Don’t Dawdle on NAFTA Overhaul, Quebec’s Finance Minister Says
Quebec Finance Minister Carlos Leitao has a message for government officials considering a renegotiation of the North American Free Trade Agreement: Time is of the essence.
“If we are going to renegotiate NAFTA, then let’s do it,” Leitao said in an interview May 5 at Bloomberg News headquarters in New York. “The worst case scenario would be if we spend years talking about renegotiating, but don’t actually do it and it just keeps hanging around and doesn’t get addressed. The longer it drags on, the bigger the real impact on investment.”
Canadian Prime Minister Justin Trudeau is facing a lengthy trade battle with the U.S., which also includes calls for a new softwood lumber pact and Donald Trump’s complaints about Canada’s system of protectionist dairy quotas. It’s all set to drag on as the president has yet to trigger a 90-day notice period to Congress to renegotiate NAFTA. The last softwood lumber dispute lasted five years.
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“The problem with the uncertainty is we don’t know what kind of process we will have,” Leitao said. “Is this going to be along the same lines as the last NAFTA negotiations? That was very systematic. There were panels on various issues. It’s that kind of certainty that we would like. The actual nuts and bolts will take time.”
Leitao has good reason to be wary of protracted trade battles, with his most recent budget already predicting Quebec’s economic growth will lag behind the Canadian average.
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Output in Quebec will grow 1.7% this year before slowing to 1.6% in 2018, budget forecasts show. That’s less than the 2.2% and 2.3% forecast for all of Canada over the same period, according to estimates compiled by Bloomberg.
While the province hasn’t yet seen “any concrete impact” from the protectionist winds blowing in from the U.S., “it’s early,” Leitao said. “When we look beyond 2018 we need to be prudent. Will economic growth remain at the current pace? Will it decelerate? It will depend a lot on how the NAFTA negotiations go.”
On the softwood dispute, a decades-old irritant in Quebec and elsewhere in Canada, Leitao said any negotiation should be included in broader NAFTA discussions. “Lumber was never settled,” he said. “For us it’s a big issue.”
About 60,000 people work in Quebec’s forest-products industry. After the U.S. slapped tariffs on Canadian softwood lumber imports last month, Quebec announced a program of loans and loan guarantees for companies that the province estimates could be worth as much as C$300 million ($219 million) in the short term.
In retaliation for the U.S. decision, British Columbia Premier Christy Clark has called for Canada to ban U.S. thermal coal exports from shipping through its Pacific Coast ports. She’s also said if she doesn’t get the federal government’s backing, she’ll move ahead with a C$70-per-metric-ton carbon tax on such shipments. Trudeau told Clark in a letter May 5 the federal government is considering the request “carefully and seriously.”
Quebec’s finance minister, meanwhile, ruled out retaliating against the U.S. duties. “We’re not there at all,” he said. “In the world of trade negotiations, retaliation is never a good idea because that only, in my opinion, poisons the environment.”
Leitao also vowed to defend Canada’s “supply-management” system of dairy quotas, while signaling that the province would be open to changes to the formula.
“In every trade negotiation since the 1980s, people have been saying the end of supply management was coming — yet Canada has always been able to negotiate accommodations,” he said. “It’s important to defend the system. It works well for us, which doesn’t mean it has to stay exactly as it is.”