The reality of renegotiating NAFTA

From Ontario Chamber of Commerce Trade Survey

​Round Six of NAFTA negotiations has wrapped up and a quick scour of the landscape concludes a much more positive tone was achieved between negotiators from Canada, United States and Mexico.
That said there is more work to be done Canadian Chamber has been informing the dialogue since the beginning of the process and offers this insight:

“NAFTA Modernization is a reasonable goal: It’s a fact that NAFTA was negotiated more than two decades ago.

How to Modernize
We need to keep a few guiding principles in mind in order to succeed:

• Pursue a True Modernization of NAFTA. A NAFTA for the 21st century must maintain and reach beyond current benefits. Companies of the three countries will benefit from a renewed positioning of North America as the world’s most competitive region.
• Reduce Uncertainty. Uncertainty about the future of North America’s terms of trade could weaken growth and investment, undermining our competitiveness as a region. NAFTA negotiations must continue on a steady timeline and backed by political leadership until a win-win-win deal is achieved.
• Keep the Agreement Trilateral. Maintaining NAFTA’s three-party framework is critical as transitioning to entirely new bilateral agreements presents real risks. Such a transition could disrupt the flow of commerce and cost jobs. Also, moving to divergent rules would add to costs for companies and erode their global competitiveness.
• Ensure a Seamless Transition.  Interrupting the $1.3 trillion in annual trade across our borders or reverting to the high tariffs and other trade barriers that preceded NAFTA could put at risk millions of jobs that depend on trade within the region. A modern NAFTA should retain the existing benefits that our businesses depend on. This approach would simplify and expedite the process and minimize the risk of disruption.”
  
  

The Ontario Chamber of Commerce (OCC) recently released the findings of a survey of Ontario businesses conducted December 15, 2017 - January 15, 2018. The results show:

• The survey had a very strong response rate of over 260 responses and a completion rate of 88 percent.
• The top three response industries were retail (18%), manufacturing (17%) and professional services (14%).
• The survey notes that 15 percent of the respondents have begun contingency planning for possible changes to NAFTA, including exploring new markets, moving operations to the US, forecasting price increases of goods and shutting down businesses.

Comments to the OCC from the manufacturing sector included:

• Any changes or new approaches to NAFTA with regard to automotive tariffs would have to consider the role tariffs would play in businesses staying in Canada.
• Businesses that have companies in both the United States and Canada are concerned that changes to NAFTA would result in goods and services provided by the United States company attracting additional costs in the forms of tariffs and duties.
• Equipment price and availability are a concern to many businesses should there be any changes to NAFTA.

From the agriculture industry comments included:

• The grape and wine industry in Canada must be protected.
• Some businesses that work primarily with dairy farmers are already witnessing financial institutions starting to withdraw investments made in the dairy industry.
• There is a strong need to preserve supply management for agricultural products in Ontario.

The latest round of negotiations included discussion around automobiles, dispute resolution and the proposed review clause.   

​Round 7 of negotiations will be in Mexico starting on February 26th.