Trade Compliance

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Canada Playing a “Weak Hand” in NAFTA Talks, According to Business Group

Posted July 31, 2017


In an op-ed piece appearing today in Canadian Investor and other publications, a top official with the Business Council of British Columbia warns that Canada enters renegotiation of the North American Free Trade Agreement with a “rather weak hand” and urges policymakers to pay more attention to various factors that are hampering the country’s export economy.

Noting that Canada represents just 8% of all combined economic activity across the NAFTA region and that natural resource products (energy, minerals, metal ores, forest products, and agri-food and fish) still account for the vast majority of Canada’s $521 billion in merchandise exports, BCBC Executive Vice-President Jock Finlayson says “Canada’s position as NAFTA renegotiations begin is compromised.”

Finlayson explains how this is so by describing what he calls a number of “hard truths” about Canada’s trade performance that when taken together, he says, provide “a sobering backdrop” as the talks to overhaul NAFTA get underway:

The first hard truth about Canada’s trade… is our disproportionate reliance on a handful of industries to sustain the export economy. Most other advanced economies – the U.S., Britain, Germany, France, the Netherlands, even Italy – exhibit greater product diversity in their export mix.

The second hard truth is the marked concentration in the countries we trade with. In 2016, 75 per cent of goods exports were shipped to the United States; at the same time, the U.S. supplied two-thirds of our merchandise imports. America is also the final destination for 55 per cent of Canada’s exports of services – a fast-expanding part of our overall trade.

The final hard truth centres on Canada’s lacklustre trade performance. Exports of goods have grown only modestly since the middle of the previous decade, reflecting not just shifts in commodity markets, but also an erosion of Canada’s relative competitive position across a swath of manufacturing and natural resource industries.

Finlayson concludes by stating that considering our over-dependence on the U.S. market “at a time when protectionist sentiment is on the rise there” together with concerns about Canada’s ability to attract business investment and the “high-value” jobs that go with it, “policy-makers at all levels need to pay more attention to the challenges weighing down the Canadian export economy.”

Although Finlayson doesn’t shed any light on the specific nature of the critical issues that need to be addressed, a Business Council editorial from last year titled “How Canada can put its economy back in gear” is perhaps instructive in this regard.

For a more comprehensive analysis of the country’s recent economic and trade performance, at the start of July, the Trudeau government published the 2017 edition of Canada’s State of Trade.