Canadian anxiety over Donald Trump‘s plan to renegotiate the North American Free Trade Agreement (NAFTA) was somewhat lessened by the US President’s comments on Monday that Mexico, and not Canada, is the problematic partner in the trilateral pact.
At a news conference with Canadian Prime Minister Justin Trudeau following their first face-to-face meeting at the White House, Trump told reporters that his administration would be “tweaking” NAFTA as it relates to Canada – with whom the United States has a “very outstanding trade relationship” – but that it also plans to “work with Mexico” to make the continental trade agreement, which came into effect in 1994, “a fair deal for both parties.”
Trump called the Canada-US trade relationship “very outstanding” and said that “we’ll be doing certain things that are going to benefit both of our countries,” but offered no further details. Trudeau and his Cabinet ministers have offered no comment.
There are also concerns in Canada about a border-adjustment tax, championed by Republican Paul Ryan, Speaker of the House of Representatives.
A report issued on Tuesday by Canadian think-tank C.D. Howe Institute warned that the 20 percent border tax would hit Canadian exporters to the United States hard and reduce Canada’s economic growth by nearly a full percentage point.
The good thing for Canada is that Trump has said the proposed tax is “too complicated” and major American retailer, such as Wal-Mart and Target, oppose the tax since it would raise consumer prices.
If the tax proceeds, Canadian Foreign Affairs Minister Chrystia Freeland told US Secretary of State Rex Tillerson last week in Washington that Canada would “respond appropriately.”
But Canada doesn’t want a trade war with the US, and would rather highlight the benefits the US received from its cross-border economic relationship as Canadian Finance Minister Bill Morneau did in the American capital last week.
He told an audience at Georgetown University that 35 out of 50 American states count as Canada as their top export market, and 13 other states have Canada “in their top three.”
According to 2015 Canadian government figures, nearly 700 billion US dollars in goods and services were traded between Canada and the US, which represented daily cross-border trade amounting to 1.9 billion US dollars.
In a joint statement issued on Monday, Trump and Trudeau said they shared “the common goal of strengthening the middle class,” and would continue their bilateral “dialogue on regulatory issues and pursue shared regulatory outcomes that are business friendly, reduce costs, and increase economic efficiency without compromising health, safety, and environmental standards.”
However, following the leaders’ news conference, Canadian Official Opposition Leader Rona Ambrose said her “biggest concern” was that Trudeau’s plan to increase taxes in Canada while Trump lowers them in the United States is “going to make it easier for President Trump to steal jobs out of Canada.”
Ambrose, the interim leader of the Canadian Conservative Party, also believes Trump’s plan to tweak NAFTA will have a direct impact on Canada’s agricultural sector – specifically on the supply management system that allows Canadian farmers to negotiate the price of milk, eggs and poultry, and sets quotas for how much of these products can be imported into Canada.
The head of a national lobby group that promotes innovation in Canada told Xinhua that while “a tweak is far better than a rewrite” of NAFTA, tinkering of the trade agreement could put at risk technological research and development in Canada and US market access for Canadian technology, which are already vulnerable under Trump’s America First agenda.
“Most of the venture funds Canadian technology companies receive come from the US and we don’t want anything to touch that money or the US market, which is typically the first sale and the starting point of global expansion for these companies,” said John Reid, president and CEO of the Ottawa-based Canadian Advanced Technology Alliance, which represents over 1,000 Canadian high-tech companies and entrepreneurs.
Yet there may be good news for Canadian firms specializing in cyber-security. The joint US-Canada statement commits to further cross-border cooperation to enhance critical infrastructure security and cyber-incident management.