After suffering free trade deal negotiation-fatigue for several years now, it’s understandable that Wednesday’s implementation of the Canada U.S. Mexico Agreement (CUSMA) might be a bit of a non-event.
After all, the 20-year-old NAFTA eliminated virtually all tariffs between Canada, the U.S. and Mexico and CUSMA will maintain most of those benefits and ensure that the vast majority of North American trade will continue to be duty-free.
But it’s easy to damn CUSMA with faint praise. Carlo Dade, director of the Canada West Foundation’s Trade and Investment Centre, said Canada did much better with its European free trade agreement and the original Trans-Pacific Partnership was much better.
Dade said considering the TPP was torn up (and re-written as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership) because of the impetuousness of U.S. President Donald Trump, who’s to say he won’t do something like again.
"The three governments are pitching the deal as tremendous and ground breaking…, but you look at it and say. ‘We had all this plus more with TPP’ but we trashed that," Dade said. "Now after three years of getting dragged through the mud just to get 85 per cent of what we had already agreed to it’s like insults just get piled up on top of injury."
To underline that point, on the eve of the implementation there is more sabre rattling from Washington about the potential to re-impose tariffs on Canadian aluminum.
Dairy farmers will lose a little more of their market — about 3.9 per cent — the Canadian Grain Commission will have to re-jig some of its grading of grain varieties and Canadian retailers will have one more headache as U.S.-based e-commerce operators will be able to ship up to $40 worth of goods direct to consumers without sales tax charged and $150 worth before duties kick in.
Again, the general tariff-free environment with the U.S. and Mexico will remain and were it not for the global disruption caused by the coronavirus pandemic, most trade dynamics will likely continue apace.
Last year, Manitoba’s exports to the U.S. exceeded $12 billion, the highest on record, and regardless of the annoyance of a drawn out re-negotiation of a trade deal without any slam-dunk victory, Manitoba companies are not going to suddenly avoid the American market.
"Our businesses are still interested in the North American market," said Mariette Mulaire, the CEO of World Trade Centre Winnipeg. "There is disruption around the world, but North American supply chains are still pretty solid."
But having said that exporters and importers who have taken the tariff-free environment for granted for the past 20 years, must pay attention. Under the former NAFTA regulations, exporters had to obtain a certification to qualify. They don’t need the same documentation this time, but they do still need to acknowledge that they are in compliance.
At customs broker offices across the country, it’s all-hands-on-deck.
"Everyone is in full scramble mode," said Alan Dewar, executive vice-president of the Winnipeg customs broker, GHY International. "It’s a clean slate as of July 1. Everything prior to that has to be re-done. The bonus is, it is easier and for the vast majority there is little to no change."
Kim Ross, a trade analyst at A.D. Rutherford, another Winnipeg custom broker, said complying with the country of origin regulations can be as easy as simply declaring on export documentation, "I certify that the goods described in this document qualify as originating and the information contained in this document is true and accurate…."
Analysts, including Dade, believe the deal will actually be a net loss for the Canadian economy (0.04 per cent, according to some calculations).
It’s not hard to tell where the grumbling is the loudest — Canadian dairy producers.
David Wiens, chairman of Dairy Farmers of Manitoba, and vice-chair of the national dairy farmers’ organization, said the dairy industry — with its supply management quota system — has lost a total of 18 per cent of its market to potential foreign exporters, including about 3.9 per cent in CUSMA.
"We have a few things layered on top of each other here," said Wiens. "We have had three trade agreements now where further access has been given to the Canadian dairy markets to other countries. And this comes on top of the COVID situation… which has created a lot of volatility in our market."
The dairy industry calculates CUSMA will mean the industry will take a $330-million annual hit.
The Canadian grain industry is not expecting anything like that kind of pain, but it has been required to alter is grading system to be more accommodating to U.S. grain. Still, American grain exported to Canada amounts to "little more than a rounding error," said Rémi Gosselin, a spokesman for the Canadian Grain Commission.
Martin Cash has been writing a column and business news at the Free Press since 1989. Over those years he’s written through a number of business cycles and the rise and fall (and rise) in fortunes of many local businesses.
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