A Traffic Story Of Interest

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.

Let's take a look at what Anne Jarvis wrote in the Windsor Star.  Here are some things that she said in "Windsor-Essex is ground zero if NAFTA collapses" on January 12, 2018"

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?

I just love how Doug Porter, Chief Economist, BMO Financial Group, was quoted in the "BMO Economics: Risks Manageable if NAFTA Ends:"

"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.