IssuesTrade Diversification

Trade Diversification

First Published: Sep 05, 2019
Last Updated: Sep 05, 2019
Monitored by: Roberto Chavez

Background

In April 2017, US President Trump signed executive orders signaling TPP withdrawal and NAFTA renegotiation. While the Trudeau Liberal Government established in its post-election mandate the objective to diversify its trade, the move by the U.S. administration exacerbated the necessity to take concrete actions to attract investment and diversify trade partners beyond the United States.

To that end, the Cabinet Shuffle of July 18, 2018 served for the Liberal Government to re-structure Cabinet so as to prioritize trade, investment and export promotion mandates. The shuffle saw the creation of the Minister of Small Business and Export Promotion, with a mandate to help entrepreneurs and small businesses grow and create good middle-class jobs through trade and innovation, particularly through the promotion of export opportunities to Canadian small- and medium-sized enterprises (SMEs).

Further, The July 18, 2018 shuffle also saw a shift in the title of the Minister of Trade, with the addition of the word Diversification to the title. The change came along with the commitment to advance trade discussion with Mercosur, the Pacific Alliance, ASEAN, China, and India. As well as to continue work on implementing CPTPP, Mexico and the United States.

Current Status

To date, the Government the Liberal Government has been successful in furthering free trade agreements with United States and Mexico via renegotiation, and with the Mercosur, the Pacific Alliance, and ASEAN, as well as modernizing existing agreements with Israel and Chile. Likewise, it has been unsuccessful in fostering free trade agreements with China and India.

Liberal

The LPC want to boost the number of free trade agreements, utilize them as means to drive investment and economic growth. Announcements in the way of campaign promises with concrete measures are expected in the coming weeks. Particularly in what pertains greater market access to small and medium sized enterprises.

Conservatives

Andrew Scheer said a Conservative government would take a strong stance and stand up to China, only pursuing greater trade, should China embrace the rule of law system, when judicial processes which are supposed to guarantee equal market access are no longer subject to control by the government. Scheer’s initial commentary on trade also suggests that a Conservative Government would pursue trade with United States as opposed to a diversification approach.

The previous Harper government was known for its aggressive approach to international trade, spearheading the first round of TPP, successfully concluding CETA and negotiating approximately 10 other bilateral agreements while in office.  Scheer is expected to pursue the same track in expanding Canada’s access to global markets.

NDP

Green Party

People's Party

Bloc Quebecois

September 5, 2019
Roberto Chavez

NAFTA panel says U.S. can’t show harm from Canadian softwood industry.  A joint NAFTA panel has given the United States three months to rethink its tariffs on imports of Canadian softwood lumber.

The five-member panel of Canadian and American representatives says there is no evidence that Canada's softwood industry has harmed United States softwood producers.

The most recent softwood agreement between the two countries expired in the middle of the last federal election.

Eighteen months later the U.S. imposed a new round of import duties, arguing Canada unfairly subsidizes its softwood producers by underpricing lumber cut on government-owned land.

Canada has filed complaints under both NAFTA and World Trade Organization rules.

The Canadian industry is struggling with numerous mill closures and layoffs amid the tariffs, depressed prices from lower international demand and supply issues in Canada related to forest fires and pest infestations.

August 28, 2019
Roberto Chavez

Canada rejects calls to end trade talks despite Brazil's stand on Amazon.  International Trade Diversification Minister Jim Carr's office says Canada will continue its trade negotiations with Mercosur, the South American trading bloc that includes Brazil, despite demands to call a halt to the talks until more action is taken to protect the Amazon rainforest.

On Friday, NDP Leader Jagmeet Singh called on the Trudeau government to follow the lead of countries like France and Ireland, which are refusing to support the ratification of the European Union's trade agreement with Mercosur because of Brazil President Jair Bolsonaro's failure to respond to international concerns about the global environmental impact of deforestation.

Bolsonaro favours developing, not protecting, more of his country's forested land.  But so far, Canada isn't letting this issue stand in the way of its trade diversification goals.

In a statement to CBC News, the Minister's office said Canada's negotiations with Mercosur have made "good progress" since they were launched in March 2018. Ottawa hosted the most recent negotiating round, which concluded on August 2.  It is still "early in the negotiations," the statement said. Comprehensive trade talks regularly take years to conclude.

August 7, 2019
Roberto Chavez

Ontario’s agriculture minister is calling for the federal government to offer compensation to meat producers who have been affected by the ongoing trade spat with China. In a letter to Agriculture Minister Marie-Claude Bibeau released on Tuesday, Ernie Hardeman says his office has been told that affected farmers are losing between $15-$30 per hog per week in revenues, because of China’s decision to block pork imports coming from Canada.

“Ontario strongly encourages the federal government to work with the meat sector to provide compensation to ensure they remain viable until predictable trade is restored and assist them in securing new export markets,” Hardeman wrote.

In what Canadian officials understand as retaliation for the arrest of Huawei executive Meng Wanzhou, China has suspended necessary import permits for Canadian canola — citing unsubstantiated pests complaints — and pork. China also suspended Canadian exports of meat in late June after the Canadian Food Inspection Agency discovered several dozen veterinary health certificates had been forged.

The Trudeau government has so far increased the maximum loan limit under the Advance Payments Program (APP) to $1 million, and for canola farmers, have made $500,000 interest-free.

July 29, 2019
Roberto Chavez

The U.S. House of Representatives began its summer break, leaving the ratification of the new North American trade deal hanging.  Trade experts are divided on whether Trump may be driven to invoke the six-month notice period to withdraw from the current North American Free Trade Agreement — a threat he repeatedly made during the renegotiation of the pact with Canada and Mexico. Lawrence Herman, a Toronto international trade specialist, said it is unlikely Trump would pull the plug on the new NAFTA so close to his own election campaign because it would sow economic uncertainty that wouldn't benefit him politically.

Dan Ujczo, the Ohio-based trade specialist with the firm Dickinson Wright, said it is unlikely Trump would serve notice to withdraw, but even if he did, Congress or the courts could step in to delay that. "The NAFTA will be in place through 2019. It is unlikely that companies will face a scenario where neither the NAFTA nor USMCA is in place during 2020," he said.

Mexico is the only country to approve the new deal, with Canada awaiting to see what the U.S. Congress will do. With the Democrats controlling the lower House, no ratification bill was tabled before lawmakers broke for their five-week summer recess— a scenario Trump and his cabinet worked hard to avoid.

The Democrats want changes to the USMCA's provisions on labour, environment, patent protection for drugs and enforcement, and have been working hard with Trump's trade czar Robert Lighthizer to move forward. But they haven't reached an agreement that would persuade the Democrats to bring a bill forward in the House.That makes it all but certain that U.S. lawmakers won't be in a position to take even the most tentative steps forward on the deal before the start of Canada's federal election campaign, which is set to begin by mid-September at the latest.

For some, that could mean fireworks for the Canadian campaign — ignited by a petulant Trump.

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