Beware of trade xenophobia

What’s going on out there with global trade? Seems some parts of the developed world are becoming insular and a bit crazy.
Britain goes Brexit, thus tossing a spanner into the workings of the CETA deal and setting itself up for some economic hardship, while closer to home there are two US presidential nominees who are donning protectionist armour and slagging NAFTA.

This is a troubling development that could have serious ramifications for Canadian manufacturers, many of whom are part of the intricate supply chains that feed North American commerce.

On the Republican side, we have the Donald Trump-branded reality show actor, and he’s telling his people NAFTA is a disaster. He’ll rip up the agreement with his tiny hands if he can’t renegotiate it. And he’ll bring back all those manufacturing jobs lost to China and Mexico, evidently by magical means because details related to how he plans to reset the flow of global commerce are at best, sketchy.

On the Democratic side, Hillary Clinton is also sour on NAFTA, the trade deal her husband President Bill signed in 1993. She too believes it has been bad for America. Jobs have disappeared and companies moved offshore to cash in on cheap labour so she wants to renegotiate.

Street level, Canadians are ambivalent about the benefits of continental free trade. An Angus Reid Institute poll found about 25% of respondents believing NAFTA has benefited Canada; an equal number say it has hurt the country; 34% say it should be renegotiated; and 9% want it ripped up.

Yet North American free trade has demonstrated it expands markets and opportunities. Trade circa 1993 was $288 billion. In 2014 it topped $1.12 trillion. Canada has seen investment from the US and Mexico triple since 1993. And the Council on Foreign Relations reports US investment in Canada grew from $70 billion to $368 billion in 2013. The US think tank also tallies the number of US jobs that rely on trade with Canada and Mexico at 14 million, and 250,000 export-related jobs are created annually, which pay 15% to 20% more on average than jobs lost.

But that’s cold comfort to the many thousands of workers who have seen plants close, production moved and jobs lost to countries where labour is cheap. It’s their disgruntlement and the pain they’ve experienced from the dynamics of trade flow that fuel this election year hostility.

Who knows what will happen to NAFTA when the US picks a president. Some pundits expect the political heat will dissipate, although the Trans-Pacific Partnership (TPP) may be in for a rough ride.

Both candidates are against the TPP, which is an odd place for Hillary to be since she was involved in the negotiations during the early innings. Even Prime Minister Justin Trudeau, whose Liberal government has signed on, is being coy about how “done” this deal may be when he suggests the people should have their say before it’s implemented.

The North American and Europe markets, though lucrative, are mature. Real growth beckons from beyond.

Canadian Manufacturers & Exporters wants to double manufacturing and exporting output by 2030, so it sees this agreement, which opens access to 40% of the world economy, as a good way to accomplish that goal.

Escalating trade xenophobia will not make life better for workers or manufacturers. Falling back to tariffs and trade retaliation will impede opportunities, growth, jobs and better wages. History and experience have demonstrated there’s not a lot to see looking inward.

This article appears in the September 2016 issue of PLANT.