NAFTA, Trump and Canada - McCarthy Tétrault€¦ · 26/10/2017 · Microsoft PowerPoint - NAFTA_Renegotiation_McCarthy_Seminar_20171026.pptx Author: mkramarz Created Date: 10/30/2017

McCarthy Tétrault LLP / mccarthy.ca

NAFTA, Trump and Canada:What does it mean for your business?

McCarthy Tétrault Advance™, October 26, 2017, Montréal

The Honourable Wayne G. Wouters, H. David Plunkett,

Simon V. Potter and John W. Boscariol

2


Friendly Neighbours.Sorry: Neighbors.¬ Enduring friendship

¬ Astonishing history of cooperation

¬ Longest peaceful border

¬ Bilateral cooperation on many fronts

¬ A commitment to the rule of law

¬ Two very integrated economies

3


NAFTA has been enormousgrowth in business

4


Sure, there are differencesand there are disputes¬ Softwood Lumber,

¬ Boeing AD/CVD complaint againstBombardier,

¬ New USA complaint to WTO re BritishColumbia régime for retail sales of wine,

¬ And renegotiation of the most successful freetrade agreement in history, under the threat ofits possible disappearance.

5


But remember the happycontext¬ Enormous trade, both ways

¬ About $2 Billion of goods and services cross theCanada-US border every day!

¬ The same is true for the Mexico-US border!

¬ Relatively balanced trade

¬ Over the past two decades, China has generated morethan a third of the U.S. goods trade deficit.

¬ Canada and Mexico accounted for roughly 10%combined, and most of that is due to Mexico.

¬ Most of Canada's surplus, when there was one, isexplained by oil.

6


Balanced trade

7


Balanced trade, if that iswhat is important

8


Where do Canadianmanufactured goods go?

9


Goods and Services and Investment

¬ Key NAFTA stats for Canada¬ trilateral trade > $1 trillion (up over 300% since 1993)

¬ Canada is the US’s largest market for goods exportsand the second largest market for US services exports

¬ US is largest source of FDI in Canada – Canada is the4th largest source of FDI in the United States

¬ Mexico-Canada merchandise trade increased by 8times (1993-2015)

¬ Mexico-Canada services trade increased by 6 times(1993-2015)

¬ Canada is the 4th largest investor in Mexico

10


Importance of NAFTA alsoto the USA

¬ Canada is the number one buyer of US goods.

¬ US exports to Canada have grown faster thanCanadian exports to the US.

¬ US trade with Canada and Mexico dwarfs UStrade with all the rest.

¬ Integrated supply chains have produced greatefficiencies.

11


Everyone has benefited

12


US imports: where do they come from?

13


US automobile exports

14


Not everything is NAFTA

¬ Canada’s share of the U.S. import market hasshrunk from roughly 19% in 1988 to 13% in2016.

¬ Mexico’s share of the U.S. import market hasmore than doubled, to 13% from 5%.

¬ China’s share has grown by nearly 1,000%, to21% from less than 2%.

¬ USA has trade agreements with others.

¬ So does Canada.

15


A thickening border¬ NAFTA never produced a common market, and never met

the promise of seamless borders.

¬ Instead, the border has thickened. New security measuresand additional bureaucracy and costs.

¬ This slowed trade, added costs, and hindered allcompanies' ability to exploit the benefits of open borders.

¬ “Under the guise of security and anti-terrorism, the Americanshave increased the friction at the border very significantly – muchmore north to south, than south to north.” - Gordon Ritchie, aformer Canadian trade negotiator and one of the architects ofthe Canada-U.S. free trade agreement.

16


Concerns¬ Of course, NAFTA can be improved.

¬ Border-crossing can be made easier, quicker.

¬ Electronic commerce can be dealt with better now than by 25-year-old rules.

¬ The movement of people can be made easier.

¬ Standards and technical requirements can be betterharmonized.

¬ North American enterprise can be made continuously morecompetitive.

¬ But will we find so much fault with NAFTA that wewill throw the baby out with the bathwater?

17


Issues

¬ Which of these are the red lines?

¬ Chapter 11 Investor/State arbitration

¬ Chapter 19 Transnational panel review ofAD/CVD determinations

¬ A 5-year sunset clause

¬ Rules of Origin which require US content

¬ More protectionist US procurement and lessprotectionist Canadian procurement

¬ Raising the de minimis levels for cross-bordersales free of sales taxes

¬ Et cetera

18


What if we lose NAFTA?

¬ Considerable period of uncertainty¬ President can give 6-month notice of intention to withdraw.

¬ Executive Branch can change the regulations adopted toimplement NAFTA.

¬ But they were often adopted not so much to implement NAFTAas to implement legislation which will remain the law untilCongress changes it.

¬ Fallback to CUSFTA¬ possible but unlikely

¬ WTO agreements

¬ Some other bilateral arrangement(s)

19


What Canadian companies should beconsidering now

¬ NAFTA vs WTO MFN tariff rates

¬ Do you need to requalify for NAFTA?

¬ Do you need to establish qualification for MFNin absence of NAFTA?

¬ Investment protection

¬ AD/CVD binational panel and safeguardprotections

¬ Government procurement

¬ Energy export restrictions

20


Trading protections available

¬ IP protections¬ NAFTA vs TRIPS vs CETA

¬ WTO protections in other areas, eg GATS

¬ Immediate-, mid- and longer-term FTAopportunities¬ CETA

¬ China

¬ Japan

¬ India,

¬ TPP (minus US)

¬ Take advantage of ongoing governmentconsultations

Documents

NAFTA, Trump and Canada - McCarthy Tétrault€¦ · 26/10/2017 · Microsoft PowerPoint - NAFTA_Renegotiation_McCarthy_Seminar_20171026.pptx Author: mkramarz Created Date: 10/30/2017