Canada's view: Why it's in America's interest to save NAFTA from Trump

by Joseph N. DiStefano, Philadelphia Inquirer

The neighbors stopped by last week, and said it’s time we North Americans talk.
“We practically live together,” says Perrin Beatty, the industrialist who heads Canada’s Chamber of Commerce, and was the nation’s foreign minister when his Conservative Party was in power.

Take that TD Bank down the road. The “T” is for Toronto, where it’s based. Suncor, Canada’s oil giant? Born in Philly, where it grew out of Sunoco. U.S.- and Canada-built cars are full of parts shipped across the Great Lakes and back. Canadians supply more stuff to U.S.-based Home Depot alone than they sell to France. And the United States sells more to Canada than it buys.

“It’s an easy relationship,” said Phyllis Yaffe, the broadcast producer who runs Canada’s consulate in New York. Like Beatty, she has a sister who lives in the U.S.

But that cozy relationship is in danger, the pair told me, stopping by Philly en route to Washington, for the latest round of talks renegotiating the North American Free Trade Agreement — which helped negotiate in the 1990s, and which President Trump and Democrat Hillary Clinton blamed for U.S. unemployment in last year’s bitter election.
In the ensuing talks, the Trump administration has introduced many “measures that are unacceptable to the U.S. business community, let alone the Canadian and Mexican business communities,” Beatty told me.

Trump’s negotiators, he said, want to block cheaper imports in hope of reviving old-fashioned home industries and reopening long-gone factories — like King George III, whose similar attempts to favor his home producers stoked our War of Independence.

Canadians don’t threaten war; they hope to bring us to our senses. Beatty says Trump wants to impose tariffs that would make imports expensive for American consumers. U.S. negotiators want a “sunset clause,” making rules temporary and discouraging cross-border investment. They want to strictly measure U.S. auto parts in cars, limiting Canadian and Mexican parts. Beatty called that “wholly unworkable,” given today’s “deeply integrated and highly efficient” supply chains. The administration also wants U.S. courts, not trade-partner panels, to rule on our trade complaints, and would end Canadian sales to U.S. government agencies, driving up costs for U.S. taxpayers.

The Canadians see U.S. business as an ally. On his web site, U.S. Chamber president Thomas Donahue warns of a dystopian post-NAFTA economy: “The U.S. unemployment rate is climbing. Crops in the heartland are rotting. Manufacturers are moving abroad. Consumer prices are rising.”

If NAFTA goes down, the U.S. loses and China wins, Beatty said: “The North American industrial base is…  facing burgeoning competition from Asia and elsewhere. We need to source affordable inputs from the U.S. and Mexico. That’s what keeps our employers in business. If you drive up the costs of production by reinstating tariffs, you will be less competitive. Trade creates economic growth. If we had to compete without you, it would drive companies out of business — ours and yours.

“We wouldn’t all go away if NAFTA disappeared. But growth, and substantial numbers of jobs, would,” he said. “If you displace North American products, who fills the gaps? The Chinese.”

What motivates Trump? “It’s more ideological than a case of any sector or industry lobbying,” Beatty responded. “The president ran against NAFTA. It was used as a symbol.”

The real cause of change is capital investment in more efficient technology, Beatty said. That has removed many jobs in traditional sectors. “They are looking for someone to blame.”

But hasn’t foreign trade wiped out many small industries?

Beatty should know: His family used to manufacture farm equipment in a small town west of Toronto. Nearby towns made clothing, competing with makers in North Carolina and East Asia.

Those factories are gone, but they were doomed even without a trade agreement, Beatty said, while his old Parliament district has prospered: “Small manufacturing has given way to an explosion of technology. Now those towns — Kitchener, Waterloo, Guelph — they have information economies. [The firm that made the] BlackBerry is from Waterloo. The people who ran it have spawned new start-ups. They have become much more diversified and several times larger. The transition wasn’t easy for my family. But we are now doing what is sustainable, given the natural evolutions that have taken place. We are part of the future.”
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Kill NAFTA and you force the Canadians and Mexicans to sweeten trade deals with China, Beatty reiterated. “It’s seductive, to want to protect your native industries. But at the end of the day it is destructive to growth. You erect walls, and it makes it more difficult for businesses to serve each other. To invest. For people to be mobile — to work in each other’s countries for short periods, as you often do, in manufacturing and in collaboration. Unfortunately, when you get simple quick fixes, they are often wrong.”

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