Regional Spotlight

Canadian Perspectives on NAFTA

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Bretton Woods Committee

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On June 28, 2017 the Bretton Woods Committee hosted the virtual conference, Regional Spotlight: Canadian Perspectives on NAFTA. In the context of the upcoming NAFTA renegotiation, this event explored Canadian priorities and the potential impacts on the future of the Canadian economy, the integrated relationships between Canada, the United States, and Mexico, and the future of multilateral trade institutions. Featured speakers included Benoit Daignault, President and CEO of Export Development Canada, as well as Brett House, Vice President and Deputy Chief Economist at Scotiabank. Kent Hughes, Public Policy Fellow at the Woodrow Wilson International Center for Scholars, moderated the engaging conversation.

Daignault opened the session by stating that NAFTA has been, by and large, successful in bringing millions of jobs to Canada, the United States, and Mexico, enabling North America to grow to 21 percent of the global economy. Therefore, Daignault proposed, renewed negotiations should seek to accomplish an “evolution, not revolution,” of the current deal because the agreement provides a strong foundation from which to work. In his view, Canada has an opportunity to modernize provisions surrounding intellectual property rights, service industries, and the movement of labor to adapt to the changing global economy. Daignault acknowledged that the U.S. manufacturing sector is facing job losses, but largely due to automation and technology – not an unfair trade deal – and that increasing protectionist policies is not the answer. He stressed that failure to come to a trilateral trade agreement would result in a disruption of the highly integrated continental supply chain, so the “NAFTA-Three” should focus on transparently modernizing the agreement and establishing certainty in the markets to spur entrepreneurship.

In his opening remarks, House pointed out that NAFTA has been renegotiated multiple times before, so re-opening the NAFTA dialogue should be seen as the norm. He stated that trading relationships should not be judged on surpluses and deficits alone and that, overall, NAFTA has been particularly beneficial to the United States. NAFTA is also popular among Canadians, considering that three-fourths of Canadian international trade is with the United States. House laid out the case that NAFTA modernization should focus on harmonizing border operations, easing movement of labor, and expanding services trade across the continent. He added that scrapping NAFTA in favor of a trio of bilateral agreements would increase trade burdens and risks weakening each country’s economy. In his opinion, the dispute settlement mechanism and currency provisions would not be areas of high priority for Canada in the talks, and that currency issues would be better discussed in the multilateral context of the IMF. House expressed optimism that modernizing NAFTA can result in a “win-win-win” scenario, in which Canada, the United States, and Mexico are all better off.

Hughes asked the speakers to discuss what a renegotiated NAFTA should look like and what risks may be associated with revisiting the agreement. Daignault said that his biggest concern was returning to less movement of goods and investments, and a new NAFTA should make it easier for “labor, data, and information to flow.” House agreed that higher mobility of goods and services is key, while still respecting rule of origin requirements. Hughes also asked what North America should do to become more economically competitive as a region. House believed further integration of professional labor and customs arrangements as well as resolution of the healthcare issue in the United States would increase continental competitiveness. Daignault added that improving education and attracting top talent to North America would also elevate its position in the global economy. Both speakers agreed that increased multilateral trade, rather than protectionism, would fuel growth and produce greater economic benefits.

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