Several weeks have passed since Donald Trump was elected President of the United States of America, and in that time, we have seen a very different and sometimes unpredictable version of the person we saw on the campaign trail, having reversed several of his most extreme positions; for example, the wall might be a fence, parts of Obamacare are worth keeping, and some undocumented immigrants will be able to stay, to name a few.
Trump’s stance on trade however is likely to be firmly positioned. Trump argued during the campaign that trade policies unfairly targeted American workers. How he maneuvers during his tenure as President is likely to have consequences for Canada, and by extension, our cities.
Long before Trump decided to “get ISIS” or “lock up Hillary”, he had been vocal about unfair trade practices that “rip off” American industries. His favorite target was China, with whom the US has a $365 billion trade deficit.
That number pales in comparison to the trade figures for America’s largest trading partner, Canada. In 2015, the total amounts of goods exchanged between Canada and the US was valued at more than $662 billion. By comparison, Mexico and the United States exchanged $583 billion in goods. While the US enjoys a $12 billion trade surplus with Canada, its trade deficit with Mexico was $50 billion.
Trade in North America is subject to the North American Free Trade Agreement (NAFTA), which Trump singled out during his campaign. “NAFTA is the worst trade deal maybe, ever signed, anywhere.” he proclaimed on nationally televised debates. Trump called for either abandoning, or a “total renegotiation” of NAFTA saying, “We intend to immediately renegotiate the terms of that agreement to get a better deal for our workers. If they don’t agree to a renegotiation, we will submit notice that the U.S. intends to withdraw from the deal.”
Donald Trump has not clearly defined his position between how he sees free-trade with Canada so much as he has with Mexico, but the reality is that the deal covers the entire continent, and a renegotiation of NAFTA affects Brampton directly.
According to the Brampton Board of Trade, Brampton sees roughly $6.7 billion in goods sold to the US. Since NAFTA was signed in 1994, business between Brampton and the US tripled. Over 420 Brampton companies export to the US, and they consider the US to be their most important trading market, responsible for over 34% of their sales.
Over 23,400 Brampton residents work for companies in Brampton that export to the US, representing an estimated payroll income of over $1 billion.
Todd Letts, CEO of the Brampton Board of Trade says that NAFTA “has resulted in company starts, more jobs and healthy incomes for thousands of Brampton residents.” He adds that it has “contributed significantly to our regional economy and supply chain, provided property taxes to build needed infrastructure and made significant contributions to many of our community amenities.”
Letts sees potential opportunities in a NAFTA renegotiation. He points out that supply chains in North America are “highly integrated” and that both sides in the deal heavily depend on one another, and that “attempts to unbundle it will be hard to do without hurting American jobs.” For this reason, he believes that re-visiting the deal is “an opportunity in that it reinforces the understanding of the magnitude of the market opportunity for businesses on both sides of the border.”
Trump may demand and win concessions from Mexico which would also apply to Canada. Prime Minister Justin Trudeau has expressed publicly that he too, is willing to look at the deal, likely to gain a better deal in areas like softwood lumber, better arrangements for dairy farmers, and labeling of beef products.
For its part, there are things that Brampton should be doing to become more competitive in a globalized economy. Letts recommends that the City should invest more in Canada’s Trade Commissioner Service, a service hosted by Canada’s government, that helps companies that are looking to export, invest abroad, attract investment abroad or develop innovation and R&D partnerships. Doing so would help Brampton to diversify to other major markets like Europe and Asia.
When asked about the risks, Todd Letts points to uncertainty as potentially dampening business confidence: “Businesses don’t like uncertainty. If European companies were considering setting up shop in Brampton, to best access the US, they may hesitate or delay investment decisions, until there is more certainty in Trump’s thoughts on the free-trade arrangement between Canada and the US.” He added, “There’s always the risk that trade with the US will get more expensive or more complicated.”
“However, there is very little risk that specific products won’t have access. Our products are in demand.” says Letts.
Donald Trump is scheduled to take the Oath of Office on January 20, 2017, and is making preparations by assembling his cabinet and advisors. His recent pick of Wilbur Ross, a billionaire investor and critic of NAFTA, will become his Commerce Secretary. Their first goal is likely to begin to reduce America’s trade deficit with China, but in due course, the new Donald Trump administration will hopefully make clear just exactly what it is about NAFTA that they would like to change.