Posted by on Dec 13, 2016

Free trade is complicated business, as will soon find out US president-elect Donald Trump. NAFTA may very well be up for a major grooming, but CETA (crossing fingers now) will increase US exports to Canada and advance the balance of trade in favor of the Americans. And a healthy trade balance is a principle very dear to Mr. Trump who’s looking to restore fairness in trade deals.

On the flip side, are more imports bad for the Canadian economy? Imports typically get a bad rap and are usually seen as the culprit in international trade. Well the answer is no, considering that those imports will create jobs and provide Canadian export opportunities with the EU. And Canada is well positioned to attract those US manufacturers and investors who will be looking north to get their goods into the EU market.

One of the least talked about repercussion of CETA is the impact it will have on US manufacturing moving to Canada. Perhaps not the entire US plant will be moving here, but some part of the manufacturing process will certainly migrate north. Most CETA analysis reported in Canadian media focuses on threats to certain Canadian industries; attention hasn’t yet shifted south concerning our trade with the USA.

No doubt US manufacturers will have a serious look at Canada to produce goods that are primarily aimed for EU clients, in addition to serving their Canadian market. Some serious planning will be going in meeting rooms across the fifty states: How to manufacture enough in the US to ship NAFTA qualifying inputs/components duty free across the Canadian border, and then sufficiently transform or add value to those inputs/components in Canada to make a qualifying CETA good entering the EU with preferential treatment? That will be the question.

Increasingly US exports to the EU will shift to Canada. Semi-manufactured US goods will come to Canada first, where sufficient Canadian content can be added to qualify for CETA. Although not an agreement that should concern American manufacturers at first glance, they will soon be learning CETA rules of origin that matter most to them. Perhaps getting better at it then most Canadian manufacturers will care to admit. Becoming familiar with FTAs, even those of other countries and working those rules to your advantage, will provide an undeniable competitive edge.

To think that NAFTA has nothing more to offer after twenty-two years and CETA is of concern mainly to Canadians and Europeans, one should think again. Both American and Canadian manufacturers have something to gain yet again. More FTAs please.