Ending NAFTA would trim less than one per cent off Canada's economy: two studies

[Tennis]

Canada’s economy would lose less than one percentage point if President Donald Trump makes good on his threat to rip up the North American Free Trade Agreement, say two new studies that suggest ending the trade treaty would do minor damage.

The total impact of ending NAFTA and reinstating tariffs would trim 0.7 to 1 per cent off Canada’s GDP according to a Bank of Montreal study, while another study by the former head of computer modeling for Canada’s foreign-affairs ministry puts the damage at 0.55 per cent.

Both studies’ authors agree these findings carry a lesson for Canadian negotiators: they can bargain with confidence and not feel pressured to sign a bad deal, because the end of NAFTA is far from a total scare scenario.

The damage would be much smaller than the financial crisis of 2008; smaller even than the impact of the soaring loonie of the late 2000s; and would be roughly comparable to the national effect of the 2015 oil-price plunge, says BMO’s chief economist.

”It’s an important risk to the outlook. It would be a fundamental change in the trading relationship. But I happen to believe we’ve dealt with much bigger challenges before, in the last 20 years,” said BMO’s Douglas Porter. ”It’s a serious risk – but it’s a manageable risk.”

His research finds the hardest-hit area would be Ontario and the auto sector. It finds that other provinces have more diverse trade, like B.C. with Asia and Quebec with Europe; while provinces reliant on oil and gas would get a reprieve from lower tariffs on those products.

The paper also assumes the Canadian dollar would drop five cents, lowering the cost of investment in Canada.

But Porter cautions that his paper only addresses the second-most-dramatic scenario: that’s NAFTA ending without the original 1987 Canada-U.S. trade agreement being reinstated, and with the U.S. reimposing tariffs.

It doesn’t map out what-if outcomes for the most dramatic scenario, one Porter sees as unrealistically remote – that’s Trump entirely scrapping international trade norms, bypassing the World Trade Organization and reimposing tariffs beyond the current international rates.

He still says ending NAFTA would hurt all three countries unnecessarily: ”I don’t mean to dismiss it. One per cent of GDP is still serious stuff… And it’s totally unnecessary… Normally policy-makers bend over backwards (to increase GDP).”

The author of the other study uses a metaphor to describe the effect: he compares it to erecting a wall down the centre of Toronto, on Yonge Street. He says people would find workarounds and, after the initial disruption, the economy would grow again – but it would produce a permanent nuisance.

”You would create a dead-weight cost, an inefficiency,” said Dan Ciuriak, a former federal official who now runs a consultancy, in an interview about his just-completed paper for the C.D. Howe think-tank. ”There would be a permanent reduction in the efficiency of the economy.”

Ciuriak found that the end of NAFTA would shave 0.55 per cent off Canada’s GDP, push 25,000-50,000 Canadians out of the workforce and reduce exports by 2.8 per cent. The damage predicted in his report is far less than the 2.5 per cent GDP loss he said he was expecting to find when he was interviewed as he began his work last month.

The damage would be almost completely offset if Trump were to allow the reinstatement of the original 1987 Canada-U.S. Free Trade Agreement, Ciuriak said. It would barely be offset if Canada and Mexico remained in NAFTA alone, which he said would soften the 0.55 per cent GDP loss by a mere 0.08 per cent.

Ciuriak did not analyze how currency reactions might soften the blow. He merely looked at the direct effect of a NAFTA cancellation, and plugged tariff rates into computer models to assess how the new costs would affect trade. What he found was not so striking.

”In a good growth year (a 0.55 per cent downturn)… it’s not (enough to cause) a recession,” he said.

”It is fairly modest. That means Canada’s negotiators do have this luxury, if you will. Accepting a bad deal is not necessary. A bad deal may be worse than no deal at all. That’s … where this (research) is taking us.”

http://www.680news.com/2017/11/27/na...conomy-impact/

So basically nothing. Wanna end NAFTA? Go for it bud. We're gonna be fine.
This no doubt will strengthen Canada's negotiating position.

[TheDestinatus]

[Tennis]

Lol dude. U.S. got destroyed in the war of 1812. They won't try again.

[TheDestinatus]

Lol dude. U.S. got destroyed in the war of 1812. They won't try again.

If it got destroyed, how is it still there?

[breadisfunny]

good nafta needs to die.

[Theodarzna]

Sweet, then I wont feel bad with it gone. I wouldn't want to hurt Nova Scotia or Quebec.... or whatever else is in Canada that isn't the two good parts.

[GreenJesus]

Lol dude. U.S. got destroyed in the war of 1812. They won't try again.

I think the U.S. is in a slightly different position today than they were just a few decades after declaring independence.

Does the article say anything about how the US benefits?

[Independent voter]

I think the U.S. is in a slightly different position today than they were just a few decades after declaring independence.

Does the article say anything about how the US benefits?

Trade among the NAFTA partners increased from about $290 billion in 1993 to over $1 trillion by 2016


Texas has a bigger and more modern army than Canada.

$1 trillion dollars is nothing to sneeze at, if NAFTA is only 1% of Canadian trade than Canada has been getting screwed. Canada's entire GDP for 2016 was only 1.5 Trillion.

[Tennis]

I think the U.S. is in a slightly different position today than they were just a few decades after declaring independence.

Does the article say anything about how the US benefits?

Maybe so but so is Canada. We're part of NATO and have strong ties with other countries. They would be on Canada's side.

[Reinhard von Lohengramm]

Maybe so but so is Canada. We're part of NATO and have strong ties with other countries. They would be on Canada's side.

Going to take the bait.



NATO was/is a defense against the USSR/Russia.
The U.K. wants to cosy up as much as it can to the U.S.A. so that the ramifications of Brexit are minimized. Other than that... who do you expect to come "running to our side" France? Germany? Turkey (LOL)?

Canada should try to get the best possible outcome for Canada, even if that means saying "fuck you" to Mexico.

[Deleted]

I don't care enough to read into all of this, but there is no surprise now that CEFTA is active. Canada is just an extension of European Union in NA now.

[Tennis]

I think the U.S. is in a slightly different position today than they were just a few decades after declaring independence.

Does the article say anything about how the US benefits?

It's likely a myth that the U.S benefits. But if they want to shoot themselves in the foot then so be it.

[Moadar]

Maybe so but so is Canada. We're part of NATO and have strong ties with other countries. They would be on Canada's side.

Canada does what its told by the US. No one is going to side with your backwater country when fighting the US would mean financial ruin. Money is the strongest tie of all and you can't compete.

[Tennis]

Canada does what its told by the US. No one is going to side with your backwater country when fighting the US would mean financial ruin. Money is the strongest tie of all and you can't compete.

No way dude. We're an integral part of NATO. Not to mention Russia and China won't stand by and let the U.S. invade Canada.

I'm not worried at all.

[vindicatorx]

Lol dude. U.S. got destroyed in the war of 1812. They won't try again.

Uhm not sure how they teach history in Canada but the Canadian militia had like 1 good showing in the War of 1812.

[Treeskee]

Uhm not sure how they teach history in Canada but the Canadian militia had like 1 good showing in the War of 1812.

Was that the showing when they burnt down the old white house?

OT: I think NAFTA should just be dropped, but that's far from likely to happen.

[vindicatorx]

Was that the showing when they burnt down the old white house?

That was the British, thanks for playing.

[Moadar]

No way dude. We're an integral part of NATO. Not to mention Russia and China won't stand by and let the U.S. invade Canada.

I'm not worried at all.

Nah man they would help, its easy pickings.

[Tennis]

Nah man they would help, its easy pickings.

Why would they help? They're not allies of the U.S.

[Jotaux]

Does the article say anything about how the US benefits?

The US doesn't benefit from ending NAFTA. Even if the talks fall apart, the agreement would just continue as is because no one is dumb enough other than Trump to want to end it.