May 19, 2020

Replacing NAFTA: what it means for Canada

NAFTA
USMCA
trade negotiations
import/export
baddey dey`
3 min
Replacing NAFTA: what it means for Canada

The 1994 North American Free Trade Agreement (NAFTA) has in recent years created trade tensions between its members: the US, Canada, and Mexico

On 30 September, the United-States-Mexico-Canada Agreement (USMCA) was informally agreed, bringing an end to re-negotiations of NAFTA triggered by President Trump and signalling significant changes in trade relations between the three countries.

Though the member states formally agreed to USMCA on 1 October, ratification and implementation of the new trade relationships is subject to a 60-day review process.

Under the new trade agreement, the US will also have increased access to Canada’s dairy market, with Canada eliminating two major quota and pricing systems limiting trade.

As a result, the US will be able to export more dairy products to Canada at the equivalent of 3.6% of the Canadian market.

Canada and Mexico will increase duty thresholds for US goods, with both raising the limit for duty-free shipments of US goods to US$117.

Various Canadian auto parts and vehicles will be excluded from US import tariffs, including 2.6mn passenger vehicles to be imported to the US annually, Canadian light trucks, and auto parts up to a value of US$32.4bn in declared customs value each year.

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Vehicles will qualify for the duty-free treatment provided 75% of their parts were manufactured in member states, up from 62.5%, and that 40-45% of used parts were made by workers earning at least $16 per hour.

Industry Week noted: “This provision is an incentive for automotive manufacturers to produce more goods in the United States, given its higher labor costs than those in Mexico.”

Though Canada has won significant concessions through these negotiations, it has not fared as well as the US with USMCA.

Under USMCA, Canadian steel will continue to suffer a 25% US import tariff, with 10% applied to aluminium.

The new intellectual property clause, extending the period through which new biologic drugs are protected from generic reproduction, has been raised from eight years to 10, meaning that Canadians will pay more for new drug treatments for longer in the future.

According to CBC, a key aim for Canada during NAFTA’s renegotiation was to “open subnational (state and municipal) procurement in the U.S., so Canadian businesses could compete for more government contracts,” a significant achievement in Canada’s deal with the European Union.

Unfortunately for Canada, no such success has been secured with USMCA, with “‘Buy American’ rules that block cross-border procurement” seemingly unchanged in the new agreement.

Additionally, USMCA also throws up a potential significant roadblock for Canadian trade negotiations with China.

CBC said: “Among the exceptions near the end of the USMCA is language that may restrict Canada's ability to negotiate a trade deal with a "non-market" country — which, in today's context, could be interpreted as "China." (The agreement makes "non-market economy" a self-defining term, and the American view that China is not a market economy is well-known.)”

Any trade negotiations made by a member country of USMCA must be disclosed in full to other members for their review and approval, meaning that Canada likely cannot negotiate free trade with China without US input.

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Jun 10, 2021

G7 Summit guide: What it is and what leaders hope to achieve

G7
G7Summit
Sustainability
EU
3 min
Business Chief delves into what the G7 is and represents and what its 2021 summit hopes to achieve

Unless you’ve had your head buried in the sand, you’ll have seen the term ‘G7’ plastered all over the Internet this week. We’re going to give you the skinny on exactly what the G7 is and what its purpose on this planet is ─ and whether it’s a good or a bad collaboration. 

 

Who are the G7?

The Group of Seven, or ‘G7’, may sound like a collective of pirate lords from a certain Disney smash-hit, but in reality, it’s a group of the world’s seven largest “advanced” economies ─ the powerhouses of the world, if you like. 

The merry band comprises:

  • Canada
  • France
  • Germany
  • Italy
  • Japan
  • The United Kingdom
  • The United States

Historically, Russia was a member of the then-called ‘G8’ but found itself excluded after their ever-so-slightly illegal takeover of Crimea back in 2014.

 

Since 1977, the European Union has also been involved in some capacity with the G7 Summit. The Union is not recognised as an official member, but gradually, as with all Europe-linked affairs, the Union has integrated itself into the conversation and is now included in all political discussions on the annual summit agenda. 

 

When was the ‘G’ formed?

Back in 1975, when the world was reeling from its very first oil shock and the subsequent financial fallout that came with it, the heads of state and government from six of the leading industrial countries had a face-to-face meeting at the Chateau de Rambouillet to discuss the global economy, its trajectory, and what they could do to address the economic turmoil that reared its ugly head throughout the 70s. 

 

Why does the G7 exist?

At this very first summit ─ the ‘G6’ summit ─, the leaders adopted a 15-point communiqué, the Declaration of Rambouillet, and agreed to continuously meet once a year moving forward to address the problems of the day, with a rotating Presidency. One year later, Canada was welcomed into the fold, and the ‘G6’ became seven and has remained so ever since ─ Russia’s inclusion and exclusion not counted. 

 

The group, as previously mentioned, was born in the looming shadow of a financial crisis, but its purpose is more significant than just economics. When leaders from the group meet, they discuss and exchange ideas on a broad range of issues, including injustice around the world, geopolitical matters, security, and sustainability. 

 

It’s worth noting that, while the G7 may be made up of mighty nations, the bloc is an informal one. So, although it is considered an important annual event, declarations made during the summit are not legally binding. That said, they are still very influential and worth taking note of because it indicates the ambitions and outlines the initiatives of these particularly prominent leading nations. 

 

Where is the 2021 G7 summit?

This year, the summit will be held in the United Kingdom deep in the southwest of England, with Prime Minister Boris Johnson hosting his contemporaries in the quaint Cornish resort of Carbis Bay near St Ives in Cornwall. 
 

What will be discussed this year? 

After almost two years of remote communication, this will be the first in-person G7 summit since the novel Coronavirus first took hold of the globe, and Britain wants “leaders to seize the opportunity to build back better from coronavirus, uniting to make the future fairer, greener, and more prosperous.”

 

The three-day summit, running from Friday to Sunday, will see the seven leaders discussing a whole host of shared challenges, ranging from the pandemic and vaccine development and distribution to the ongoing global fight against climate change through the implementation of sustainable norms and values. 

 

According to the UK government, the attendees will also be taking a look at “ensuring that people everywhere can benefit from open trade, technological change, and scientific discovery.” 

 

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