A Pressed Cheat Sheet for:
NAFTA and CETA
Published Dec 6, 2016
~5 minute read
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Two acronyms you’ve been hearing a lot about but don’t really get.
NAFTA = North American Free Trade Agreement: A complicated trade deal between Canada, Mexico, and the US.
CETA = Comprehensive Economic and Trade Agreement: An equally complicated trade deal between the EU (European Union) and Canada that makes it easier and cheaper to import/export goods between countries.
NAFTA history lesson
Free trade deals have been all the rage since the late 1980’s (although not everyone loves them, but we’ll get to that later). Canada is already a member of NAFTA – signed back in 1994, the agreement removes a lot of taxes on goods shipped between Canada, the US, and Mexico. NAFTA makes it easier for Canadian companies to sell goods in Mexico and the US, but also easier for Canadian companies to move to Mexico or the US to sell goods back to Canadians. People feared that it would result in widespread job loss but instead, trade between Canada and the US more than tripled, and American investment in Canada increased from $70 billion in 1993 to $368 billion two decades later.
While Canada, the US, and Mexico were busy bro-ing out in North America, European countries moved in together. They formed the Eurozone which made NAFTA look like Canada, the US, and Mexico had personal space issues. The EU eliminated tariffs, like NAFTA, but also got rid of borders, and the Eurozone replaced national currencies with an international currency – the euro. FYI: the EU is different from the Eurozone. Every Eurozone country is in the EU, but not vice-versa. The EU, comprised of 28 countries, has free trade and open borders, but only the Eurozone countries use the euro as their currency.
Why is NAFTA back in the news?
ICYMI: The US elected a new President named Donald Trump. He’s very protective of Americans and wants to keep things in the family. Making it easy for other countries to trade with the US is not something he’s a fan of. During his campaign, he said he wanted to renegotiate NAFTA, but didn’t indicate what parts, exactly. Canada and Mexico are open to the discussion. After all, the agreement is more than 20 years old.
NAFTA and the EU are the result of the same economic arguments that led to CETA (less tariffs = more trade = more money for everyone). They also made CETA very complicated because both the EU and Canada have other obligations that they have to meet.
What is CETA?
CETA is a trade agreement between Canada and the EU that will remove 98% of taxes and duties between Canada and the EU. It is Canada’s largest free trade deal since NAFTA, and the EU’s largest free trade deal ever.
Why is this necessary?
NAFTA increased trade in North America, and made Canada, Mexico, and the US all richer. The EU did the same for Europe (or most of Europe, sorry Greece). Supporters think free trade makes everything more efficient and helps the economy grow. Now, Canada and the EU want to keep reaping the benefits and create an agreement together, aka: CETA.
It took a long time, right? Why?
It all started in 2008 with a study that assessed the benefits of the deal. Negotiations continued between 2009 and 2014 before things got complicated. In the EU, every member state has to agree with the deal. 27 out of 28 members agreed. You might remember Wallonia in the headlines recently. Wallonia is a small region in Belgium – it refused to sign for political, economical, and environmental reasons. Eventually, Wallonia gave in and CETA was passed by Belgium and the EU.
Supporters are saying:
CETA could boost Canadian-EU trade by up to 20%, increase Canada’s economy by $12 billion, and the EU’s economy by $17 billion. Key supporters include Trudeau’s Liberal government, the Conservative government, and the leaders of all 28 EU countries.
Opponents are saying:
There’s a fear that CETA could gradually diminish worker rights and reduce salaries. Product and food safety is another concern. The EU has some of the strictest safety regulations in the world (another reason why negotiations took so long), so EU residents are concerned that the deal could compromise their safety standards. Due to these regulations, certain products, like meat raised with hormones, will not be exported from Canada to the EU. Greenpeace and some other environmental groups are also opposed to the deal on environmental grounds.
I remember something about Brexit?
The Brexit means that the UK is getting ready to leave the EU. If this happens, the UK will have to renegotiate a trade deal with the EU. Many people are pointing to CETA as a model for a future EU-UK trade deal. However, the EU likely won’t make things easy because they don’t want to encourage other countries to abandon the EU. And remember, even under the best circumstances (if you can’t negotiate with Canada, who can you negotiate with?), it still took the better part of a decade to pass CETA.
So, how will this affect me?
CETA probably won’t affect you overnight, but over the next few years you may see a few more European products on the shelves, greater interest in business cooperation, and eventually greater economic prosperity for Canada.
– Contributed by Richard Beattie
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