NAFTA Trumped?

There is a report on Global News, quoting a CNN report that says that “The North American Free Trade Agreement (NAFTA) could be on the chopping block on President-elect Donald Trump‘s first day in office, according to a new report … [and] … According to CNN’s report, Trump will also explore stopping the Trans-Pacific Partnership deal, “unfair imports” and “unfair trade practices,” in addition to “pursuing bilateral trade deals.”

But the report also notes that ““The Trump trade plan breaks with the globalist wings of both the Republican and Democratic parties … [and] … The Trump administration will reverse decades of conciliatory trade policy. New trade agreements will be negotiated that provide for the interests of US workers and companies first.”” On this line, the Globe and Mail notes that “Donald Trump may be waking to the realization that a major centre of opposition could come from members of his own party: Senate Republicans who are warning that the incoming president’s preferred policies and people may not meet with their approval .. [and] … Mr. Trumpappears intent on implementing much of the agenda he campaigned on.

The 100 US senators, a bare majority Republicans, may think differently.

First, look at these two maps (both are from Business Insider and use US Census data):

They show that less than half of US states (23) import more from Canada than anywhere else (China is second being the major source of imports for 17 states, including big states like California and New York). But 30+ states have Canada as their most important foreign market. That suggests that 60+ US senators may want to think twice about shelving a trade deal that might costs them access to their biggest foreign market.

Second, consider a very useful report by Michael Babad in the Globe and Mail that says that “The numbers alone raise questions about Donald Trump’s condemnation of the North America free-trade agreement  Indeed, they suggest the U.S. president-elect is somewhat off base, leading BMO Nesbitt Burns to ask how NAFTA can possibly be an “existential threat” to the American economy … [because] … A 12-month total to September shows the U.S. trade deficit with Canada shrinking to only $8.1-billion (U.S.), from an oil-fuelled peak of about $80-billion in 2008, BMO chief economist Douglas Porter noted.

The latest number, he said, is “literally a rounding error,” accounting for a teeny 0.04 per cent when expressed as a share of gross domestic product … “The U.S. bilateral trade deficit with Canada has been whittled down to nearly nothing in recent years,” Mr. Porter said … [and] …  “This is due to the combination of lower commodity prices, firmer Canadian domestic spending, and the loss of Canadian manufacturing share in the U.S. market”Mr. Porter didn’t say Mr. Trump was off base, though his numbers also show that the U.S. deficit with Mexico, which has taken the brunt of the president-elect’s complaints, is 0.3 per cent, or $63-billion, over the same period … [but] … “Combined, the two countries account for less than 10 per cent of the total U.S. trade deficit, begging the question of why so much focus is falling on NAFTA,” Mr. Porter said … [and] … “Even at its ‘peak,’ the deficit with Canada was running at an unremarkable 0.6 per cent of U.S. GDP. Put another way, U.S. exports to Canada are now equal to 97 per cent of imports from Canada, almost precisely balanced” … [further] … That’s on the goods side. When you include services, the Americans have actually been running a surplus of $7.7-billion. That, too, is basically a rounding error, this time in favour of the U.S. equivalent to 0.04 per cent of GDP …  The total deficit with Mexico came in at $60-billion …  “But that’s less than a fifth of the imbalance with China, smaller than the deficit with Germany and in line with the shortfall with Japan,” Mr. Porter said … “Thus, overall trade in goods and services with its NAFTA partners generates a deficit of less than 0.3 per cent of U.S. GDP,” he added … [and] … “We would simply ask: In what way, shape, or form, does that pose an existential threat to the U.S. economy?”

But, rounding error or not, a lot of Americans, millions of them, likely including Mr Trump him self, believe that free(er) trade hurts them, the American working class. President elect Trump may just want to sweep NAFTA up in a wholesale assault on what many, many Americans see as unfair trade.

What can Canada do?

First: defend Canada-US free trade on the basis that it is, generally, fair and beneficial to both parties.

Second: work on other trade deals ~ nail down the CETA, do whatever it takes to salvage the TPP, negotiate new free(er) trade deals, as matters of the absolutely highest priority, with the UK, China, India and others, including the Philippines.

Third: do what it takes to get on and stay on the “right” side of the USA ~ scrap the carbon tax, tone down the green agenda, tighten immigration control, starting with visas for Mexicans, stop funding anti-American UN  agencies like the UNRWA, increase defence spending, and the list could go on and on and on.

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