NAFTA: Part 2

By Reid Offers

 

Editor’s note: This article was written pre-USMCA. Updated information coming soon.

 

In the previous issue, we discussed what NAFTA is and how it has benefited the trade amongst Canada and our two neighbors to the south. Now you might be wondering, “why in the H-E double hockey sticks does some boring international trade agreement have to do with me, a millennial student at a Canadian university?” The short answer to this question is quite simple: it has a lot to do with everyone here. However, in order to come full circle to this question, there is a lot that has to be addressed in the wake of the latest mainstream media circus that has engulfed politics around this topic lately.  

 

President Trump’s Views

As one of his key campaign promises to “Make America Great Again,” Trump threatened to withdraw from NAFTA his first 100 days in office if Canada and Mexico did not come back to the bargaining table to revitalize NAFTA. In agreement, all three countries said they would renegotiate parts of the deal. There is much debate, though, over what should be decided between the three countries and a lot of misunderstandings over what is really hurting and what is benefiting the American worker with regards to the free trade agreement.

Simple as it may be to draw basic conclusions about the President’s intentions to fulfill this campaign promise or the emotionally-charged rhetoric engulfing such a promise, it is more challenging to arrive at one sound reason for such a stance. With conservative populism on the rise in the Midwest and Southern United States, the voters charging the Trump base are fueled with anti-globalist economic views since many believe globalization to be harmful to the manufacturing and farming sectors that prop up their states’ economies. That said, NAFTA and other trade deals are not what is hurting the American manufacturing sector. While NAFTA has been active, there has only been a drop of 200,000 manufacturing jobs in the United States, accounting for less than 1 percent of total US manufacturing job losses since 1971. Automation has taken away the most jobs, leaving NAFTA as a scapegoat for the President to campaign on in order to win votes.

 

Trump Turns to Dairy

Despite this loss of jobs, the President found another way to fire up his base: cause quite literal beef with Canada. In order to protect the interests of Canadian dairy farmers, the federal government places a 270% tariff on dairy products entering the country from other nations. Ottawa does this in order to maintain the status quo of wages paid to dairy farmers in Quebec and Ontario who might otherwise be subject to fluctuating prices if imported products came from American farms. The protectionism of the policy notwithstanding, the United States government already imposes tariffs on dairy goods entering their borders. When confronting the issue of fair trade, it’s important to ask: is it fair for Canadian farmers to face a decrease in wages so farmers in places like Wisconsin can have access to a relatively small market which might not increase their profits very much?

 

But What About Alberta?

Despite all this talk about dairy farmers and manufacturing jobs, you’re probably still wondering what this has to do with Alberta. The United States accounts for 86% of goods exported from the province, meaning tariffs on Albertan lumber, wheat, oil and natural gas could raise prices and hurt jobs for those employed in those sectors.

 

At the same time, the overall Canadian economy would shrink a total of 1% in 10 years if tariffs were imposed. With Alberta and Canada not growing as strongly as the U.S already, this could mean it would be tougher for many students to find a job after graduating. Canadian companies might find it more beneficial to their profits to migrate south and set up shop in the States. Estimates are that half a million jobs would be lost if NAFTA fell apart.

 

Where Are the Talks Currently?

Mexico and the United States are currently working out their issues separate from Canada; however, with the midterm elections coming up in the US, congressional Democrats have voiced their opposition to a non-trilateral free trade agreement. Even the Mexican President-elect agreed that, once in office, his new government will not leave Canada out of a deal. Any new deal would have to get approval from both of the countries’ upper houses of legislature, which certainly would be hard to do without us canucks in on the deal. There is simply too much damage to be done to all the parties involved if any of the negotiations fall apart. Despite having the strongman attitude, it would be a very risky political move for President Trump to withdraw entirely. Nothing is for certain of what will come out of the talks, and much will happen in the following months, but Canadians need to be informed and up to date on how such consequences will impact their economy.

 

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