Canada and Trade: The Mouse and the Elephant
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Canada is a small, open economy in a globalized world. As a result, Canadian governments have tended to prefer negotiated agreements that govern trade, instead of the insecurity and ‘wild west’ of unfettered competition. At the same time, Canadians tend to support relatively high levels of government involvement in economic management, making it difficult to maintain a balance acceptable to our trade partners. With the US ‘elephant’ increasingly hostile to multilateral efforts, and the Trump administration targeting Canada in a variety of different ways, it remains to be seen how much Canada ‘the mouse’ will be able to hold its own in international negotiations. This session will explore the past, present, and future prospects for Canada as a trading nation in a world increasingly at odds with our preferred model of economic development.
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Canada and Trade: The Mouse and the Elephant
- 1. CANADA AND TRADE THE MOUSE AND THE ELEPHANT
- 2. CANADA AND TRADE: THE MOUSE AND THE ELEPHANT 2Dr. Rosalind Warner
- 3. CANADA AND TRADE: THE MOUSE AND THE ELEPHANT • Dr. Rosalind Warner • Twitter: @rwarner23 • Email: rowarner@okanagan.bc.ca • Blog: rozwarner.wordpress.com 3Dr. Rosalind Warner
- 4. CANADA AND TRADE: THE MOUSE AND THE ELEPHANT • NAFTA Basics • NAFTA: ‘Very bad’ for the US? • Why the Hate? • 4 Reasons in Order of Likelihood • Leaving NAFTA: it’s hard to say goodbye(?) • Leaving NAFTA: Alternatives 4Dr. Rosalind Warner
- 5. NAFTA BASICS 5Dr. Rosalind Warner
- 6. NAFTA BASICS 6Dr. Rosalind Warner
- 7. NAFTA BASICS 7Dr. Rosalind Warner
- 8. NAFTA: ‘VERY BAD’ FOR THE US? 8Dr. Rosalind Warner “Free trade can be wonderful if you have smart people, but we have people that are stupid.”
- 9. NAFTA: ‘VERY BAD’ FOR THE US? 9Dr. Rosalind Warner • On the other hand… • US is still able to impose tariffs with few repercussions from NAFTA (ahem softwood lumber) • US Law still applies… • Job losses between 1994 and 2002 due to NAFTA: 2% “the worst trade deal ever signed.”(?)
- 10. NAFTA: ‘VERY BAD’ FOR THE US? 10Dr. Rosalind Warner 2016 US trade deficit IS a real problem (imports over exports with all trade partners): $750 billion
- 11. On the other hand…Canada is the US’s best customer • …we buy more American-made goods and services than any other country, US had a $12.5 b trade surplus with Canada in 2016. • Total American trade with Canada in 2016: 11 $627 billion Dr. Rosalind Warner
- 12. So…Why the hate? 12Dr. Rosalind Warner • 4 Reasons, in order of likelihood (LEAST to MOST likely)…
- 13. Why the hate? Dr. Rosalind Warner Reason Number Four (least likely): BETRAYAL & CHEATING
- 14. Why the hate? 14Dr. Rosalind Warner
- 15. Cheating? Take cheese, for example.. European and American dairy farmers receive huge subsidies Canadians, instead, choose supply management – dairy producers form a cooperative to regulate supply domestically, plus a system of quotas and tariffs
- 16. BTW….We beat the French! Dr. Rosalind Warner
- 17. So, it’s not free trade, but it’s not (really) ‘cheating’ either… Dr. Rosalind Warner
- 18. How ‘cheating’ helps the US… Dr. Rosalind Warner 70% of the world’s maple syrup is made in Quebec
- 19. How ‘cheating’ helps the US… Dr. Rosalind Warner The OPEC of maple syrup Today, a barrel of maple syrup is worth about $1,200 — that's around 18 times the value of U.S. crude oil.
- 20. Why the hate? Dr. Rosalind Warner Reason Number Three (slightly more likely): MONEY
- 21. Dr. Rosalind Warner A gambit to attract investment
- 22. Money matters… Dr. Rosalind Warner 22
- 23. Money matters… Dr. Rosalind Warner 23 US just introduced the most extensive tax package since 1986 ….went from having one of the highest tax burdens to the middle of the pack
- 24. Why the hate? Dr. Rosalind Warner Reason Number Two (a little more likely): MISERY
- 25. The insistence on victimhood… Dr. Rosalind Warner
- 26. Curtis Ellis: “it used to be that you couldn’t drink the water in Mexico and they made cars in Michigan, now they make cars in Mexico and you can’t drink the water in Michigan” Dr. Rosalind Warner
- 27. In 1947, the US produced 56.7% of all the steel in the world, by the 1980s, that was down to 10%. Dr. Rosalind Warner
- 28. Steel and Aluminum Dr. Rosalind Warner Cold War era clause used to impose 25% tariff on steel and 10 percent on aluminum.
- 29. Steel and Aluminum Dr. Rosalind Warner BUT there’s a problem…’de-industrialization’ affects all of the world’s advanced economies Steel production is now heavily mechanized and highly productive, any growth will be without growth in employment benefits
- 30. Why the hate? Dr. Rosalind Warner Reason Number One (most likely): LEVERAGE
- 31. The Big Bazooka “if people know you have the big bazooka, you probably don’t have to use it,” implying that Trump can threaten unilateral tariffs if Mexico and Canada do not offer adequate concessions. ~US Commerce Secretary Wilbur Ross Dr. Rosalind Warner
- 32. Trump’s real game Dr. Rosalind Warner •Trump “already winning” due to uncertainty… • Fiat Chrysler recently moved production of some Ram heavy duty trucks from Saltillo, Mexico to Warren, Michigan, creating 2,500 US jobs
- 33. Move plants home Dr. Rosalind Warner • If NAFTA disappears, or content rules changes, a Mexican-built Ram truck could have faced a 25% import duty in the US • Moving production to Michigan takes that risk off the table
- 34. US’s NAFTA Goals • US negotiating goals: • Reduction in Mexico’s trade surplus with the US, or a 35% tariff across the board on all trade with Mexico • Stronger ‘rules of origin’ on auto parts • New chapter on the digital economy to liberalize information technology flows • Remove binational panels of dispute settlement • Renegotiate every 5 years • Access to government procurement contracts without reciprocity 34
- 35. LEAVING NAFTA: ITS HARD TO SAY GOODBYE Dr. Rosalind Warner • From 1990 to 2016, Canada’s total trade with the United States more than tripled. • Canada sends 75%of all goods exports to the US • Canada and the US are the world’s largest trading partners • Canadian goods exports to the U.S. are up 150% from 1993 (pre-NAFTA). • Canadian services exports up roughly 225% from 1993 (pre-NAFTA).
- 36. LEAVING NAFTA: ITS HARD TO SAY GOODBYE? Dr. Rosalind Warner • Goodbye to Chapter 11 Investor-State Dispute Settlement mechanism • Allows a corporation to use an international agreement… • …to pursue claims against its own government
- 37. LEAVING NAFTA: ITS HARD TO SAY GOODBYE? Dr. Rosalind Warner
- 38. LEAVING NAFTA: ITS HARD TO SAY GOODBYE? Dr. Rosalind Warner Energy • NAFTA gave the United States secure access to Canadian energy when it incorporated the provisions of the Canada-U.S. Free Trade Agreement (CUFTA). BUT…the US is set to become the world’s largest oil producer in the next few years
- 39. Energy “Without NAFTA, U.S. energy dominance in global markets is a fantasy. With a better NAFTA, it could become a reality.” ~ Sands 39 …a fading dream? Dr. Rosalind Warner
- 40. LEAVING NAFTA: ITS HARD TO SAY GOODBYE Dr. Rosalind Warner Provinces hardest hit: New Brunswick •28.5%of GDP in 2016. • The provinces food, agricultural and forestry sectors are most vulnerable to changes.
- 41. LEAVING NAFTA: ITS HARD TO SAY GOODBYE? Dr. Rosalind Warner Provinces least affected: British Columbia • geographic location, which opens it up to Asian markets. •8% of GDP, which is lower than most provinces.
- 42. LEAVING NAFTA: ALTERNATIVES Dr. Rosalind Warner • China? Not so fast….A very interesting pivot…
- 43. CANADA-MEXICO RAPPROCHEMENT? Dr. Rosalind Warner • 2014 agreement enhanced air travel, investment support, defence cooperation, and a pledge to promote ‘shared values’
- 44. The end of multilateralism
- 45. BIBLIOGRAPHY Dr. Rosalind Warner Ashkenas, J., & Parlapiano, A. (2014). How the Recession Reshaped the Economy, in 255 Charts - The New York Times. Retrieved March 16, 2018, from https://www.nytimes.com/interactive/2014/06/05/upshot/how-the-recession- reshaped-the-economy-in-255-charts.html Beinhart, L. (2018, March 15). Trump’s Tariffs: A Bad Solution to a Very Real Problem. AlJazeera. Retrieved from https://www.aljazeera.com/indepth/opinion/trump-tariffs- bad-solution-real-problem-180315080636306.html Brown, C. P. (2018). What We Do and Don’t Know After Trump’s Tariff Announcement | PIIE. Retrieved March 9, 2018, from https://piie.com/commentary/op-eds/what-we-do- and-dont-know-after-trumps-tariff-announcement Canada | United States Trade Representative. (2018). https://ustr.gov/countries- regions/americas/canada
- 46. BIBLIOGRAPHY Dr. Rosalind Warner Dawsey, J., Paletta, D., & Werner, E. (n.d.). In fundraising speech, Trump says he made up trade claim in meeting with Justin Trudeau - The Washington Post. Washington Post. Ellis, C. (2018). Trade Deals for American Prosperity | America First Policies. Retrieved March 9, 2018, from https://www.americafirstpolicies.org/issues/trade-deals-for- american-prosperity/ Healing, D. (2018). NAFTA’s Chapter 11 dispute mechanism too costly for Canada at $314M, says report - Politics - CBC News. http://www.cbc.ca/news/politics/chapter-11- report-ccpa-1.4489102 Heinbecker, P. (2017, November 2). Opinion | Trump’s Trade War With Canada. The New York Times. Hufbauer, G. C., & Jung, E. (2017). Renegotiating NAFTA: What Happens Next? | PIIE. Retrieved March 9, 2018, from https://piie.com/blogs/trade-investment-policy- watch/renegotiating-nafta-what-happens-next
- 47. BIBLIOGRAPHY Dr. Rosalind Warner Kolb, M., & Cimino-Isaacs, C. (2018). A Guide to Renegotiating NAFTA | PIIE. Retrieved March 9, 2018, from https://piie.com/blogs/trade-investment-policy-watch/guide- renegotiating-nafta Ljunggren, D. (2017, December). Some Canada firms could move to U.S. amid NAFTA worries: survey. Reuters. https://www.reuters.com/article/us-canada-trade/some- canada-firms-could-move-to-u-s-amid-nafta-worries-survey- idUSKBN1E915E?feedType=RSS&feedName=topNews Magnus, G. (2017). Trumpeting a global trade war | Prospect Magazine. Retrieved March 12, 2018, from http://www.prospectmagazine.co.uk/magazine/donald-trump-us-politics-global-trade- war Mintz, J. M. (2017). Trump’s tax tsunami is about to wallop Canadian jobs and investment | Financial Post. http://business.financialpost.com/opinion/jack-mintz- trumps-tax-tsunami-is-about-to-wallop-canadian-jobs-and-investment
- 48. BIBLIOGRAPHY Dr. Rosalind Warner Mulholland, A. (2014). Canada, Mexico sign deals to boost trade, growth, air travel | CTV News. CTV News. Associated Press (2016, March 16). Why Vermont is experiencing a maple syrup boom - CBS News. Moneywatch. Sands, C. (2017). ENERGY – NAFTA Renegotiations and Energy. Retrieved March 9, 2018, from http://www.energymag.ca/usa/nafta-renegotiations-and-energy/ Stewart, E. (2018, March). “We’ve been in a trade war for 30 years”: a former Trump trade adviser explains the case for tariffs. Vox. Wilson, C. (n.d.). NAFTA Resource Page | Wilson Center. Retrieved March 16, 2018, from https://www.wilsoncenter.org/collection/nafta-resource-page Canada’s Trudeau accuses China of “dumping” steel on global markets - Channel NewsAsia. (2018, March 13).
Editor's Notes
- CANADA AND TRADE: THE MOUSE AND THE ELEPHANT Guest Speaker: Rosalind Warner* - Study Group Coordinator: Vern Piedt (250-764-3073) Friday, March 23– 2:30 – 4:30 pm – 1 session Fee: $10 – Max/Min: 30/10 WAITLIS T Canada is a small, open economy in a globalized world. As a result, Canadian governments have tended to prefer negotiated agreements that govern trade, instead of the insecurity and ‘wild west’ of unfettered competition. At the same time, Canadians tend to support relatively high levels of government involvement in economic management, making it difficult to maintain a balance acceptable to our trade partners. With the US ‘elephant’ increasingly hostile to multilateral efforts, and the Trump administration targeting Canada in a variety of different ways, it remains to be seen how much Canada ‘the mouse’ will be able to hold its own in international negotiations. This session will explore the past, present, and future prospects for Canada as a trading nation in a world increasingly at odds with our preferred model of economic development. *
- © Copyright PresentationGo.com – The free PowerPoint template library
- © Copyright PresentationGo.com – The free PowerPoint template library
- © Copyright PresentationGo.com – The free PowerPoint template library
- Canada has long been the United States’ best customer, buying more American-made goods and services than any other country — more than China, Japan or Britain. American trade with Canada totaled $627.8 billion in 2016; the United States had a $12.5 billion trade surplus.
- Clara is a college student in Toronto, and in a few days, she's flying home to Paris to visit her family and friends. She also stopping at a fromagerie to buy some cheese to bring back to Canada, specifically Comté, a cousin of Gruyere made under strict rules in the French Alps. "It's not gooey, and you know it's not going to give a scent to your entire suitcase," Clara says. Comté is also a lot cheaper in France. It's easy to find at supermarkets for the equivalent of about $6 or $7 a pound. In Canada, it's both a lot harder to find, and it's usually at least $20 a pound. In 2012, a joint US and Canadian law enforcement operation uncovered a scheme that involved thousands of pounds of cheaper American-made cheese being smuggled into southern Ontario, where much of it was sold to restaurants. A Canadian police officer involved in the scheme received a four-month prison term. There was also the food importer in British Columbia fined in 2014 for sneaking in 40,000 pounds of Portuguese cheese, some of which was hidden in shipments of grapes and grape juice. In 2016, a man in Saskatchewan was caught trying to bring 44 pounds of undeclared Mexican cheese from the US. He opted to pay a 40 Canadian dollar fine (about $31) rather than pay the large duty to import it. A recent trade deal with the European Union gives him cause for concern. The Canadian government agreed to a large increase in cheese imports from the EU. The effects are beginning to be felt in Canada, with more lower-cost European cheese on store shelves.
- Vermont, the country's largest producer, made 1.3 million gallons of syrup last year, compared with an estimated 500,000 gallons in 2008. And that's where the benchmark global price for bulk maple syrup — the price paid by processors to Vermont's maple syrup producers — is set each year by a powerful, but legal, cartel. The Québec cartel has been largely successful in stabilizing prices in an industry where the supply is never predictable because of weather. Because weather is often fickle, drums of maple syrup are stacked at the Global Maple Syrup Strategic Reserve in rural Québec, three hours drive east of Montréal. The reserve is managed by the Federation of Québec Maple Syrup Producers, a government-sanctioned union of syrup producers. Surpluses are stored in good years, and it's from the reserve that syrup is released in down years.
- To maintain prices, the federation and its accredited buyers negotiate the global benchmark price. With the exception of small containers of less than 1.3 U.S. gallons, all Québec producers must sell their syrup exclusively to the federation. The federation also sets quotas on how much a farm can produce. “The system that's in place, the supply management system, is good for Québec producers and U.S. producers because it guarantees good prices and that allowed U.S. producers to actually expand rapidly in the last few years,” explains Pascal Thériault, an economist at McGill University's Faculty of Agricultural and Environmental Sciences in Montréal.
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- During the past 25 years, employment in manufacturing as a share of total employment has fallen dramatically in the world’s most advanced economies, a phenomenon widely referred to as "deindustrialization." The trend, particularly evident in the United States and Europe, is also apparent in Japan and has been observed most recently in the Four Tiger economies of East Asia (Hong Kong, China, Korea, Singapore, and Taiwan Province of China). Not surprisingly, deindustrialization has caused considerable concern in the affected economies and has given rise to a vigorous debate about its causes and likely implications. Many regard deindustrialization with alarm and suspect it has contributed to widening income inequality in the United States and high unemployment in Europe. Some suggest that deindustrialization is a result of the globalization of markets and has been fostered by the rapid growth of North-South trade (trade between the advanced economies and the developing world). These critics argue that the fast growth of labor-intensive manufacturing industries in the developing world is displacing the jobs of workers in the advanced economies. After the US steel industry hit bottom in the 1980s, the parts that were left underwent radical reforms. They increased "productivity", a term that refers to output per worker. It is now a heavily mechanised industry. In 1980, the labour of one person turned out an estimated 200 tonnes a year. Now it's 1,000 tonnes. There's a steel plant in Austria that can turn out 500,000 tonnes with just 14 employees, almost 36,000 tonnes per person. The only way tomorrow's steel is competitive is with ever fewer people. In the US, if recent history is a guide, they will be paid less, benefits will be cut, and unions will be driven out.
- Whether by design or by luck, Trump is already winning the NAFTA renegotiation. It turns out the uncertainty over NAFTA’s fate is Trump’s friend. It is part of what appears to be a systematic — U.S. trading partners might say predatory — strategy to shift investment dollars to the United States. I have had conversations with business leaders in recent weeks in which they all quietly acknowledge the same thing: Until they know what the new rules will be under NAFTA, they are likely to hedge their bets by locating new investments in the United States rather than in Canada or Mexico, just in case the rules change and they are frozen out of the largest North American market. The most explicit move was the decision by Fiat Chrysler last month to move production of some Ram heavy duty pickup trucks from Saltillo, Mexico, to Warren, Michigan, creating about 2,500 jobs in the U.S. If NAFTA disappears, or the rules for automobile content are changed significantly as the Trump administration wants, a Mexican-built Ram truck could have faced a 25 percent import duty in the United States. Moving production to Michigan takes that risk off the table. Trump has taken credit for other decisions, like Toyota’s announcement of a new $1.6 billion car plant in Huntsville, Alabama, although that decision appears to have been in the works before Trump’s election.
- Further, Washington is apparently insisting on “rules of origin” that would require Canadian and Mexican vehicles to contain no less than 50 percent American parts and services for duty-free entry into the United States, an onerous demand benefiting American producers. Washington is also asking that such vehicles contain at least 85 percent of parts and services from the three Nafta countries. The existing 62.5 percent has allowed for the use of cheaper supplies outside the trading group.
- -Newfoundland and Labrador recently were ordered to pay #130 m to Abitibi-Bowater for compensation for loss of access to public lands and waters in a NAFTA Chapter 11 lawsuit— NAFTA’s Chapter 11 allows foreign companies to file compensation claims in countries where they have investments and feel a government action – such as legislation or expropriation – is unfair and discriminatory. -the company had filed for bankruptcy, closed down its operation, left the cleanup costs and unemployment claims for the province to worry about, and then demanded compensation for the loss of its access to forests in newfoundland---
- In the last two years, Obama raised tariffs on steel from China, India, South Korea and Taiwan. Soon after, China accused Japan, South Korea and the EU of dumping steel on the market and announced its own penalties. India applied anti-dumping duties on Chinese steel.
- "We are very concerned about the actions taken by China and the dumping of steel and aluminum on the global market," Trudeau said following a tour of an aluminium plant in Quebec. His comments came amid rising global trade tensions in the wake of a US decision to impose steep tariffs on imported steel and aluminum. Canada, the top supplier of steel and aluminium to the US market, and Mexico have been temporarily exempted from the tariffs until trilateral continental trade talks conclude. Trudeau, who is expected to travel to three other Canadian steel cities to reassure workers in the coming days, said Canada already has "significant barriers" in place to prevent low-cost steel and aluminum from being dumped there, and is prepared to work with Washington to "do even more.“ Trudeau's dumping accusations against Beijing, which echoed Trump's own message, come after exploratory talks with China failed to advance to Canada-China free trade negotiations. Instead, Ottawa signed onto the 11-nation Trans Pacific Partnership (TPP), which excludes both China and the United States, and entered into talks last week to join a South American trading bloc as part of a concerted push to diversify its trading relationships. A Canada-EU free trade accord, meanwhile, entered into force last September. Read more at https://www.channelnewsasia.com/news/business/canada-s-trudeau-accuses-china-of--dumping--steel-on-global-markets-10038166 Read more at https://www.channelnewsasia.com/news/business/canada-s-trudeau-accuses-china-of--dumping--steel-on-global-markets-10038166
- In addition to an updated bilateral air transport agreement, which adds more direct flights between Canadian and Mexican cities for both passengers and cargo and allows for flexibility on pricing, other agreements include: RELATED STORIES Expanded Canada-Mexico air travel agreement reportedly in the works White House to PM: Don't expect much of an answer on Keystone Envoy calls Canada-Mexico relationship 'stagnant' as PM's visit approaches Three Amigos: Harper, Obama, Nieto to meet in Mexico next month Mexico 'really mad' at Canada over imposed travel visa: ambassador PHOTOS a memorandum of understanding to enhance co-operation between Export Development Canada and Mexico’s Banco Nacional de Comercio Exterior. a “master co-operation agreement” to ensure financial support and other assistance for Canadian and Mexican companies in order to boost trade and investment. a declaration of intent on defence co-operation, which calls for the two countries to work together on North American security issues, as well as military training, defence research and material. a renewed joint Canada-Mexico action plan to promote the two countries’ “shared values.” an energy deal that will see Canada assist with regulatory development, technology and environmental monitoring. In the last two years, Obama raised tariffs on steel from China, India, South Korea and Taiwan. Soon after, China accused Japan, South Korea and the EU of dumping steel on the market and announced its own penalties. India applied anti-dumping duties on Chinese steel.
- In the last two years, Obama raised tariffs on steel from China, India, South Korea and Taiwan. Soon after, China accused Japan, South Korea and the EU of dumping steel on the market and announced its own penalties. India applied anti-dumping duties on Chinese steel.
- In the last two years, Obama raised tariffs on steel from China, India, South Korea and Taiwan. Soon after, China accused Japan, South Korea and the EU of dumping steel on the market and announced its own penalties. India applied anti-dumping duties on Chinese steel.