and farm groups who largely support NAFTA are happy to see negotiations continue rather than having the agreement collapse.
Truth is that Trump can’t actually withdraw from NAFTA without the support of Congress. However, Dade points out that with all the uncertainty, investment dollars are flowing into the U.S. as various companies hedge their bets. Whether this is Trump’s grand design or just by accident is difficult to determine.
Dade’s presentation was before the latest pronouncement from Trump that American duties of 25 percent on steel and 10 percent on aluminum imports are going to be levelled under the guise of ensuring American security.
Apparently, no countries, not even American allies like Canada will be exempt. These duties could signal the start of a nasty trade war as countries around the world retaliate.
If Trump gets sufficiently obstinate, he may not have to withdraw from NAFTA to see it scuttled. Canada could end up walking away. Even more likely, if the Mexicans elect a new president this summer, that country could pull out of the deal.
One major success on the trade front is Canada signing onto the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. Under Trump’s direction, the U.S. did not participate. According to Dade, this deal will give Canada a growing trade advantage over the U.S. into markets such as Singapore, Malaysia and Japan.
He uses the example of plant protein from the new processing plants being established on the Prairies. He envisages this being shipped to Grupo Bimbo in Mexico, the largest bakery company in the world, which would in turn ship its products to the other nations within the CPTPP.
However, if we want to benefit, Canada must get the deal before Parliament this spring for ratification. Alarmingly, it isn’t on the order paper yet. The federal government almost botched Canadian participation in the deal. Hopefully, they won’t botch the legislation.