I am just in the mood these days to write a lot more than I
have written for awhile. Sure, there are a lot of stories about which I would
like to write. However, I believe that the main reason why I feel like writing
so much has to do with the weather.
It still is so cold outside with the temperature so low. The
likelihood that I would want to walk around for say 20 to 30 minutes several
times a day as I did before is extremely low. It is just not worth it to me.
Instead, I do more exercising in my condo.
Clearly, I have more time to do other activities because I'm
not exercising as much as I did before. One of those activities, as you can
tell now, is writing more articles. Here is another one that I have just put
together on one major topic.
WHAT IS HAPPENING IN THE BORDER CROSSING FILES
Do you really know what is going on, dear reader? I sure
don't. I am completely out of touch in all of this stuff.
The relationship involving Canada,
the United States and Mexico
is so confusing. Should we hope that the 3 countries will restructure their
relationship, hopefully soon, or will it completely collapse? If it collapses,
what happens economically to Canada
especially where most of my readers including me and my family happen to live ie.
in the Windsor
area where the automobile industry plays such a large role?
It all started off so positively didn't it. It seemed as if
we were going to have a deal completed rather quickly. All of the Senior
Leaders seemed to be such great "friends" with each other at first.
Regretfully, that hasn't happened. Now the question is will the parties be
able to negotiate some kind of a deal at all. My expectation frankly is that
they will not be able to do so soon and it may appear that the relationship amongst
the parties will end. I am hoping that the termination does not happen but
rather the parties spend some additional time in negotiating a final settlement
before everything is forced to finish up.
There are so many stories out there about what is happening
at the border. Some are good while some are not. It is so difficult trying to
figure out exactly what is going on and what may happen. All that I know is
that Canada
has to make sure that whatever happens is beneficial for our economy,
especially for our area that is so dependent on the border crossing here.
I wish I knew what the real situation is. But I do not. I
just wonder if you, dear reader, will know anything either if one looks at
recent news stories that come out.
She quoted this person with something that is extremely
scary:
"The regional economy is tied to the U.S. more than any other place in Canada, and if the U.S. withdraws from NAFTA, “it
would be disastrous,” says Jonathan Azzopardi, president of mould maker Laval
International in Tecumseh.
“There’s no other way really to put it,” he said. “That’s
our biggest partner, and we can’t afford to have them turn their back on us.”
Considering the statistics she set out in the beginning of
the article what she wrote is quite understandable:
"Forty thousand people in Windsor
and Essex County work in manufacturing, 80 per
cent of them in the auto industry.
There are more than 90 vehicle and parts manufacturers, more
than 250 machine, tool, die and mould manufacturers, most producing for the
auto industry."
Her column sets out a lot of problems that this Region
faces. If those problems cannot be solved, then it will be disastrous
economically here. However, is it really that bad?
"While the termination of NAFTA would be a net negative
for the Canadian economy and a mild negative for the U.S., it is a manageable risk that
policymakers, businesses, and markets would adjust to in relatively short
order, according to a new report from BMO Economics – The Day After NAFTA.
"It is critical to note that policy would not stand
still in the event of a negative outcome for NAFTA," said Doug Porter,
Chief Economist, BMO Financial Group. "Monetary policy would be looser
than it would otherwise be, the Canadian dollar would adjust lower, and even
fiscal policy would potentially adjust. We expect that Canadian trade policy
would be aggressively aimed at diversifying Canada's
interests by securing new arrangements with faster growing economies like the
TPP and Mercosur nations, India
and China,
while seeking to achieve full benefit of the recently enacted Canada-European
Union Comprehensive Economic & Trade Agreement.
"All of these factors would work to mitigate the
economic damage," concluded Mr. Porter."
Pshaw, no need to worry right, after reading this comment in
a covering newsroom memo. Oh dear, can that be right? I think they forgot to
mention this part in their actual report. I don't know why that seems to have
been so forgotten. Maybe they thought it might scare some people, especially in
Ontario:
"The transportation equipment industry would be one of
the hardest-hit, as the trade agreement has resulted in extremely tight
integration across the North American auto sector, with parts reported to cross
the border up to seven times over the course of vehicle production (raising the
possibility that the total tariff burden could exceed the WTO rate). In Canada, the industry’s reliance on exports to
the U.S.
is among the highest of all industries, with 69% of total sales heading south
across the border…
Downstream from manufacturers, the auto distribution
industry would also be highly affected. Conservative industry estimates suggest
that the cost of vehicles produced in North America
could increase by over US$1000 on average, which would weigh noticeably on
consumer demand and squeeze dealership margins. Certain dealerships would also
face cost pressure far exceeding the industry average, depending on the
composition of sales relative to that of domestic production. Auto distribution
would be further disrupted by the greater regulatory burden of a closedborder
regime, with deliveries to dealer lots likely to be delayed upon termination of
the trade agreement—a particularly troubling prospect with industry sales and
turnover near peak rates across the North American marketplace…
Ontario still looks like
the province most at risk from a disruption to NAFTA, since its economy is
arguably the most integrated with the U.S. through well-established
supply chains. Indeed, Ontario’s export sector
is one of the most highly-levered to the U.S., with nearly 83% of shipments
going south of the border in 2016. Because the province is relatively
export-intensive to begin with, that leaves 26% of GDP tied to U.S. exports.
And, the bulk of those exports (80% of the U.S. total) are in industries that
we deem vulnerable to trade negotiations, including a whopping $79 bln of transportation
equipment exports. Indeed, the tightly-integrated auto sector is probably the
key area of concern for province, especially when considering activity in other
areas that feed off the sector. All told, U.S.
exports in vulnerable sectors account for roughly 20% of Ontario GDP, the
highest share in Canada
by a wide margin."
I would have thought that one ought to be rather concerned
over what would happen if one lives in the Province of Ontario
as most of my readers do! Anne referred to the C. D. Howe Institute report in
her article as another relevant report.
Here is what it stated in this report "The NAFTA Renegotiation: What if the US Walks Away?" Tell me how you feel:
"Industrial products in the chemicals, rubber and
plastics complex and automotive sectors experience large declines in bilateral
exports to NAFTA partners; these losses are partly compensated by
re-orientation towards third markets and to the domestic market, in part
filling gaps resulting from declining bilateral imports. Total sales of these
sectors fall by $3-4 billion…
Significant sectoral impacts from loss of export markets are
therefore limited to a handful of sectors, most notably the automotive and
chemicals-rubber-plastics sectors. If the CUSFTA holds, Canada stands to make some gains in the United States by diverting trade away from Mexico. If Canada and Mexico
continue free trade under a CMFTA, Canada
makes gains in the Mexican market, largely at the US expense…
The United States
is exposed to trade with Canada
and with Mexico
in roughly equal measure: dropping free trade with either is damaging in
roughly equal measure. For the US economy, the
impacts would not be particularly large, but they are concentrated in two key
areas: the automotive sector and agricultural exports to the Mexican market…
The sharp and narrowly felt pain in the US automotive and
farm sectors means that this battle will be fought within the United States,
between US stakeholders, Congress and the White House, as much if not more than
between Canada and Mexico and the Trump Administration. Indeed, awareness of
this reality may even make the Trump Administration’s threat to terminate NAFTA
look like a bluff."
I think that this work is a bit more positive, if I really
understood it all. Mind you, it still makes this matter seem even more
complicated for people like me who are not very experienced in this area.
So where is everything going? I wish I knew the answer to
that but I don't. I must admit though that deep down I believe that there will
be an agreement signed between the 3 countries. After all, do the Americans
political leaders think that they and their party members will be re-elected if
all of this falls apart? A lot of US States do have a role to play in dealing
with Canada
and especially with the automobile industry. Wouldn't it be better for the
Republican leaders if some deal is reached just before election campaign in the
Fall? I would think so because they could look like heroes that they entered
into a good deal that is appropriate for the US.
Naturally of course, the Canadian Government would be
pleased to have a deal done this year because the next Canadian election is
next year and they could use their interpretation of what happened as a win for
Canada
which only their Party could have accomplished. They would have a whole year to
promote it aggressively.
Should we all be panicking now and try to figure out where
we should go if all of this collapses? Who wants to live in a country that is
economically destroyed, particularly in our area which is so dependent on the
automotive industry?
Hold on, maybe there is another story coming out. Its may be
one suggesting that our salvation is coming up very quickly because our Federal
Government has figured out now that we might be in big trouble.
I just saw another
news story that just came out that may be helping all of us in Canada because
it may suggest that a deal is possible to save this country sooner rather than
later. Take a look at this article by Thomas Walkom who is a National Affairs
Columnist on the Toronto Star that was written on January 14, 2018: (Thomas Walkom, Toronto Star, January 14, 2018)
"On NAFTA, Canada agrees to discuss the
unthinkable
Sometimes governments talk tough on trade to divert
attention when they are preparing to cede ground…
Canada
seems to be quietly backing down on the North American Free Trade Agreement. It
is now willing to bargain U.S.
demands that the Liberal government had formerly dismissed as deal-breakers.
That seems to be the gist of several days of confusing
messages on the NAFTA negotiations coming out of Ottawa.
Foreign Affairs Minister Chrystia Freeland set the table
last week when she told reporters that Ottawa has come up with “creative” ideas
for dealing with the impasse in the three-way talks between Canada, Mexico and
the U.S…
The Globe and Mail reports that Canada will propose technical
changes to auto content rules in order to mollify the Americans. The newspaper
also reports that Canada is
mulling over proposals to change three dispute settlement chapters in order to
make them more acceptable to Washington."
Who knows if this is true or not? Maybe this is designed to
fool the Americans so that Canada
can remain tough but so that the Canadian politicians retain the support of the
public that will be voting for them next year. Here is what reporter wrote at
the end of his article:
"Sometimes governments talk tough when they are tough.
But sometimes they do it to distract attention when they are preparing to cede
ground.
We shall see which holds here."
Keep on reading all of this nonsense in the media, dear
reader, and let us see what happens, especially those of us who live in one
of the key automotive centres in this Country and who could lose so much if it
all fails.