The winners and losers if NAFTA talks fail

OTTAWA, ON. (NEWS 1130) – With the latest round of NAFTA talks wrapping up last week in Montreal, Canada’s Foreign Affairs minister says there are gaps, but Chrystia Freeland is “cautiously optimistic” the trade deal with the US and Mexico can be successfully renegotiated.

However, it’s fair to question what might happen to Canadian industries should the talks fail.

There will be winners and there will be losers, but David Detomasi with the Smith School of Business at Queens University says one column would be a lot longer than the other. “If they fail, the losers will be just about all of them. The biggest one for Canada’s sake will be automobiles.”

And that’s if the US continues to push for higher American-made content in automobile manufacturing.

Detomasi adds agriculture might also be a loser because of US demands to liberalize how the Canadian system is managed. “In order for the talks to proceed, they’re putting a lot of demands on us too that relies how we manage our agriculture system and I don’t think we’re going to want to do that.”

He says that any industry which depends upon an integrated supply across the US border — and that’s a lot of them — would be hurt in some way if NAFTA talks fail.

“How are we going to attack some of the newer markets of the future that are supposed to be growing, and are growing, but we’re not in them as much as we could. These are the big emerging markets, particularly China and some others that are emerging to be big players in the global economy. We need to be looking at them a little bit more because we’re too comfortable just looking at the US.”

Economic impact

A forecast on NAFTA says extending negotiations into 2019 would prolong uncertainty for the Canadian economy and trim anticipated growth.

Scotiabank estimates the lingering doubts would shave 0.2 percentage points off Canada’s potential GDP, while the bank projects the country would still see modest economic growth of 2.3 per cent on the year.

The timing question is increasingly relevant.

With serious negotiating on the hardest issues just barely begun, and national elections in Mexico and the US later this year, conversations are turning to what might happen when the current schedule of talks concludes in March.

One scenario involves the talks slowing down, then picking up again after the American congressional elections and after a new Mexican president has taken office in December.

Scotiabank says the ongoing efforts to renegotiate and modernize NAFTA look set to extend beyond the current end-of March deadline.

It says difficult issues remain unsettled and the remainder of 2018 features a packed political calendar that could delay further talks.

It echoed roughly identical findings from the Bank of Canada.