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An Opportunity to Revise NAFTA for the 21st Century

Posted By Stephen Cryne, November 25, 2016

During the 2008 presidential campaign President Obama had this to say about the North American Free Trade Agreement (NAFTA), "NAFTA's shortcomings were evident when signed and we must now amend the agreement to fix them." During President Obama’s term in office there have been some modest improvements, under the Beyond The Border Action Plan, to improve the flow of goods and people between Canada and the U.S.

 

Fast forward to the 2016 presidential campaign and (now President Elect) Donald Trump said this about NAFTA “We lose with Canada --- big-league. Tremendous, tremendous trade deficits with Canada. This is the worst agreement ever signed.” 

 

What can be expected going forward? Let’s look at the huge importance of trade between Canada and the U.S. Given the size of the Canadian market, a free trade agreement is more important to Canada than the U.S., but nevertheless it is a significant amount of trade, and it’s especially important to U.S. states in the Great Lakes region and southwest.   

 

Every day over $2 billion in trade and services pass between our two countries. The combined annual trade and investment amounts to almost one and a half trillion dollars. From an employment perspective, U.S. exports to Canada support some 8 million U.S. jobs, while about two and half million Canadian jobs (14% of the workforce) are dependent on Canadian exports to the U.S. Canada is the United States’ largest customer, and over 400,000 people cross the border every day.

 

In Washington State for example, goods sold to Canada amount to over $23 billion per year generating 244,000 jobs. In the state of Michigan 241,000 jobs are dependent on $75 billion worth of annual trade with Canada. In the State of New York, trade with Canada is almost $34 billion per year and creates 596,000 jobs.  (Mr. Trump singled out how bad NAFTA has been for New York State when he said, “New York State has been horribly, horribly hurt by NAFTA.”)

 

The movement of employees between our two countries, is vitally important in supporting that trade in goods and services. As an integrated economy we do more than make and sell things to each other; now, our companies increasingly innovate and make things together.

 

The NAFTA includes provisions covering labour mobility. The Trade NAFTA (TN) visa is designed to facilitate temporary entry of workers on a reciprocal basis. The TN provision is guided by a list of professional occupations to work in Canada, the U.S or Mexico.

 

One significant drawback of the TN list is that it’s over 20 years old. A lot has happened in that time that the list has not kept up with. New occupations have emerged, particularly in IT, finance, healthcare and many other industries. Only two professions have been added to the list since its inception.

 

This disconnect with the modern labour market hurts productivity. It creates inconsistency, delays and unpredictability for many businesses that need to mobilize employees between the two countries. In a survey we conducted of Canadian and U.S. businesses in 2013, the resounding message was that the TN visa list is out of step with existing and emerging occupations.

This is in contrast to the more contemporary approach Canada is taking on mobility provisions in agreements with its other trading partners, such as the Canada European Comprehensive Economic Trade Agreement (CETA). While CETA excludes key services in health care, public education and other social services, the temporary entry provisions will make it easier for highly skilled professionals and businesspeople, such as engineers and senior managers, to work in the EU. CETA’s temporary-entry provisions will expand on existing WTO access by setting a framework to facilitate temporary travel or relocation for selected categories of business persons, including short-term business visitors, investors, intra-company transferees, and professionals and technologists.

 

A further advantage of CETA, in comparison to NAFTA, is the inclusion of a framework for the mutual recognition of credentials. When regulatory bodies in two jurisdictions agree that the professional qualifications in each other’s jurisdictions are satisfactory, they can sign a mutual recognition agreement that allows professionals trained and qualified in one jurisdiction to provide services in the other.

 

Would it not make sense to have such arrangements in place within the North American trade pact?

 

Political issues aside, the economic benefits of NAFTA to Canada and the U.S are significant. Dismantling the agreement will exact a high price on business and affect the livelihood of over 10 million workers and their families in Canada and the U.S. alone.

 

Is NAFTA the worst trade deal ever signed? Far from it…but it sure could use a major makeover to the TN visa list to increase productivity and the economic benefits that go with it.

 

Stephen Cryne is the President and CEO of the Canadian Employee Relocation Council and is located in Toronto.

 

 

 

 

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