The Claim: “In the new NAFTA, Justin Trudeau gave up concession after concession, but got nothing in return for Canadians. Now Canadians are paying for his mistakes.”
— Conservative Leader Andrew Scheer tweets about “Justin Trudeau vs. Reality” on the new NAFTA deal.
In this online attack, Scheer tries to back up his claim by juxtaposing an October quote from the prime minister touting the benefits of the new NAFTA agreement with a line from a recent C.D. Howe Institute study that suggests the “negative elements outweigh the positives…” when it comes to the renegotiated trade deal.
The Conservative leader goes on to correctly cite one of the paper’s key findings: That the Canada-U.S.-Mexico Agreement (CUSMA) will shrink this country’s GDP by 0.4 per cent, delivering a more than $10 billion US hit to general economic welfare.
But he neatly skips over some inconvenient words with his ellipses, where the authors write that the agreement will result in “lower real GDP and welfare for all three parties, with Mexico being hardest hit and the United States the least.”
In the new NAFTA Justin Trudeau gave up concession after concession, but got nothing in return for Canadians. Now Canadians are paying for his mistakes. pic.twitter.com/wofCYDL0l8
— Andrew Scheer (@AndrewScheer) July 28, 2019
What the economic think-tank actually predicts via its modelling is that the real GDPs of the U.S. and Mexico will shrink by 0.1 per cent and 0.79 per cent respectively due to the new deal, with an associated welfare loss of almost $15 billion US for Mexico and $17.4 billion for the much larger American economy.
The three-way drop is attributed to “inefficiencies,” like more restrictive rules of origin for vehicles that have been baked into Donald Trump’s NAFTA 2.0.
Scheer is correct in saying that Canada made some important concessions at the bargaining table: The Americans are getting more access to our dairy, egg and other protected agricultural markets. Drug costs are likely to go up because new medicines will be protected from generic competition for 10 years, instead of the eight under the old deal. Copyright will now extend for 70 years from the content creator’s death, up from 50, meaning increased licensing costs for users.
But that doesn’t necessarily mean that Canada got nothing in return. The all-important Chapter 19 dispute resolution mechanism remains part of the new agreement; the language of Canada’s existing cultural exemption is preserved; and the government remains free to block access to foreign digital content, or to create policies that support and benefit Canadian creators — all things the Americans had been determined to do away with.
And there is new language recognizing the treaty rights of Indigenous people and the government’s duty to fulfil its legal obligations toward them — even if conflicts with the trade deal.
It was less of a rout than a hard-fought draw, says Dan Ciuriak, lead author of the C.D Howe study.
“My conclusion is that Canada pushed back as hard as possible against a much larger and more ruthless opponent,” he said. “We had a very experienced and effective team.”
The proof of competency can be found in comparing the outcome of CUSMA and a scenario in which NAFTA was allowed to die, said Ciuriak, a former deputy chief economist for the Department of Foreign Affairs and International Trade who now runs an Ottawa consultancy that specializes in modelling the effects of trade deals.
The hit to the Americans is pretty much the same either way: A –0.1 per cent shrinking of their GDP.
To Ciuriak, that suggests the U.S. agreed to deal that was basically a wash for them, even with the Canadian concessions. And definitely something less than the complete NAFTA overhaul Trump had promised.
And while the predicted damage to the Canadian economy sounds large, Ciuriak said it’s the equivalent of about a single quarter of growth.
(In July, the Bank of Canada updated its forecast for real GDP growth, to 1.3 per cent for 2019 and about two per cent in both 2020 and 2021, citing escalating trade conflicts as the biggest risk facing the Canadian and global economies.)
In Ciuriak’s assessment, Trump’s “arbitrary unilateralism” made the CUSMA negotiations less about gains and more of an exercise in “cost minimization” for Canada.
And he’s slightly perplexed that the Conservatives are citing his work in their attempts to paint the deal as a failure.
“Scheer’s interpretation of our study is not an accurate one,” he said.