Monday, January 15, 2018

The End of NAFTA?

Donald Trump has stated that he may just invoke the withdrawal clause of the North American Free Trade Agreement (NAFTA).  Something he said he would do during the 2016 US elections.

That has frightened more than a few of the ruling class in this country.  They have not begun to preach doom and gloom about it because doing so will not swing Donald Trump one way or another.  It would be different if someone in Canada was making these statements.

So, would the ending of the NAFTA really be that big of a deal?  Probably not.

Free trade existed between our countries before the NAFTA and it will continue to exist after it is gone.  At the time the NAFTA was ratified in North America over 85% of the trade between Canada and the United States occurred without any government interference.  The NAFTA and the previous Free Trade Agreement were designed to create free trade for the remaining 15%.  Since then the amount of trade that now takes place without any government interference is greater, although not as much as the NAFTA proponents would have us believe.  It is now around 90%.  

In other words the impact of the NAFTA on the Canadian economy has not been that great and its demise would not be such a disaster for the Canadian economy.  Certainly, those sectors of the economy that are most vulnerable to American protectionism would suffer somewhat but over all things would proceed pretty much as business as usual.

In fact, there might even be some hidden benefits to the end of the NAFTA. With the NAFTA, an individual company can sue the Canadian government if it believes that a government is pursuing policies or laws that interfere with the ability of that company to sell its goods or services in Canada.  In effect, that has hamstrung Canadian governments when they might have wanted to pass more strigent environmental, labour, health and safety laws and regulations.  Further, the more conservative elements of our society have been slowly eroding our single payer health care system and the more progressive elements of our society have not been able to reverse them because once a part of the health care system was privatized it became subject to the NAFTA.  So, reversing the privatization was impossible because American or Mexican firms could sue a government, under the NAFTA, to prevent it.

Without the NAFTA progressives in this country would have more freedom to reverse some of economic policies and laws pursued by conservatives without having to worry about running afoul of the treaty.

Which brings me to one of the reasons why the ruling class in this country is so frightend of the end of the NAFTA.  I am certain they realize that the actual negative impacts on the Canadian economy would be manageable.  What really frightens them is some progressive government may just decide to use its new found freedom in ways that they would not like.

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