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Trump Makes It Official: How a Renegotiation of NAFTA Could Affect New Brunswick

dairy

With the Trump administration delivering a letter to Congress today, signalling its intent to renegotiate NAFTA, New Brunswickers are wondering what that could mean for their economy.

With the uncertainty in recent weeks surrounding the effects of NAFTA renegotiations, new softwood lumber tariffs and vague threats directed at particular industries by the states and its leaders, there’s been much talk about the key issues at stake for Canada and New Brunswick, particularly the effects on the dairy and softwood lumber.

University of New Brunswick assistant economics professor Murshed Chowdhury says NAFTA renegotiations will certainly have some effect on New Brunswick’s economy since more than 90 per cent of the province’s trade is with the United States, but that it’s difficult to say at this point what the effects will be.

In an interview with Huddle, Chowdhury cited the softwood lumber industry as an example, saying we’ve already seen increased duties of up to 24 per cent on softwood lumber exports that negatively impact 25 sawmills in New Brunswick.

“If there’s any sort of renegotiations and any sort of tariff imposed, which is proposed … that would raise the cost for these industries,” he says. “In that case, the cost advantage we may have because of this trade, it would be eliminated or reduced.”

“The economy has some spillover effect so if there is an effect in one industry and other markets are somewhat integrated, it will have an effect.”

Irving Paper Ltd. was the only one spared a tariff increase recently; in fact, it saw its tariff dropped by 18 percent to 5.9 per cent.

The dairy industry is also nervous

Alaina Lockhart, Member of Parliament for Fundy Royal, says the issue of dairy trade, which is not a part of the existing NAFTA deal, is a particularly relevant one for her riding.

Lockhart says much attention was drawn to the Canadian dairy industry following comments made by U.S. President Donald Trump that Canadian dairy trade policies are unfair to American dairy farmers, but that the federal government has made clear the fact that it strongly supports supply management and is not looking to renegotiate those terms.

“Canada made a decision with the dairy industry decades ago and supply management has been a system that has worked really well for the producers, the farmers, the processors and the consumers,” Lockhart says.

“So as much as it’s blown up in the media a little bit, it’s not something that we’re looking to change and the government has been really clear about that.”

Dairy Farmers of New Brunswick chairman Paul Gaunce says Trump’s claims that Canada had done a huge injustice to American dairy farmers are untrue. He explains that even many dairy farmers in Wisconsin, where Trump’s comments concerning dairy were initially made, recognize that the problem they have with their industry is not Canada, but rather overproduction and an oversaturation of the market.

“The whole world has a lot of dairy products right now and that’s why we use our supply management,” Gaunce says. “Why would you need a whole glut of milk when you can just produce what the country needs? And that’s what we do. We just produce what the country needs and whatever our trade obligations are.”

Chowdhury says the effects the province’s economy sees will depend on what kinds of tariffs or renegotiations take place in our industries, but that the provincial and federal governments should cooperate on a proactive approach to mitigating potential negative effects.

“Particularly at the provincial level, we need to have detailed specifics, desegregated data which would tell us for which industry we’re doing how much trade [and] with whom,” Chowdhury says. “So unless we have those specific details, it will be difficult to make any sort of prediction or any sort of conclusion.”

“There needs to be a very coherent connection between the provincial level and the federal level. We need to figure out where we have the advantage … Policy makers need to see the detailed picture before changing anything.”

And we don’t have much time to sort through these issues. The U.S. can start renegotiating the agreement 90 days from the notification letter sent to Congress today.

h/t NBC News.