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Finance & Innovation

Trudeau Says Canada Is Ready for Surprise Decisions From Trump on NAFTA

Prime Minister Justin Trudeau says the government is “braced” for whatever decisions US President Donald Trump makes next following a meeting between the two leaders in Washington.

Trudeau and Trump met this week at the White House to discuss a number of issues, with the highlight being discussions about the North American Free Trade Agreement (NAFTA).

“We’ll see what happens with NAFTA, but I’ve been opposed to NAFTA for a long time in terms of the fairness of NAFTA,” Trump said at the public conference in the Oval Office. “I think Justin understands that if we can’t make a deal, it’ll be terminated, and that’ll be fine.”

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Contrary to Trump, Trudeau has praised NAFTA as an arrangement between countries and reiterated this in a press conference post-meeting.

"I continue to believe in NAFTA; I continue to believe that as a continent working together in complementary ways is better for our citizens and better for economic growth, and allows us to compete on a stronger footing with the global economy," Trudeau said.

The meeting at the White House included Trudeau and Trump as well as eight of their senior advisors, according to CBC.

During their discussion, Trump proposed replacing the existing agreement with a new deal that would exclude Mexico. When created in 1988, NAFTA originally only included the US and Canada, but Mexico joined in 1994.

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Critics of NAFTA both in Canada and the US have argued that Mexico’s lower wages need to be addressed during renegotiations.

Still, others argue that Mexico should be kept in the agreement, since goods that cross between Canada and the US also sometimes cross through Mexico. Products traveling between the US and Mexico can currently do so without paying duty, which minimizes the cost of the product altogether — meaning the cost of the goods in Canada are lower.

If the trade agreement comes to an end between the US and Mexico, Canadian consumers will likely see an increase in the cost of goods.

From the American side of things, NAFTA supporters estimate that around 14 million jobs rely on trade with Canada and Mexico. The nearly 200,000 jobs related to export that are created annually thanks to NAFTA also pay an average of 15% to 20% more than the jobs that are lost because of it, according to the Council on Foreign Relations report NAFTA’s Economic Impact.

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A study of NAFTA’s effects by the Peter Institute for International Economics (PIIE) in 2014 indicated that about 15,000 jobs are lost each year because of the agreement, but that for each job lost, the economy gains around $450,000 in the form of higher productivity and lower consumer prices, according to the CFR rapport.

Global Citizen campaigns on issues that relate to poverty. Keeping an agreement like NAFTA in place is a component that could ultimately lead to minimizing poverty as supporters argue it creates more jobs than it loses, and allows for better products to be purchased within the US and Canada at a lower cost. This benefits all people, and especially those living as part of lower-income families.

Trump has been vocal about his dislike of the NAFTA agreement, and it seems unlikely that slight tweaks to the agreement would change that. Trump wants more automotive manufacturing to take place in America and wants to extend more government contracts to U.S. companies.

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Trudeau indicated several times on Wednesday following the initial meeting that the Canadian government is “ready for anything.”

“I think Canadians are aware that the American administration and the president makes decisions that surprise people from time to time,” he said at his press conference.

In 2016, Canada exported $3.9 billion in goods to the US, and imported $3.6 billion, according to Statistics Canada. Canada is the largest goods export market for the US, according to the Office of the US Trade Representative.

The benefits are therefore two-sided.

Trudeau heads to Mexico City today to meet with Mexican President Enrique Pena Nieto.