Elizabeth Morgan | CARICOM must exploit US-Canada trade spat
Canada is an important trading partner of Jamaica and other CARICOM member states in goods and services. With Canada and some CARICOM member states being former colonies of Britain and members of the Commonwealth, trade between them dates back over centuries. Canada and CARICOM both have in common the USA as a principal trading partner because of proximity and history. Developments in US-Canada trade relations, therefore, are of interest to us in Jamaica and the Caribbean.
In 2017, export of goods between the United States and Canada was valued at US$582.4 billion. The US exported US$300 billion to Canada and imported US$282.2 billion, giving it a surplus of US$17.5 billion. The US also had a surplus in trade in services valuing US$25.9 billion. Seventy-five per cent of Canada's trade is with the USA.
In 1987, Canada and the USA concluded the US-Canada Free Trade Agreement. In 1992, Canada, USA and Mexico concluded and signed the North American Free Trade Agreement (NAFTA). It was ratified in 1993. The general assessment is that while there have been some difficulties arising in NAFTA, specifically with agriculture and motor vehicles, it has been beneficial to the three countries, with trade valuing in excess of US$1 trillion.
Three Amigos Summit
The annual North American Leaders Summit, known as the Three Amigos Summit, commenced in 2005 and enabled discussions on security, trade and other issues of importance to the three countries. The last summit was held in 2016.
Candidate Donald Trump was very critical of NAFTA, describing it as a bad agreement not in the interest of the USA. Initially, his criticisms targeted Mexico, with which the US has a trade deficit and from which migrants come to the USA. With the election of President Donald Trump, the Three Amigos Summit has not been held.
President Trump has insisted on renegotiating NAFTA, and this commenced in mid-2017. While some progress has been made, work on key issues has not been encouraging. It is not clear whether the negotiations can be completed this year.
The US relationship with Canada began to sour as the NAFTA negotiations stalled and President Trump imposed tariffs on steel and aluminium imported from Canada citing national-security concerns. Canada retaliated by imposing tariffs on a range of goods imported from the USA and initiated dispute-settlement consultations at the WTO.
The relationship further deteriorated following the Group of 7 Summit, with President Trump criticising Prime Minister Trudeau and withdrawing from the summit communique. Canadians are rallying in defence of their country and prime minister.
In his Cabinet reshuffle on July 18, Prime Minister Trudeau made it clear that Canada has to advance its efforts to diversify its trade and reduce its reliance on the US market. The prime minister has appointed Jim Carr as minister of international trade diversification, a new title. It will be recalled that Conservative Prime Minister Stephen Harper was focused on finding new markets and negotiating free-trade agreements.
The Comprehensive Economic and Trade Agreement with the EU was negotiated under Harper. Canada also joined the Trans-Pacific Partnership which was concluded without the USA and signed in March 2018.
Canada has been negotiating trade agreements with India, Japan, Singapore, and Morocco and is in discussions with China, MERCOSUR (Argentina, Brazil, Paraguay and Uruguay) and Thailand, among others. A trade agreement was also being negotiated with CARICOM, which was not concluded.
In the 1930s, Canada championed a strengthened trade and economic relationship within the Commonwealth. This unravelled because of scepticism from at least one Canadian prime minister and lack of interest from Britain preferring to join the European Economic Community. Now with Brexit and a greater focus on the Commonwealth, some analysts are seeing the 53-member group as an untapped resource for Canada. It seems, though, that Canada does not have great enthusiasm for fostering intra-Commonwealth trade.
Canada has not traditionally viewed CARICOM as a significant trading partner. It is unlikely that Canada will accord priority to reviving the 2009-2016 trade negotiations with CARICOM. It will want to prioritise negotiations with the larger markets.
CARICOM continues to trade with Canada under the 1986 Canada-Caribbean Trade Agreement. The Canada-CARICOM meeting at the Summit of the Americas and the invitation to CARICOM for the G7 Summit show that there is still room to strengthen the relationship between CARICOM and Canada on economic, environmental and social issues. With the USA seemingly withdrawing from the global stage, Canada could be seeing a greater role for itself.
Access to Existing Markets
The lesson for the Caribbean from the Canada-US trade relationship is that although the US remains a near and large market, CARICOM countries should seek to maintain and better utilise access to existing markets, such as Canada, and seek new markets. The USA has a trade surplus with CARICOM of more than US$4.6 billion, but this does not guarantee that the current US administration, with unclear/shifting trade policies, will continue to be sympathetic to the development needs of the region.
I do hope that the US will renew the Caribbean Basin Initiative, which comprises the Caribbean Basin Economic Recovery Act and the Caribbean Basin Trade Partnership Act.
- Elizabeth Morgan is a specialist in international trade and international politics.
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