EDC asked one of Canada’s foremost trade experts, international trade lawyer, Lawrence Herman of Herman Associates, what changes to NAFTA would mean for the Canadian auto industry. Summarized in this informative Question and Answer session, Herman’s answers provide valuable insight into the key questions Canadian businesses are asking. This Q and A is the second in a three-part series. Steer your way to Canada-U.S. trade still a powerful driver for automotive sector and Technology and Innovation: The Future of Canadian Auto Sector to get the big picture on this important issue.
In this Q and A, you’ll learn:
During the inaugural bilateral meeting between Prime Minister Trudeau and President Trump February 13, the U.S. President said his intention is to “tweak” NAFTA, as far as Canada is concerned.
“We’ll be tweaking it. We’ll be doing certain things that are going to benefit both of our countries. Our relationship with Canada is outstanding,” Trump said during the press conference.
But what does that mean exactly? And how will changes impact the auto sector, the most integrated industry in North America?
EDC asked one of Canada’s foremost trade experts, international trade lawyer, Lawrence Herman of Herman Associates, what changes to NAFTA would mean for the Canadian auto industry – an industry that accounted for $77 billion in exports in 2015, which translates into 12 per cent of Canada’s total trade.
Question 1: President Donald Trump said that he wants to “tweak” NAFTA as far as Canada is concerned. What does that mean exactly?
Question 2: Is NAFTA a bad deal or is it time to update the agreement? Why or why not?
Question 3: Is it possible to tweak specific elements of the agreement with Canada and doing a more in-depth overhaul with Mexico? Why or why not? How could this possibly impact integrated industries like auto?
(In terms of the possible impact on auto) We don’t know, but it will depend very much on the kinds of issues the Americans present in so far as their relations with Mexico are concerned.
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Question 4: Are there any specific provisions in NAFTA currently that deal with auto specifically?
Question 5: Historically, how have Auto Pact and the FTA and NAFTA shaped the Canadian auto industry? Which one has had best/worst impact on the industry?
Question 6: What would be the impact of a 35 per cent tariff on the NA auto industry? Meaning, what would be the impact on all three countries?
Question 7: The U.S. doesn’t have a free trade agreement with E.U. Does the recent ratification of CETA and special provisions for the Canadian auto sector give Canada a bargaining chip? Could the U.S. in theory take advantage of this agreement and how?
Question 8: What’s the best-case scenario of a new NAFTA for the Canadian auto industry in your opinion?
Question 9: What is the worst-case scenario?
Question 10: What advice would you give Canadian companies in the auto industry in terms of investment south of the border and/or Mexico in the short term? In the long term?