On The New NAFTA 2.0 Deal

On October 1st the Canadian federal government announced that an update of NAFTA had been achieved and that trade negotiations with the U.S. and Mexico had concluded.

Caption: Prime Minister Justin Trudeau and Minister of Foreign Affairs Chrystia Freeland arrive to hold a press conference regarding the United States Mexico Canada Agreement (USMCA) at the National Press Theatre, in Ottawa on Monday, Oct. 1, 2018. (Sean Kilpatrick/The Canadian Press via AP)

Uncertainty over the potential dislocation and chaos of a bad deal or a breakdown in talks is now no longer a major concern. So, what happened? What is the new deal? And what did Canada get out of it? 

Details About The New NAFTA Deal – Now Called The USMA

The deal was signed at the last possible minute, just meeting U.S. determined timetables. The new deal transforms and ‘modernizes’ NAFTA, now renamed USMCA (US, Mexico, and Canada Agreement). In many ways, Canada netted very few tangible gains from the agreement. The biggest benefit of the deal, as stated by the Prime Minister and his Foreign Minister, is that the deal was signed to begin with and that the trade pact didn’t collapse. The second main benefit was that the potentially devastating Trumpian threat of tariffs on Canada’s auto exports didn’t come to pass. These are not net benefits.

Who Got The Better Deal – Trump or Canada?

Trump’s repeated key goal was to open up Canada’s protected dairy industry to U.S. producers. Canada conceded on this to the consternation of our nation’s agricultural sector. Canada made concessions to its generic pharmaceutical sector which experts say will raise drug prices. We conceded by doing nothing to have newly imposed tariffs on steel and aluminum lifted, which will do long term damage to manufacturing. Gains were few. Duties on internet purchases will be lessened, and Canada kept the dispute resolution mechanism and protections to our cultural sector – two advantages we had with the original NAFTA.
While the end of uncertainty is good for Canada’s economy and real estate sector, the concessions made were disappointing, considerable, and will cost average Canadian consumers. 

A Positive August For Real Estate

Numbers reveal a positive August for GTA real estate and welcome figures for an industry that had a relatively cool summer selling season.

In Toronto, sales increased by 8.5% and prices were up 4.7% from a year ago. The average price for a home is now roughly $764,000 dollars. Although nowhere near early 2017 highs, the market is showing its resilience and demand despite all the battering it received over the past year.

New listings increased by 6% and the overall number of active listings increased by 9%, showing many new sellers joining the market and feeling positive about their capacity to get good prices for their assets. General media sentiment on the figures was positive, with many remarking that the figures show a market that is rebounding, on positive footing, and in good overall shape.

On Interest Rates And The Bank Of Canada

The Bank of Canada maintained its existing rate of 1.50%. There was no increase, which some expected, largely due to uncertainty over a trade deal with the U.S. and the potential implications and affects on the economy of a bad deal.

As Tembo has noted there is a risk of the U.S. placing tariffs on the Ontario economy and Canada’s forced departure from NAFTA. Such an outcome would devastate Ontario’s economy, whose backbone is automobile assembly and its associated spin-off industries and supply chain. Core inflation exceeded the Bank’s target of 2% and is at 3%. 

The Latest Trade Negotiation News With The U.S.

The Prime Minister has stated that there will be no NAFTA deal with the U.S. unless Canada’s cultural industries (arts and broadcasting sectors) are protected. The PM is worried U.S. media conglomerates or companies could buy a Canadian newspaper or TV station. In addition the Prime Minister wants a dispute settlement clause included to to “ensure the rules are followed.” President Trump has tweeted that a deal with Canada is not a ‘necessity’ and he has repeatedly warned that he could easily exclude Canada from a deal if tariffs on Canadian dairy and eggs are not eliminated.