Free trade on the campaign trail
P rominent American comic Dick Gregory once likened political promises to marriage vows: "They are made at the beginning of the relationship between candidate and voter, but are quickly forgotten." It...
Prominent American comic Dick Gregory once likened political promises to marriage vows: “They are made at the beginning of the relationship between candidate and voter, but are quickly forgotten.” It is a sentiment that often comes to mind while watching the exhaustive coverage of the U. S. primaries. Candidate hopefuls have all made their fair share of promises in the lead up to the 2008 general election.
But a recent promise made by Senators Hilary Clinton and Barack Obama could have serious implications for Canadian manufacturers if it survives the election. Both senators took strong positions against the North American Free Trade Agreement (NAFTA) while speaking in Ohio, with Clinton indicating that she would consider opting out of the agreement. The anti-NAFTA message was particularly resonant in Ohio, where the agreement is deeply unpopular among laid off blue-collar workers. For many, NAFTA has become synonymous with a hemorrhaging manufacturing sector.
But what about local businesses? The Canadian manufacturing sector has been missing from the conversation.
Speaking with people in the plastics industry, there is no clear-cut consensus over NAFTA. Some see it as of great benefit to their businesses, allowing them to expand into and compete within the U. S. market. NAFTA’s provisions — namely, the elimination of tariffs — make it significantly less expensive to do business with our neighbours. Others have been more wary of the agreement’s impact, noting that Canadians cannot compete with Mexico’s low-cost maquiladora culture.
In my view, local manufacturers should stand up for NAFTA. As one industry professional recently noted in conversation, NAFTA isn’t all good, but it isn’t all that bad either. And despite recent softness in the market, the U. S. is still one of the largest markets for plastic exports. According to Export Development Canada’s most recent forecast, the U. S. accounts for over 93 per cent of Canada’s total exports in the plastics and rubber sector.
With the recent pressure on profit margins, adding to the exporter’s bottom line would make it harder for small-and medium-sized enterprises (SMEs) to compete.
And let’s not leave Mexico out of the equation. Although many large players have already moved through Mexico before moving on to greener pastures in China or India, some Canadian SMEs are just discovering Mexico’s vast potential both as an export market and an outsourcing destination.
I had the opportunity last year to visit some of the U. S. and Canadian companies who were manufacturing their products in Mexico. North American Industries — a Canadian company founded by the president of Richmond Hill, Ont.-based Brushstrokes Fine Art — was helping Canadian companies set up manufacturing operations in the country. I met several plant operators during my trip, but the Brushstrokes story was the one that stuck with me.
The company, which produces art reproductions, decided to move its manufacturing operations to Mexico after receiving a large contract from a big box store. Brushstrokes’ president realized that he couldn’t grow the company in Canada to sufficiently increase business volumes.
In this new global economy where SMEs have to go big or go home, stopping NAFTA in its tracks would be a counterintuitive move. Anti-NAFTA ideas may assuage the shared grief of laid-off manufacturing workers, but they do nothing for the sector at large.