Differing Perspectives About NAFTA
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Charest Tells U.S. Think Tank He Wants Beefed Up NAFTA Deal
(Canadian Press)
It's time for Canada to push for closer trade ties to
the United States by creating a better method for resolving cross-border disputes, Premier Jean Charest said on Thursday.
Charest, addressing a prestigious Canadian-U.S. relations conference at
Columbia University, said he wants a liberalized North American trade zone where services and manpower travel more freely across national borders.
The premier told Columbia's American Assembly that
Canada, the United States and Mexico must strengthen and expand the 10-year-old North American Free Trade Agreement.
"I believe the time has come for NAFTA plus," Charest told about 60
academics, former politicians and ex-ambassadors. The premier said the ongoing softwood lumber dispute between Canada and the U.S. has dragged on because the U.S. took advantage of NAFTA's shortcomings to
delay a resolution.
"In NAFTA plus, what we're hoping for is a panel that can bring the parties together so that once a decision is made, it's made," he told reporters following his speech.
"If this had been the case in the softwood file, I think it would have been resolved a long time ago."
Charest suggested Canada will need Quebec's help in persuading the United States to
beef up NAFTA. He said a modernized NAFTA deal would serve as a solid base for an eventual hemispheric free-trade agreement stretching from the Arctic to the southern tip of Argentina. Discussions to set up
the hemispheric trade zone have stalled.
The premier also suggested Canada and the U.S. might reach a series of agreements on manpower mobility and immigration that will also help continental security
-- if a grand new free trade agreement is not reached.
"I believe we will succeed in solidifying Canadian-American relations, with a better framework." Charest also said Canada needs to
"forge a common cause with our Mexican ally" to balance the power of the United States in a strengthened trade deal.
Charest, who was part of the Conservative government that signed the original
Canada-U.S. Free Trade Agreement in 1988, stopped short of suggesting full integration, including a common currency, along
the lines of the European Union.
"Frankly, I have seen no interest of this type of arrangements in the United States," he said. Charest said further economic integration could give residents
of the three countries a new continental identity. The cultural shift would lead to even further integration, he suggested.
"If a European-style political union is out, we may still gradually
develop a North American community in which citizens of the three countries see themselves more and more as North Americans, in addition to being Americans, Mexicans or Canadians. And Quebecers."
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North American Trade Integration Slipping, Says Scotiabank Economist
(Canadian Press)
North American producers are increasingly looking
beyond the continent for growth opportunities and for a source of cheap inputs and final goods, according to the latest NAFTA Quarterly, released today by Scotia Economics.
"A fundamental shift
in the dynamics of global trade is under way, driven by massive currency realignments and by the rising importance of China and other low-cost nations on the international stage," says Adrienne Warren,
Senior Economist, Scotia Economics. "While the biggest impact of the rise in Chinese trade has been on other economies within Asia, the repercussions are being felt globally."
North American
producers, for their part, have piggybacked on the revival in industrial activity and rising commodity prices. By late-2004, export levels in both Canada and the United States had essentially returned to
their late-2000 peak, and had surpassed this mark in Mexico.
"The details of these trade flows tell another story, with the gains unevenly distributed by NAFTA partner," adds Warren. While
rising sales of raw materials and industrial supplies are supporting overall Canadian shipments, exports of manufactured goods have fallen 4 per cent over the past two years, as producers of industrial
machinery, business equipment, autos & parts and consumer goods have all seen their sales decline. Canada benefits from an abundance of natural resources, but is at a competitive disadvantage to
lower-cost nations when it comes to labour-intensive manufacturing, a situation exacerbated by the 30 per cent appreciation of the Canadian dollar vis-a-vis the U.S. dollar since the start of 2002.
In contrast, U.S. and Mexican exports of manufactured goods have both risen by more than 10 per cent over this period. The 25 per cent decline in the trade-weighted U.S. dollar since early 2002, consistently
strong productivity gains and an export base heavily geared toward high value-added goods have all contributed to the enhanced competitiveness of U.S. producers. At the same time, Mexico's position as North
America's lowest cost producer has been reinforced by the almost 20 per cent decline in the peso against the greenback - and 40 per cent against the loonie -- over the past three years.
According to
the report, there is also a major shift under way in the regional pattern of NAFTA trade. In both 2003 and 2004, exports between the three NAFTA economies grew more slowly than their exports with the rest of
the world, reversing the trend of the prior decade. Intra-NAFTA exports as a share of total NAFTA exports totalled 55 per cent in 2004, down slightly from a peak of 56 per cent in 2002.
On the other
side of the ledger, there has been an even larger displacement of regional imports in recent years. Intra-NAFTA imports as a share of total NAFTA imports has fallen from 39 per cent in 1999 to 36 per cent in
2004. This import substitution in favour of lower-cost suppliers mirrors a broader trend by North American firms to relocate production sites or to 'offshore' back-room operations to developing nations,
China and India in particular.
For Canada and the United States, the degree of trade interdependence between the two countries has been declining since the beginning of the decade, and has now fallen
below pre-NAFTA levels. Canadian trade (exports and imports) with the United States as a share of all Canadian trade totalled 74 per cent last year, down from a peak of 77 per cent in 1999. The corresponding
Canadian share of U.S. trade slipped from 21 per cent to 19 per cent over the same period.
The close economic ties between the NAFTA partners will no doubt continue. Yet the challenges are also
clear, especially for Canada and Mexico, which are heavily dependent on the U.S. market. At the same time, the modest de-linking in North American trade can be seen as an opportunity for exporters and
importers alike.
North American producers have access to a more diversified and dynamic international export market. And the ability of North American manufacturers to secure a source of low cost
inputs is also expected to become increasingly important as emerging market exporters move up the value-added ladder and broaden their range of product penetration.
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