Canada is putting on a brave face, but it is looking more and more like the USA and Mexico will say here is the deal. Freeland can say what she wants, but she is not negotiating from a position of strength!

1. NAFTA (NORTH
AMERICANTRADE
AGREEMENT)
By: PaulYoung, CPA, CGA
August 7, 2018

2. PaulYoung - Bio
• CPA, CGA
• Academia (PF1, FA4 and MS2)
• SME – Risk Management
• SME – Close, Consolidate and Reporting
• SME – Public Policy
• SME – EmergingTechnology
• SME – Financial Solutions
• SME – Business Process Change
• SME – Supply Chain Management
Contact information:
Paul_Young_CGA@Hotmail.com

3. Agenda
• What areTrade Agreements?
• What is NAFTA
• Trade between NAFTA countries
• Poison Pills
• Softwood Lumber
• PMTrudeau statements
• Mexico and CanadaTrade
• USA and Mexico
• Canada and USA
• NAFTA Blogs
• Issues at hand with NAFTA

4. What are trade deals?
• Source - http://www.businessdictionary.com/definition/free-trade-agreement.html
Treaty (such as FTAA or NAFTA) between two or more countries to establish a free trade area
where commerce in goods and services can be conducted across their common borders,
without tariffs or hindrances but (in contrast to a common market) capital or labor may not
move freely. Member countries usually impose a uniform tariff (called common external tariff)
on trade with non-member countries.

5. What is NAFTA
• Source - https://www.thebalance.com/nafta-definition-north-american-free-
trade-agreement-3306147
The North American FreeTrade Agreement is a treaty between Canada, the United States, and Mexico
that removes trade barriers. By eliminating tariffs, NAFTA increased investment opportunities.The
NAFTA agreement is 2,000 pages. It has eight sections and 22 chapters.
It's the world’s largest free trade agreement. Its members contribute more than $20 trillion as measured
by gross domestic product.

6. Mexico, Canada and USATrade
Source – Stats Canada and Bureau of EconomicAnalysis
December 2016
Exports
$23,504 Million
Imports
$19,110 Million
Surplus/(Deficit)
$4,393 Million
December 2016
Exports
$1,683 Million
Imports
$774 Million
Surplus/(Deficit)
$994 Million
December 2016
Exports
$23,311 Million
Imports
$21,161 Million
Surplus/(Deficit)
$2,150 Million

7. What does Mexico and CanadaTrade?
Source - http://www.lop.parl.gc.ca/Content/LOP/ResearchPublications/2012-60-e.htm
Commentary
• Capital Equipment trade is deficit
between Mexico and Canada
• Transportation equipment is deficit
between Canada and Mexico
• The only surplus is with agriculture and
food

8. Mexico and USATrade
• The trade deficit with Mexico was $63 billion. Exports were $231 billion, made up
primarily of auto parts, and petroleum products. Imports were $294 billion, with
cars, trucks and auto parts being the largest component. (Source: "U.S.Trade With
Mexico," "U.S. Exports to Mexico," "U.S. Imports from Mexico," U.S. Census.) -
Source – Balance “https://www.thebalance.com/trade-deficit-by-county-3306264”

9. Canada and USATrade
• Canada, the United States, and Mexico are partners in the world's largest trade
agreement, NAFTA.The U.S. trade deficit with Canada is $11 billion.That's only 2
percent of the total trade of $545 billion.The United States exports $267
billion, more than to any other country. It imports $278 billion. By far, the largest
export is automobiles and parts. Other large categories include petroleum
products, and industrial machinery and equipment.The largest import is crude
oiland gas from Canada's abundant shale oil fields. (Source: "Trade With
Canada," "U.S. Exports to Canada," "U.S. Imports from Canada," U.S. Census.) -
Source – Balance “https://www.thebalance.com/trade-deficit-by-county-3306264

10. NAFTA / Issues
• NAFTA is close to 30 years old and needs to be modernized
• USA is threatening punishing Mexico with import taxes.
• Import taxes will push up the cost of consumer goods
• Canada is export driven country, but needs to have better access to markets
• Pipelines
• Port Expansion
• Reducing red tape and regulations
• Mexico has not lifted people out of poverty despite new FDI
• http://www.ibtimes.com/mexicos-economy-rising-poverty-inequality-undermine-pena-nietos-economic-
agenda-2080010
• USA has trade deficit with both Canada and Mexico
• Mexico trade deficit is driven by automotive
• Canada trade deficit is driven by raw materials (Forestry, Metals and Energy)

11. NAFTA / Latest News – PM of Canada
Source - http://www.cbc.ca/news/politics/trudeau-tpp-nafta-talks-1.4398049
CBC News – November 10, 2017
It was Justin Trudeau's most Harperesque moment — opting not to go along just to get along with 10
other Pacific Rim nations determined to salvage the Trans-Pacific Partnership in Vietnam.
Earlier this week, the prime minister hit the brakes on throwing Canada's full support behind the
proposed "TPP 11," a salvage of the larger pact that President Donald Trump killed when he withdrew
U.S. support earlier this year. Trudeau's muted enthusiasm for a quick deal triggered the harshest
barrage of international criticism he's ever faced.
Much of the outrage over Canada's sudden outlier status — a position it frequently occupied under the
Stephen Harper Conservatives — emanated from Down Under.
An Australian television station cited sources who said, "the Canadians screwed everybody." "Justin
Trudeau sabotages Trans-Pacific Partnership," the Sydney Morning Herald newspaper flatly declared in
a headline.

12. USA Poison PillTrade
Source - https://www.canadianmanufacturing.com/exporting-and-importing/no-free-rides-nafta-canada-mexico-stand-firm-u-s-poison-pills-204344/
That suggests that if the U.S. is seeking an easy win on TPP-related issues, it might have to
concede in other contentious areas that Canada and Mexico find objectionable.
Sources characterized that approach as a response to the poison-pill proposals—increasing
American content in automobiles, attacking Canada’s supply management system for
agriculture, establishing a five-year sunset clause, doing away with a dispute settlement
mechanism and reducing Mexican and Canadian access to bidding on U.S. procurement
projects.
Sources say no progress is expected to be made on those fronts during the fifth round of
talks, which get underway in Mexico starting Wednesday. The focus, they say, will be on
making incremental progress in a number of other areas—they wouldn’t provide specifics—at
the 28 separate bargaining tables.

13. Softwood Lumber
Source - https://www.canadianmanufacturing.com/exporting-and-importing/ottawa-
launches-nafta-challenge-softwood-lumber-dispute-still-can-204332/
Canada and the U.S. have battled over softwood for decades and the disputes have been before
both NAFTA and the World Trade Organization multiple times. Canada has won almost all of those
challenges, and even in cases where Canada was found to be subsidizing its industry, NAFTA
panels or the WTO have said the subsidy was so minimal it had no effect on U.S. producers.
Natural Resources Minister Jim Carr has repeatedly said Canada has every reason to believe it
would prevail in such a challenge again.
However, until Tuesday it wasn’t clear whether Canada would take that route again in the midst of
difficult NAFTA renegotiations, particularly given the American objective to eliminate Chapter 19
altogether.
Chapter 19 establishes a panel of five arbiters, agreed upon by both countries, who will decide if
the duties meet U.S. law. Without that mechanism, Canada would have to use the U.S. court
system to make such a challenge.

14. Canadian Premiers
Source - http://globalnews.ca/news/3602057/canada-premiers-meeting-edmonton/
GlobalTV – July 16, 2017

15. USA Governors
Source - http://www.macleans.ca/economy/u-s-governors-tell-trudeau-they-want-nafta-to-survive/
Macleans Magazine – July 14, 2017

16. USA and NAFTA (Issues)
Source - https://www.reuters.com/article/us-trade-nafta/grim-reality-of-nafta-talks-sets-in-after-tough-u-s-demands-
idUSKBN1CJ0TH
• Automotive Content (local content) - One of the U.S. proposals unveiled this week would
require that 50 percent of the value of all NAFTA-produced cars, trucks and large engines
come from the United States, people briefed on the negotiations said.
• Agricultural Sector - U.S. negotiators also want to end a trade dispute settlement system that
has deterred U.S. anti-dumping cases while erecting new protective barriers for seasonal fruit
and vegetable growers. And though Canada and Mexico had sought more access to U.S.
government procurement contracts, they were met this week with a proposal that would
effectively grant them less.
• Meanwhile, theTrump administration’s call for a so-called NAFTA sunset clause would
effectively trigger a renegotiation of the pact every five years.
• Canada opens their market up to dairy imports from the USA
• Elimination of Softwood lumber subsidies (WTO dispute)

17. MerchandiseTrade / 2018
Source – Stats Canada

18. Trump and NAFTA
• Trump is too busy using intimidation tactic instead using diplomacy when dealing withTrade!
https://twitter.com/CTVNews/status/1011414935572754432
• Lumber Exports - http://news.buzzbuzzhome.com/2018/06/tariffs-canadian-lumber-us-
homebuilders-feeling-pinch.html - Rising lumber costs are hurting the cost of housing.
• Energy – USA refineries benefit from discounted Canadian Oil -
https://globalnews.ca/news/3946839/deloitte-oil-demand-oil-refineries-economy-oilsands/
• DairyTariff – Canada made concessions with the USA -
https://www.realagriculture.com/2018/01/new-tpp-deal-without-the-u-s-same-concessions-
for-canadas-supply-managed-sectors/

19. Blog / NAFTA
• https://www.canadianmanufacturing.com/exporting-and-importing/u-s-mexico-
nafta-talks-minus-canada-feds-encouraged-talks-are-back-on-217002/
• USA is working with Mexico on a bi-lateral deal
• Freeland and USATrade Minister do not get along -
https://www.theglobeandmail.com/business/article-amid-rumblings-of-separate-
us-mexico-trade-deal-trudeau-reaffirms/

20. What needs to be done
• Common ground has to be found
• Canada needs to look at bilateral deals with USA, i.e. the old USA FTA
• Canada sided with Mexico despite Mexico having over $10B surplus with Canada
• Many areas are integrated like Automotive as such tariffs just hurt the overall
sector
• Uncertainty with trade is impacting the stock market
• Trump needs to also become more flexible in terms of trade.Tariffs do not work.

21. RebuttalTrade

22. Rebuttal#1 - NAFTA
• https://beta.theglobeandmail.com/news/politics/trudeau-trump-hope-to-reach-nafta-deal-
by-end-of-the-year-white-house/article36138353/?click=sf_globefb
• The timeline is very tight asTrudeau and his team keep pushing both social and climate
change policies on to the NAFTA. I am all about the environment, but there needs to be a
balance.Trudeau and his team are all about pushing agenda 2030 -
https://www.slideshare.net/paulyoungcga/what-is-agenda-2030
• Canada also is siding too much with Mexico and that is also wrong. Canada has large trade
deficit with Mexico as such PM Selfie should be aligning more withTrump -
https://www.slideshare.net/paulyoungcga/government-policies-for-mexico-may-2016
•

23. Rebuttal #2 – Job Quality
• Here is my blog on skills trades:
• http://www.huffingtonpost.ca/nobina-robinson/canada-skilled-trades_b_14136620.html
• There is lots of misconception about the skills trade in Canada, especially who is responsible. Each province is responsible for post-secondary education - http://dev.cfswpnetwork.ca/wp-
content/uploads/sites/71/2015/07/Fact-Sheet-Funding-2013-11-En.pdf
• Government also have to be careful when making promises like free education
• http://business.financialpost.com/fp-comment/why-free-tuition-helps-all-the-wrong-students
• There is no such thing as free education as someone else has to pay for it through taxation dollars.
• There are structural issues with education that seems to never be address by provincial governments as part of the money they received via the CST Transfer - http://www.fin.gc.ca/fedprov/cst-eng.asp
• AIT has said there are barriers to trade including the LP in Ontario clauses that support unions: http://www.slideshare.net/paulyoungcga/internal-trade-canada or
http://www.canada.com/news/national/Wall+lays+Sask+stance+local+procurement/10436173/story.html
• Skill Gaps - http://www.fraserinstitute.org/uploadedFiles/fraser-ca/Content/research-news/research/publications/do-labour-shortages-exist-in-canada.pdf. Who trains Electricians, Welders, Plumbers, etc.?
http://www.parl.gc.ca/Content/LOP/ResearchPublications/cei-16-e.htm or http://www.sunnewsnetwork.ca/sunnews/politics/archives/2014/11/20141110-183419.html
• Harper has double the transfers as such portion of the transfers relates to education, but you said nothing about that in your posts, why? http://www.slideshare.net/paulyoungcga/provincial-transfers-and-program-spending/
It is not Harper’s fault that Wynne decided to use the money to expand University spots, instead of the trades: http://www.wlufa.ca/the-implications-the-2014-ontario-election-for-higher-education
• Loans for Trades - http://www.vancouversun.com/business/Harper+announces+loans+Canadian+trade+apprentices+Delta+appearance/10712329/story.html
• Skills gaps analysis: http://static1.1.sqspcdn.com/static/f/1493895/25691274/1416506638937/Final+Skills+Shortage+CFCM+October+2014+1.pdf?token=Rcc8u8l28HLLo1q1T9eLjYlq%2BcE%3D
• Job Outlook - https://www.youtube.com/watch?v=TulkPgfR-R0
• Millennials Strategy - https://www.youtube.com/watch?v=EoRxR7OpEK0
• Education - https://www.bloomberg.com/news/articles/2017-07-28/unions-urge-slow-down-as-self-driving-car-bills-pick-up-speed

24. Rebuttal #3 -Trade
• Here is what I said on balance of payments as it ties to the latest trends - http://frontstreetcapital.com/commentary/canadian-equity-q4-2015
• Mulcair quote - http://www.cca-acc.com/en/information/election-2015/where-the-leaders-stand/thomas-mulcair “However, it is obvious that Canada can and must do better.
Our current account went from a surplus of $19 billion in 2006 to a deficit of $62 billion in 2014, and March,April, and May 2015 were the three worst months of trade deficit in
Canada’s history”
• Comments on Balance of Payments:
• Corporate profits outflows as part of the balance of payments deficits. If there are more Canadian companies investing and succeeding in Canada, then there are more profits
staying in Canada. Unfortunately, you will never hear the NDP and LPC comment on the details when it comes to balance of payments.
• Over the past month there has been little discussion on the economy other than snippets from either LPC or NDP.
• The opposition makes it sound GDP is easy fix when it fact it is not.There are many factors that driveGDP including Exports.Yet the LPC and NDP have said little on the
various policies that drivesGDP.There have been statements like more money for forestry, aerospace, automotive, etc., but no clear path on how to support investment and
trade deals - http://www.slideshare.net/paulyoungcga/canada-gdp-analysis-2015
• China controls the bulk of the rare metals - http://www.avalonraremetals.com/_resources/presentations/Corporate_Presentation.pdf. Rare metals are key to renewable
energy, but little is said by either NDP or LPC when it comes to a made in Canada solution including the extraction/refining of rare metals, vanadium, lithium, etc.Yet Green
Energy is key platform for both the NDP and LPC - http://www.slideshare.net/paulyoungcga/federal-policy-analysis-green-technology-canadaa
• NDP and LPC like to highlight balance of international payments as way to say Harper is failing - http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/econ01a-
eng.htm. It is all big words to highlight negativity, but never details. Balance of Payments has many facets including FDI, investment income, etc.
http://www.statcan.gc.ca/eng/nea/about/bp
• So, if the NDP and LPC think they have easy fixes for the above issues then call their bluffs, because there is no easy fix.

25. Rebuttal#4 -Trade
• NDPer,
• It is funny how you make comments on China, like Harper sold Canada out!Yet you provide no links/facts that support your claim. I bet you will come back to me with links to
Huffington Post or iPolitics or maybe Mike Harris (Unifor supporter), right
• TPP 101 - https://www.youtube.com/watch?v=X5zc7tWUr44
• Have you look at the deal or are you taking sound bites from the NDP or other parties? Here is what key people say about FIPA:
• CME - http://www.cme-mec.ca/?lid=JCKNC-E742G-1W6JA&comaction=show&cid=3BQUJ-U9UKB-6PRJU
• CAPP http://business.financialpost.com/2014/12/06/level-playing-field-why-a-chinese-currency-hub-will-help-boost-canadas-oil-sector/?__lsa=3b29-0e59
• Here is what is says on lawsuits:
• In two decadesCanada has lost lawsuits, however, the money is peanuts in terms of the overall spending. http://www.huffingtonpost.ca/2015/01/14/canada-sued-investor-
state-dispute-ccpa_n_6471460.html. I quoted Huffington Post as way to show the LPC bias towards the lawsuit.This article says 20 years as such it goes to show with all the
trade over the past 20 years the value of the lawsuits is peanuts. Let’s say exports are $400B on average for 20 years then that means 8 trillion of exports and only $175M in
lawsuits. I think that is a pretty good loss ratio, right?
• FIPAVideo - https://www.youtube.com/watch?v=aig1N_iv39o
• If you like I can go into more aspect of exports? For each $1B of exports there is 5,500 new jobs. How come you did not mention that comment?
http://business.financialpost.com/2013/04/18/trudeau-favours-trade-so-far-so-good/.
• How about a looking at other trade deals with growing economies like Colombia or South Korea other nations?
• ColombiaTrade with Canada - http://www.cme-mec.ca/?lid=JCKNC-E742G-1W6JA&comaction=show&cid=ZN8E6-5D4S5-R8TRX or http://www.ibtimes.com/colombia-
surpasses-argentina-latin-americas-third-largest-economy-due-inflation-currency-changes-gdp
• South Korea - http://www.thestar.com/news/canada/2014/03/11/who_will_be_winners_losers_in_korea_deal.html
• I can go into other deals like Europe or other countries. I think you will ignored the links as such there is no point for me to waste any more time with my post!
• Trade and investment deal are very key as it is difficult for Canadian companies to expand into various countries due to protectionist policies of various governments!

26. Blog #5 - NAFTA
• Source - https://www.canadianmanufacturing.com/exporting-and-importing/u-s-congress-report-says-trumps-got-
wrong-nafta-203094/
• Minster Freeland comment “Canada maintains it does not have a trade surplus with the U.S., a point ForeignAffairs
Minister Chrystia Freeland routinely uses to illustrate her point that it’s not a good way to measure the success or
failure of NAFTA.
• Trudeau also has sided with Nieto - http://www.cbc.ca/news/politics/trudeau-pena-nieto-mexico-canada-trade-visit-
1.4350828. Nieto is on his way out - http://www.latimes.com/world/mexico-americas/la-fg-mexico-president-
20170301-story.html.Trudeau had common ground withTrump and that was Mexico. Canada has a large trade deficit
with Mexico - https://www.slideshare.net/paulyoungcga/nafta-october-2017 (The deficit is about $10B)
• This comment is ridiculous as the Stats Canada shows a different view when it looks at exports and imports -
https://www.slideshare.net/paulyoungcga/merchandise-trade-canada-august-2017 or
http://www.statcan.gc.ca/daily-quotidien/171005/dq171005a-eng.htm “Exports to the United States were down 1.8%
to $32.6 billion in August, notably on lower exports of unwrought gold. Imports from the United States rose 0.9% to
$30.3 billion. As a result,Canada's trade surplus with the United States narrowed from $3.2 billion in July to
$2.3 billion in August.The Canadian dollar gained 0.5 US cents relative to the American dollar from July to August.
• The issue is likely that Canada surplus is driven by shipment of raw materials which Freeland seems to be deflecting
off as part of negotiations.

27. Blog #6 - NAFTA
https://www.nbcnews.com/business/autos/auto-industry-declares-war-trump-over-nafta-n815996
Many markets are very integrated in terms of their whole supply chain, especially Automotive. President Trump is concern with the automotive sector due to
fact USA has an automotive trade deficit with Mexico - http://fortune.com/2017/08/14/trumps-nafta-autos-talks-mexico/.
The problem is automotive new plants have gone to Mexico as such just killing NAFTA could mean higher duties on imported cars and trucks from Mexico. The
sticker price will go up which means likely higher prices for the consumer. Here is a look at the Global Automotive Market -
http://www.gbm.scotiabank.com/scpt/gbm/scotiaeconomics63/GAR_2017-10-31.pdf
What is the Solution?
 Mexico needs to face more pressure when it comes to raising the labour rates as part of closing income inequality in their country -
https://www.slideshare.net/paulyoungcga/mexico-income-inequality
 Labour unions need to look at ways to reduce cost for business including pushing government for reforms in areas like taxation (payroll tax, corporate tax,
property tax, hydro rates, carbon pricing and other user fees and tax)
 Global automotive producers also need to refine their executive compensation programs as part of curtailing costs.
 Automotive needs to return to rural areas as part of cost control. Rural areas could then be re-open in terms of economic development.
 Canada and USA have common ground with automotive as they both have automotive deficits with Mexico.