7. Canada and the United States 7.1. The Canada-US Relationship 7.2. Trade and NAFTA 7.3. Defending North America 7.4. North American Security and Terrorism

7. Canada and the United States

7.1. The Canada-US Relationship7.2. Trade and NAFTA7.3. Defending North America7.4. North American Security and Terrorism7.5. Sovereignty and the Arctic

7.1. The Canada-US Relationship

• Blessed and cursed by geography? • Diplomatic• Trade• Social and cultural links• Common Infrastructure• Security and defence

7.2. Trade and NAFTA


• Two way trade between Canada and the US totaled approximately $710 billion in 2008

• Two way trade across the border is valued at approximately $1.9 to $2.2 billion per day

• Canadian exports to the US accounted for 76% of all exports in 2008

• Canadian exports to the US generated 26% of Canada’s GDP in 2007

• US investment in Canada in 2007 totaled approximately $289 billion (57.6% of total)

Exports of goods ($ millions)

2001 2003 2005 2007 2008

Exports 420,657 400,010 453,060.1 465,408.6 489,740.5

US 352,083 330,375 368,577.3 355,475.7 369,758.8

Japan 10,124 9,785 10,470.5 10,094.6 11,874.3

UK 6,912 7,697 9,683.2 14,762.6 14,242.1

Other EU 16,712 16,420 19,206.8 24,840.6 25,408.0

Other OECD 16,712 12,668 15,245.5 20,490.5 21,078.5

ROW 22,695 23,062 29,876.9 39,744.4 47,378.7

Imports of goods ($ millions)2001 2003 2005 2007 2008

Imports 350,682 341,832 388,210.3 415,711.5 442,567.0

United States

254,949 239,870 259,783.3 270,319.8 280,590.2

Japan 10,572 10,644 11,214.3 11,975.1 11,614.9

UK 11,952 8,826 9,061.6 9,955.2 11,088.5

Other EU 23,197 25,982 29,285.6 32,460.6 35,431.0

Other OECD

18,645 19,676 24,308.8 25,010.1 27,604.6

ROW 31,365 36,831 54,556.1 65,990.7 76,237.9


Changes in Trade Policy


Signed: 17 December 1992In force: 1 January 1994


Signed: 17 December 1992In force: 1 January 1994

The NAFTA Debate

The NAFTA Debate

The case for NAFTA:• Secure access, avoid the “hub and spoke” model• Increase trade• Increase investment• Preserve right to regulate• Stimulate innovation• Good for Canadians• Free trade not the source of economic troubles

The NAFTA Debate

The case against NAFTA:• US economy in decline• NAFTA part of the neoliberal economic agenda• Negative impact on workforce• Loss of economic sovereignty• Loss of cultural autonomy• Weak environmental provisions• The “slippery slope”


NAFTA Provisions (22 Chapters)– Eliminates all tariffs on trade in goods

(exemptions)– Liberalizes trade in services and government

tenders– Investment protection (the notorious Chapter 11)– Intellectual property protection– Protection of right to adopt health,

environmental, and safety standards


NAFTA Provisions

Parallel Accords on Environmental and Labour Standards:

North American Agreement on Environmental CooperationNorth American Agreement on Labour Cooperation


NAFTA Provisions

Parallel Accords on Environmental and Labour Standards:North American Agreement on Environmental ProtectionNorth American Agreement on Labour Cooperation

Dispute Resolution MechanismFree Trade Commission; Arbitral Panel; Scientific Review

Panel


Evaluating CUSFTA, NAFTA, and “Free Trade”

Overall assessmentWho benefits? Who does not?Is CUFTA/NAFTA the only variable?

Evaluating Free Trade

Trade • Between 1989 and 2002, Canadian exports rose by 221

percent, and imports by 162 percent• Exports rose from 25.7% of GDP in 1989 to 45.5% of GDP in

2000. Imports increased from 25.7% of GDP in 1989 to 40.3% in 2000.

• Between 1985 and 2002 US-Canada trade grew from US$116 billion to US$420 billion

• The US became a larger market for Canadian manufactured products than the Canadian market (53% of manufactured products exported to US)


Investment • Between 1996 and 2002 C$ 102 billion in investment

came to Canada from the US• The stock (or share) of US investment in Canada rose

from 12% of GDP in 1989 to 20% of GDP in 2001• US investment in Canada fell as a percentage of total

foreign investment in Canada (from 70% in 1989 to 65% in 2001)


Industrial Productivity • Huge manufacturing transition: 47% of all plants in

existence in Canada in 1988 (accounting for 28% of all jobs in Canada) had closed by 1997. Meanwhile, 39% of all plants in Canada in 1997 (21% of all jobs) did not exist in 1988.

• Productivity did increase by 14% per hour (but rose by 52 percent in the US and 53 percent in Mexico), so relative gains did not materialize


Jobs and Wages • Huge layoffs in 1989-1991: in the manufacturing

sector, one in five workers lost their jobs• Canadian Centre for Policy Alternatives tracked

largest 47 Canadian corporations after FTAs: 11 increased jobs (28,073) 36 cut (216,004).

• The workforce of 39 corporations was cut by 100,000 (14.5 %) in the years following NAFTA

• Unionization rates in manufacturing declined from 45.5% in 1988 to 32.4% in 2002


Access • Still many trade disputes and the US still uses

its legal system to harass and penalize Canadian exports

• Dispute mechanism has no enforcement capacity, and disputes take years to resolve


Social Issues • Canadian social model remains different in social

support, health care, insurance, education• However, there has been some convergence

between the US and Canada in some social indicators• While Canada still spends more on social programs

and public services relative to the US, the gap has been narrowing

• Income inequality has risen in Canada


Canada – US Trade Disputes:– Agriculture (wheat, sugar, dairy products,

potatoes)– In 1997 Ethyl Corp (MMT)– In 1998 S.D. Myers (PCBs)– Sun Belt Water (water exports)– In 1998 Canadian Loewen Group – In 1999 Methanex (MTBE)– Softwood Lumber


The Softwood Lumber Dispute–At issue since 1982: subsidies– The 1986 dispute– The 1996 SLA (expired 2001)– The 2001 dispute–2003-2005 NAFTA and WTO rulings– July 1 2006 SLA


Provisions of the 2006 SLA:– Seven year agreement (can be terminated

after three years)–US returns 4 billion in subsidies–Ban on further US trade actions against

Canada–Restriction on Canadian SL exports if prices

fall below certain levels


The Future of NAFTA• Future of North American trade now linked to the

North American security• Widening of membership?• Renegotiation?• A Customs Union?

Documents

7. Canada and the United States 7.1. The Canada-US Relationship 7.2. Trade and NAFTA 7.3. Defending North America 7.4. North American Security and Terrorism