NAFTA Redux – Renegotiating Prosperity

For over a quarter century, a set of trade agreements with the United States and Mexico have underpinned the Canadian economy and become the primary focus of the economies of Ontario and of Toronto. The original Free Trade Agreement between the US and Canada was signed thirty years ago and expanded to include Mexico in the 1994 North American Free Trade Agreement. Before an agreement was in place, North American trade was subject to a patchwork of tariffs, quotas, and often arbitrary duties imposed on goods and services that crossed some of the longest borders in the world. Since the agreements were ratified, three of the world’s largest and most dynamic economies have virtually integrated with each other, forming the one of the largest and most prosperous trading blocs on Earth. Starting one week from today NAFTA is being reopened and renegotiated.

Though economists suggest the vast majority of North Americans have somehow benefited from freer trade between Canada, the US, and Mexico, there remains a deep misunderstanding about the effects of NAFTA. One misconception is that the agreement cost Canadian and American jobs. This idea is so pervasive that reforming NAFTA was used by now President Donald Trump as a political platform as he promised Americans he would negotiate a better deal for America. Though the trade agreement caused a severe degree of change in the economy, it also created the conditions for better employment for a larger number of people in a far more efficient structure. Those improvements were not visible to every part of society.

Unfortunately, NAFTA did not create jobs equally throughout all parts of North America. Here in Ontario and in the American rust belt, tremendous job losses and wage stagnation have been the reality as factories closed and workers competed with each other and with workers in far away states for the few remaining jobs. NAFTA prompted a fundamental shift in how products were made in North America, especially in heavy manufacturing. It also factored in the decline of the value of labour which has steadily decreased over the past thirty years as technology and transportation have allowed companies to replace workers with robots, move jobs to areas where workers are paid lower wages, or to import less expensive retail goods from overseas. Manufacturing provided the bedrock of many local economies around the Great Lakes. Many of those local economies have crashed because they weren’t diverse enough to withstand the sudden changes brought by globalization. Most have not yet recovered.

Beyond manufacturing, NAFTA has created an equal and open market for nearly every economic sector though the benefits show differently in different places. Areas with robust and dynamic economies like large urban areas or, specialized agricultural communities have thrived after many restrictions and barriers to the American market were removed. Canadian equities such as minerals, potash, and other commodities found easier access to American markets and there was a general and sustained uptick in jobs and entrepreneurialism. This is especially true in Canada’s technology and science sector. Free access to American markets have allowed our technology sector to act as an arm of the much larger and better financed American sector.

Canada’s economy is absolutely dependent on the United States and far more dependent on NAFTA than the US is. In a Globe and Mail series on the upcoming renegotiations, University of Calgary economist Trevor Tombe broke down cross-border trade as a percentage of provincial or state GDP. In provinces like Ontario and New Brunswick, half of all economic output is connected to cross-border trade. For other provinces such as BC, Alberta, and Quebec, cross-border trade accounts for a quarter to a third of economic output. By contrast, only two American states, Michigan and Vermont showed double digit percentages (15% and 14% respectively) of state GDP associated with NAFTA. If NAFTA were to be abrogated entirely, American business might suffer a downturn while Canadian business would suffer depression.

To enact the renegotiation process, the United States gave 90-days notice back on May 18. That means on August 16, all parties must be prepared to begin negotiations. Two months later, on July 17, the Trump administration published a detailed summary of its trade objectives.

Canadian businesses need to pay strict attention to what the Americans want from these negotiations and how changes might affect their ways of doing business. The summary covers a wide range of business and agricultural sectors and has implications covering social services, environmental law, copyright and other cultural protections, and labour. Some of the specific trade issues noted in the American summary include; telecommunications, financial services, energy, digital trade in goods and services, cross border data flow, investments, intellectual property, state owned and controlled enterprises, labor, and small to medium sized enterprises. Each of these trade issues will be open to negotiation, starting next week.

Canadian interests might have less cause to worry than our partners in Mexico do. Trump has repeatedly suggested his ire is not directed at Canada, which maintains a mostly equal trade balance with the United States, but with Mexico, which enjoyed a $63.2 billion trade surplus in goods with the US in 2016. Many of those goods, particularly in the automobile sector were, before NAFTA, made in the USA. Trump campaigned on bringing manufacturing jobs back to the US and won the support of Americans living in what’s become known as the Rusted-out Belt around the Great Lakes. He also campaigned on getting Mexico to pay for a physical border wall stretching along America’s southern boundary. There is a possibility Trump is using NAFTA to bully Mexico but it is hard to see how that will manifest, given the vast investments made in Mexican factories by American manufacturing business.

Nevertheless, Canadian business is advised to follow negotiations as closely as possible. The Telsec Business Blog will continue to cover NAFTA negotiations but a far deeper study is suggested. The outcome of NAFTA renegotiations will form the template through which 70% – 85% of Canadian trade is done in the foreseeable future.

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Hotels

1. Jennifer Smith
General Manager
The Omni King Edward Hotel
37 King Street East
Toronto, ON
M5C 1E9
Tel: 416-863-9700
Website: www.omnihotels.com/hotels/toronto-king-edward

2. Mark Perry
General Manager
Executive Hotels and Resorts (Boutique)
8 Colborne Street
Toronto, ON
M5E 1E1
Tel: 416-350-2419
Website: www.spazen.ca or www.cosmotoronto.com

3. Emeline Boul
General Manager
Hotel Victoria (Boutique)
56 Yonge Street
Toronto, ON
M5E 1G5
Tel: 416-363-1666
Mobile: 647-574-5832
Website: www.hotelvictoriatoronto.com

4. Omkar Sawant
Reservations Manager
One King West Hotel
1 King Street West
Toronto, ON
M5H 1A1
Main: 416-548-8100
Reservations: 1-866-470-5464
Website: www.onekingwest.com

5. Van Nguyen
General Manager
Cambridge Suites Toronto
15 Richmond Street East
Toronto, ON
M5C 1N2
Direct: 416-601-3757
Hotel: 416-368-1990
Website: www.cambridgesuitestoronto.com

Restaurants

1. Michael Pagliaro
Carisma (Italian)
15 Toronto Street
Toronto, ON
M5C 2E3
Tel: 416-864-7373
Website: www.carismarestaurant.com

2. Patti Shaw
Terroni (Italian)
57 Adelaide Street East
Toronto, ON
M5C 1K6
Tel: 416-203-3093
Website: www.terroni.com

3. Declan
Restaurant 20 Victoria – Michelin guide approved
20 Victoria Street
Toronto, ON
M5C 2A1
Tel: 416-804-6066
Instagram for reservations: https://www.instagram.com/twentyvictoria/

4. Mana
Nami (Japanese)
55 Adelaide Street East
Toronto, ON
M5C 1K6
Tel: 416-362-7373
Website: www.namirestaurant.ca

5. Restaurant Lucie
100 Yonge Street
Toronto, ON
M5C 2W1
Tel: 416-788-9054
Website: www.restaurantlucie.com

6. Niam H
Cantina Mercatto
20 Wellington Street East
Toronto, ON
M5E 1C5
Tel: 416-304-0781
Website: www.cantinamercatto.ca

7. Siva Sathasivam
Uncle Tony’s
38 Wellington St E
Toronto, ON
M5E 1C7
Tel: 416-455-6650
Website: https://uncletonys.ca/

8. Pizzaiolo
104 Yonge Street
Toronto, ON
M5C 2Y6
Tel: 416-860-0700
Website: www.pizzaiolo.ca

9. Robin Singh
Woods Restaurant and Bar
45 Colborne Street
Toronto, ON
M5E 1E3
Tel: 416-214-9918
Website: www.woodsrestaurant.ca

Health and Wellness

1. Thom Tullo
Morpheus8 by Inmode
47 Colborne Street
Toronto, ON
M5E 1E3
Tel: 416-863-6564
Website: www.amanspa.ca

2. Altitude Athletic Training
56 Colborne Street
Toronto, ON
M5E 1E3
Tel: 416-366-3838
Website: www.altitudeathletictraining.com

3. Physioheath Studios
33 Victoria Street, #130
Toronto, ON
M5C 2A1
Tel: 416-368-2525
Website: www.physiohealth.com

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    • 18 King Street East is a boutique Class A building – East of Yonge: easy street parking, less traffic, excellent restaurants and lovely parks – St. James Park @ Church & King and Berczy Park @ Wellington East, Scott and Front Streets – Very high energy and engaging area
    • A few steps (a few seconds) to the Yonge Street subway/underground PATH network and streetcar available outside building
    • Building is located in Toronto's vibrant financial district
    • Plenty of parking available in the area including street parking and reserved parking in the 18 King building 
    • Adjacent to the building huge outdoor food courtyard - Beer Bistro www.beerbistro.com and Craft Beer Market www.craftbeermamrket.ca restaurants and bars with onsite catering services
    • Onsite amenities:  Tim Horton's, Beer Bistro, Convenience store and Starbucks across the street 
    • Nearby amenities:  underground PATH network, numerous restaurants, banking, Starbucks plus a wide array of nearby shops and services 
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    • We are leaders in the service of training/meeting rooms with full conference facilities, high quality hot and cold catering
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    • Rent a space to accommodate your team for meetings, training sessions, corporate events or coworking space or flexible office space for one day, one week, one month or one year, or whatever term suits your business
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    • King Edward Hotel is located across the street - recently completed a $40 million renovation and boutique hotels close by within walking distance
  • Dining and entertainment at high quality restaurants only minutes away – Carisma, Terroni, Woods Restaurant & Bar and Michelin Rated - Restaurant 20 Victoria. Plus numerous lunch and takeout eateries nearby

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