Should Canada revisit its trade agreement with the U.S. and Mexico?
The recent United States election has, if we phrase it diplomatically, evoked many questions about the North American Free Trade Agreement (NAFTA), which exists between the U.S., Mexico, and Canada.
It’s already been in effect for over 20 years, and is based on the numerous previous agreements between Canada and the U.S. It took a long time to negotiate the conditions, but since 1994 all three North American nations exist within shared economic space, somewhat equivalent to the European Union (EU) trade space.
Though the discussion may be surprising, Canada should not be afraid of changes to NAFTA, even if they might seem frightening. We shouldn’t necessarily be afraid of president-elect Donald Trump’s economic plans yet, as there is no guarantee that he will follow his election platform. And even if he does push to renegotiate NAFTA, it won’t be as detrimental to Canada as it seems at first blush.
The significant advantage of NAFTA is that it creates a united market where intellectual property can be protected and finances can be exchanged easily. From the idealist viewpoint, it also provides more opportunities to earn and invest, developing the investment rating of the North American states.
This free trade agreement also technically should protect the market against monopolies, which would ensure that the market would not be dominated by any internal or external forces.
However, there are also some problems with the trade agreement.
The most significant disadvantage of NAFTA is exactly the same reason why so many residents of the United Kingdom voted to leave the EU during the Brexit referendum.
Many small producers are frightened that the cheaper and more available goods will flood the market with the establishment of the free international trade. They want to protect their status and secure their income by means of tariffs or other barriers to free trade.
This opinion may not be widely shared, but it has certainly garnered enough followers to endorse anti-globalist movements and promote protectionist legislature. Another argument against NAFTA is that, in comparison with the EU agreement, it was not endorsed by the states firstly, but by big corporations instead.
This could easily trigger an anti-corporate sentiment, which again, is not shared by everybody, but is at least understandable. Lately, these opinions have started to gather support, considering the recent scandals involving U.S. based corporations like Nestlé.
So what should be the decision on NAFTA in Canada? As we know, Prime Minister Justin Trudeau said pretty explicitly that he is willing to discuss the benefits of NAFTA with Trump.
The current economic instability of the whole world is a clear indicator that NAFTA is here to stay in the short term, as an oil-dependent region like North America does not need more volatility.
But now that Canada and the EU have established a free trade agreement, the overall situation could change significantly.
Canada’s agreement with the EU means that the Great White North is now integrated into a way bigger market with a totally different selection and quality of goods. This means that a change in NAFTA wouldn’t be as dire for Canada as it seems.
With the current world being in such a state of economic instability, where every change seems significant compared to the relatively stagnant past 15 years, maybe it’s a time for a new era of trade agreements.