United States - Canada Trade Relations. By: Agnieszka Markiewicz Olga Markhevka Jason Kwang

Transcription

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2 United States - Canada Trade Relations By: Agnieszka Markiewicz Olga Markhevka Jason Kwang

3 Outline 1. Introduction Canada Canada s Trade U.S. U.S. Trade 2. NAFTA What is NAFTA? Promises made Objectives Key Components Softwood Lumber Dispute The Opposing View 3. Case study: Softwood lumber dispute 4. Conclusions and recommendations

4 Key Terms NOMINAL GDP - A gross domestic product (GDP) figure that has not been adjusted for inflation. REAL GDP - This inflation-adjusted measure that reflects the value of all goods and services produced in a given year, expressed in base-year prices. Often referred to as "constant-price", "inflation-corrected" GDP or "constant dollar GDP".

5 Key Terms (cont d) FREE TRADE - international trade free from protectionist tariffs quotas, export subside and other government intervention. FTAA is a proposed agreement to eliminate or reduce trade barriers among all nations in the American continents NAFTA free trade agreement among Canada, the United States, and Mexico. NAFTA went into effect on January 1, It is also used to refer to the tripartite trading bloc of North American countries.

6 Key Terms (cont d) Softwood lumber - Easy-to-saw wood such as pine and spruce used in building. Countervailing duties - Applied on imports found to be unfairly subsidized. Dumping - Selling goods in another country at less than what they cost to produce. Stumpage - A fee charged by Canadian governments to logging companies for the right to harvest lumber from public land.

7 Canada Area: 9.9 million sq. km. Second-largest country in the world Population (2005 estimate): 32,805,041 Nominal GDP (2005): $1.077 trillion. Real GDP growth rate (2005): 2.8%. Nominal per capita GDP (2005): $32,800. Source:

8 Canada s s Trade Merchandise exports (2005, FOB basis)--$364.8 billion: crude petroleum and products, natural gas, motor vehicles and spare parts, lumber, wood pulp and newsprint, crude and fabricated metals, wheat. In % of Canadian exports went to the United States. Merchandise imports (2005, FOB basis)--$317.7 billion: motor vehicles and parts, industrial machinery, crude petroleum, chemicals, agricultural machinery. In 2005, 59% of Canadian imports came from the United States.

9 USA Area: 9,6 million sq km. Third-largest country in the world (after Russia and Canada) Population (2005 estimate): 295,734,134 Nominal GDP (2005): $12.37 trillion Real GDP growth rate (2005): 3.5% Nominal per capita GDP (2005): $41,800 Source:

10 USA TRADE Top Ten Countries with which the U.S. Trades For the month of December 2005 Country Canada Total in billions U.S. $ Year to date total in billions of U.S. $ These Countries represent 67.36% of U.S. Imports, and 63.42% of U.S. Exports in goods. China Mexico Japan Germany United Kingdom Korea, South France Taiwan Malaysia Source:

11 USA TRADE

12 Did You Know? The first free trade treaty between Canada and the United States was signed in The treaty was abrogated in 1866.

13 Free Trade Agreement Timeline November 13, 1979 President, Ronald Regan proposes a North American Agreement January 1981 President, Ronald Regan proposes a North American common market September 4, 1984 Brian Mulroney is elected Prime Minister of Canada

14 I m m not going to let Brian Mulroney destroy the Canadian dream, and that s s why this election is more than an election, it s s your future Liberal opposition leader John Turner

15 Free Trade Agreement Timeline September 25, 1984 Canadian Prime Minister, Brian Mulroney meets President Regan in Washington and promises close relationship with the US. October 9, 1984 The US Congress adopts the Trade and Traffic Act

16 Free Trade Agreement Timeline September 26, 1985 Canadian Prime Minister announces that Canada will try to reach free trade agreement with the US May 1986 Simon Reisman, Chief negotiator for Canada, and Peter Murphy, the American negotiator, start negotiations.

17 Free Trade Agreement Timeline October 3, 1987 Conclusion of the Canada US Free Trade Agreement (FTA)in Washington January 2, 1988 Prime Minister Mulroney and President Regan sign FTA January 1, 1989 The FTA takes effect December 17, 1997 Official signing of NAFTA

18 Did You Know? NAFTA, with GDP of $11.4 trillion, about 1/3 rd of the world s total GDP. $1.9 billion of goods cross the Canada- US border each day Canada-US trade equaled $ billion in In 2005, US accounted for 85% of Canada s total exports Source: Pubs_Cat2.nsf/ 0/20e452ddc39f978a85256dba0062dd75?OpenDocument

19 NAFTA

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21 What is NAFTA? NAFTA is designed to remove trade and investment barriers (i.e. tariffs & import quotas) between Canada, US, and Mexico. This is supposed to significantly boost the country s economy, while bringing into line the environmental, worker, and other economic standards.

22 Promises Creation of the world s largest market Export growth Job creation Higher living standards Reduced distortions of trade Streamlined environmental standards across borders Protection for basic worker rights Source: 0/20e452ddc39f978a85256dba0062dd75?OpenDocument

23 Objectives of NAFTA 1. Eliminate barriers to trade 2. Promote fair competition 3. Increase investment opportunities 4. Protection on intellectual property rights 5. Create efficient procedures for implementation of the agreement 6. Establishment of the framework for further integration Source:

24 Key Components of NAFTA 1. Removal of trade barriers 2. Rules of origin Provides for the elimination of tariffs on goods originating from the partner countries 3. Bi-national panel for dispute resolution NAFTA provides for Working Groups and Committees for dispute resolutions If the committee approach fails, NAFTA provides for a bi-national panel review, in place of court review, which decides on matters of anti-dumping and countervailing duty e.g. Softwood lumber dispute Source:

25 Softwood Lumber Dispute May 2002, US imposed a 27% duty on softwood lumber imported from BC The central issue of the dispute stumpage fees - the set amounts that companies have to pay for trees takes off crown land Common argument raised by US: The stumpage fees represent unfair subsidies by the Canadian government Source:

26 Tariffs between Canada & US NAFTA does not affect the tariffs phase out, which was determined under the FTA. The actual gradual removal of tariffs between Canada and the United States was completed on January 1, Since then almost ALL tariffs between Canada and US were eliminated, with several key exceptions: o Canada maintains its tariffs on eggs, dairy, and poultry products o US maintains its tariffs on sugar, dairy, peanut, and cotton

27 Opposition to NAFTA opponents of NAFTA warned that it will lead to a race to the bottom in wages, environmental standards, and in society in general race to the bottom will mean that governments will continually lower their standards in order to attract more and more investment

28 Case Study: Softwood Lumber Dispute

29 Softwood Lumber dispute History : First dated dispute in 1820 s between Maine and New Brunswick Disagreements continued right up to today Past 20 years: Coalition for Fair Lumber Imports (CFLI) US softwood lumber producers Want US Government to restrict trade in Canadian lumber Main issue - stumpage fees First petitioned against Canada softwood lumber imports in 1982

30 Softwood Lumber dispute Under US and international trade laws: Countervailing and anti-dumping duty orders can only be applied when: 1. A finding of subsidization or dumping 2. A finding that the subsidized and/or dumped imports are causing or threaten to cause material injury to the domestic industry Source:

31 Softwood Lumber Dispute May 29, 1996: Softwood Lumber Agreement: 5 year agreement Canada established quota: 14.7 billion board feet of lumber per year could be imported duty-free Did not apply to Maritimes April 2, 2001: CLFI filed anti-dumping duty petitions Alleged subsidy rate of 39.9% offered by Canadian government Margins of 22.53% to 72.91% earned Canada found not guilty by the ITC DOC found subsidies, and imposed duties of 19.31% Canada seeks exclusion from these duties

32 Softwood Lumber Dispute May 2, 2002: International Trade Commission (ITC)votes unanimously in favour of the US US imposes 27% duty on Canadian softwood lumber May 2, July 7, 2005: NAFTA issues 4 reports to US Department of Commerce (DOC) to remand determination rates consistent with US law DOC find new subsidy rate Challenged by Canada August 10, 2005: NAFTA panel rules unanimously in favour of Canada US had no basis to say they were being threatened by Canada

33 Softwood Lumber Dispute US initially refused to comply Set new duty rate to 10.8% per year Would save Canada $600 million a year Canadian government announced $1.2 billion in aid for lumber industry - Washington said they were disappointed February 2006: US says they finally complied to international standards according to WTO Canada argues US continues to artificially inflate antidumping rates by using different calculation measures

34 Softwood Lumber Dispute March 17th 2006: NAFTA panel again ruled in Canada s favour Canadian softwood lumber exports are not subsidized Total duties collected by the US = $5.2 billion

35 Softwood Lumber Dispute - Why is it such a big deal?

36 Softwood Lumber Dispute Value of board feet exports to the US (US$) 2004: $7,599, : $7,413,108 Source:

37 Softwood Lumber Implications How it affects Canada: Employs 280,000 Canadians 15,000 forestry workers laid off in BC Resolving it a top priority - International Trade Minister David Emerson How it affects the US: Dependant on Canada for 1/3 of their softwood lumber demand Industry employs over 7 million Americans

38 Softwood Lumber Implications Adversely affect NAFTA as a whole: Retaliation: Canada can impose duties on America to recover the costs Has not done so thus far Housing market Transportation industry Exchange rate Lobby groups US lumber lobby groups want to keep duties imposed on Canadian lumber industry Environmentalist argument

39 Softwood Lumber Implications 2002: Canada Wood Export Program $6.8 billion funded by Natural Resources Canada (NRCan) International offices overseas New branding initiatives (high-profile trade shows, seminars) Technical support activities (product testing, market acceptance) $35 million, 5 year partnership with domestic wood industry fiscal year: 14 industry associations submitted projects totaling $14.8 million Copyright 2005 Canada NewsWire Ltd

40 Conclusion and Recommendations

41 Goals to Canada s s success 2003: J.L. Granatstein outlined 4 national goals for Canada Protect its territory, security of its people and its unity Protect and enhance its independence Promote the economic growth of the nation to support the welfare and prosperity of its people Work with like-minded states, for the protection and enhancement of democracy and freedom America is CENTRAL to securing every one of these points Source:Copyright 2005 C.D. Howe Institute

42 What does Canada have to offer? Natural Resources

43 Energy security agreement US and Canada in partnership with many key Western Hemisphere countries: Mexico Brazil Colombia Trinidad and Tobago Central American Countries The right energy policies may present political challenges in some countries

44 What Can Canada Offer? Economic Benefits? Willingness to contribute aid and peacekeeping assistance when called upon to do so? mid 1960 s: 100,000 people in the military, 50,000 in army Today: 60,000 combined 34th in the world in UN Peacekeeping contributions Canada needs a capacity to contribute to the common good Source: Copyright 2004 Canadian Institute of International Affairs

45 Harper s s intentions Revisit the missile shield Move beyond the Kyoto debate Provide $5 billion to overhaul Canada's military and expand peacekeeping operations Be aggressive in demanding that Washington respects NAFTA

46 Recommendations Enhancing the Canada-U.S. economic relationship Eliminating barriers and unpredictability inconsistent with the reality of a common economic space.remove barriers to movement of goods 1/3 of Canadian exports to the US are imported and then re-exported as part of a more refined good or service 70 million individual border crossings each year

47 Recommendations Good sign: Air Canada continues route expansion Western Canadians benefit the most Source: Copyright 2005 Canada NewsWire Ltd.

48 Recommendations Canada should not pursue a series of marginal, resource-intensive bilateral free trade agreements likely to result in only small and declining rewards Maintain focus on achieving Canada s best interest Keeps us on America s good side

49 Recommendations If bilateral free trade accords are pursued, government should: Select economically important partners Pursue agreements that will not undercut either the multilateral system or regional liberalization efforts Negotiate agreements that not only address barriers to goods, but also services and investment, and few product exemptions Source: Copyright 2005 C.D. Howe Institute

50 Conclusion US tied to Canada s foot - both literally and figuratively As a result, their best interest becomes our best interest Should be good neighbors and strengthen relationships Seek best policies to achieve this

51 Thank you Any Questions?