We all know who won the election south of the border.
Contentious or not, and regardless of whether you agree with President Donald Trump, we need to prepare our strategic plans based on some of the things he has said. Here are some political-economic thoughts on the significance of his election as it pertains to the North American Free Trade Agreement (NAFTA).
Reverting to a bilateral FTA
It is no secret that trade deals enacted by governments ó yet written by private interests for private interests ó have granted corporations the right to operate with impunity in jurisdictions that have unequal or non-existent health, worker and environmental standards or regulations. These jurisdictions consist of poorer developing countries where the lack of protections are exploited, such as, for example, Mexico.
Externalized benefits to multinational corporations via poor countries' comparative lack of protections have acted as de facto tariffs against developed countries like Canada, where proper high standards of protective regulations cost more.
We shouldn't be lowering the bar to compete with those poorer, non-peer nations ó they need to raise the bar to compete with us. Unfortunately, though, this hasn't happened. The economic benefit of exploitation has compelled tens of thousands of companies to offshore their dollars, and in so doing have forced the loss of millions of good jobs in Canada alone. That's why, if free trade between peer nations only is re-established, it could bode well for Canada's high-value added manufacturing centres like Ontario and Quebec if capital is reshored as a result of it.
But ó and this is an enormous but ó being that Canada would be the minority partner between any future bilateral agreement with the U.S., we must expect some hardball positions being leveraged against us during negotiations. Therefore, as counter-leverage, Canada needs to improve its productivity while continuing to develop other foreign buyers for our supply of goods and services.
Trade wars
Some fear Trump could instigate the complete elimination of trade deals between countries and/or renegotiate trade deals in bad faith, which would lead to retaliatory trade tariffs against the U.S., and therefore affect that country's economy. A trade war that slows the U.S. economy and diminishes its ability to buy parts, goods and services easily from countries like Canada would likely affect international capital flows and lead to a new global recession.
Softwood lumber
Relevant, especially to most of Canada of course, is the softwood lumber industry. As long as Canadian forestry areas continue to be owned by the Crown (as opposed to privately, as in the U.S.), the U.S. will want to add tariffs for lumber imports into the U.S. since they see Crown ownership as a form of subsidy.
The Crown will not give up its forestry resources, nor should it. The Softwood Lumber Agreement expired in October 2015, and trade has been operating in good faith since then. However, we know through leaked memos that Trump will be including softwood lumber in any renegotiation of NAFTA, and we know that he will be seeking more favourable terms for the U.S.
It's clear that as difficult as it is to do, due to the uncertainty caused by Trump's election, Canada and Canadian companies need to have multiple contingency plans by strategizing accordingly.
