NAFTA is dead. So now what?

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Shakespeare
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NAFTA is dead. So now what?

Post by Shakespeare » 18 Oct 2017 01:32

Well, it's pretty clear that a US-contrived failure of NAFTA is now in the cards, combined with withdrawal by Trump, endless court battles. We can try to rework TPP and possibly engage China and India. A bilateral US treaty with this administration seems unlikely. Protectionist forces are now winning; all we need is the Smoot–Hawley Tariff Act - Wikipedia. But this country simply can not produce all it needs and is dependent on trade nevertheless.

So now what? And what are the implications for TSX stocks?
“A wise man should be prepared to abandon his baggage at any time.” -- R.A. Heinlein, The Door Into Summer.

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Re: NAFTA is dead. So now what?

Post by Shurville » 18 Oct 2017 07:06

Revert to the FTA?

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Re: NAFTA is dead. So now what?

Post by gobsmack » 18 Oct 2017 07:57


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Re: NAFTA is dead. So now what?

Post by brucecohen » 18 Oct 2017 08:37

From WaPo:
If NAFTA crumbles, trade among Mexico, Canada and the United States would fall under World Trade Organization rules with modest average tariff rates and an established, if unwieldy, process for resolving disputes.

But the tariff rates, although relatively low, would be higher on U.S. exports than on U.S. imports. Many trade experts say that would hurt U.S. exporters of everything from corn to auto parts and that the United States could end up with fewer jobs while paying higher prices for goods than it does.

Meanwhile, Canada and Mexico would be able to fall back on free-trade agreements they have forged with Europe recently, providing zero tariffs.

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Re: NAFTA is dead. So now what?

Post by brucecohen » 18 Oct 2017 17:27

From Axios:
Mexican President Enrique Peña Nieto told El Economista that Mexico and Canada will continue to participate in NAFTA under bilateral terms even if the U.S. pulls out of it. Trade with the U.S. will continue and be governed by the World Trade Organization's general guidelines, he said.

The big picture: Mexico and Canada say they'll reject the Trump administrations hardline demands on NAFTA, and Peña Nieto is saying they have a plan B if Trump won't agree to something they can live with.

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Re: NAFTA is dead. So now what?

Post by patriot1 » 18 Oct 2017 19:58

The NAFTA agreement says expressly that it will remain in force between the remaining two partners if one pulls out.

And of course, it's not at all a given that Trump has the power to take the US out. The US legislation does not grant the president power to terminate the agreement.

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Re: NAFTA is dead. So now what?

Post by OnlyMyOpinion » 18 Oct 2017 23:14

patriot1 wrote:
18 Oct 2017 19:58
The NAFTA agreement says expressly that it will remain in force between the remaining two partners if one pulls out.
And of course, it's not at all a given that Trump has the power to take the US out. The US legislation does not grant the president power to terminate the agreement.
Sounds like yet another of the initiatives & efforts of a lame duck president - in their first year?

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Re: NAFTA is dead. So now what?

Post by Insomniac » 19 Oct 2017 00:07

RIP NAFTA. Go TPP w/o USA!

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Re: NAFTA is dead. So now what?

Post by Shakespeare » 19 Oct 2017 09:07

Perhaps the real lesson is that the US is no longer a dependable friend or ally, even to Canada. Sauve qui peut.
“A wise man should be prepared to abandon his baggage at any time.” -- R.A. Heinlein, The Door Into Summer.

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Re: NAFTA is dead. So now what?

Post by Peculiar_Investor » 20 Oct 2017 11:21

Shakespeare wrote:
18 Oct 2017 01:32
So now what? And what are the implications for TSX stocks?
Who knows? Lots of speculation on the potential impacts/implications by many who earn big bucks to know what is supposed to happen. Based on my experience, nobody really knows, so I'm going to continue to still to my plan and asset allocation as stated in my investment policy statement (IPS).
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Re: NAFTA is dead. So now what?

Post by ghariton » 20 Oct 2017 13:06

Peculiar_Investor wrote:
20 Oct 2017 11:21
nobody really knows, so I'm going to continue to still to my plan and asset allocation as stated in my investment policy statement (IPS).
:thumbsup: :thumbsup: :thumbsup:

Anyway, even if I wanted to make changes (which I don't), I fail to see what those changes should be?

Reduce my holdings of U.S. equities? For all I know, U.S. economy will do better than its erstwhile partners. After All, they still have that enormous domestic market, and others (except perhaps China) don't.

Reduce my holdings of Canadian equities? Currently they are at around 3 per cent of my portfolio. It's not worthwhile to reduce that.

Reduce my holdings of Canadian fixed income? I hold RRBs, which should do all right in any storm.

Change my mix of currencies? Who knows which currencies will do well and which badly?

Go to cash? That's market timing, and a mug's game. At some point I will have to get back into the markets, and who knows what the markets will be like then?

George
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Re: NAFTA is dead. So now what?

Post by AltaRed » 20 Oct 2017 19:04

Surprise. USA has done no analysis to determine economic impact on a NAFTA demise. Gotta wonder who is at the wheel.

http://www.bnn.ca/u-s-hasn-t-analyzed-e ... e-1.890963

Also, an opportunity to buy many? most? Cdn stocks cheap in the next recession. Likely similar effects for the S&P500.
As for the economics, the former head of Foreign Affairs' computer-modelling unit, Dan Ciuriak, said he's working on a paper on different scenarios for the C.D. Howe Institute. His preliminary estimate is that the most drastic result — the end of free trade in North America — would see Canada's economy contract 2.5 per cent long-term, with a larger shock in the short term
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Re: NAFTA is dead. So now what?

Post by Shakespeare » 20 Oct 2017 19:18

Gotta wonder who is at the wheel.
That's what happens when the Great Leader has a 140 character attention span. :lol:
“A wise man should be prepared to abandon his baggage at any time.” -- R.A. Heinlein, The Door Into Summer.

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Re: NAFTA is dead. So now what?

Post by ghariton » 10 Nov 2017 18:55

One of the ways touted as mitigating the effects of an end to NAFTA has been new trade deals with other countries.

A possibility is to renew efforts to implement the TPP, a treaty from which the U.S. has withdrawn, but to which there are still eleven signatories, including Canada. Of course, Canada hasn't ratified the agreement yet, but doing so sure looks good right now, giving us access to markets such as Japan, Australia, Korea, etc.

Or maybe not.
It was Justin Trudeau's most Harperesque moment — opting not to go along just to get along with 10 other Pacific Rim nations determined to salvage the Trans-Pacific Partnership in Vietnam.

Earlier this week, the prime minister hit the brakes on throwing Canada's full support behind the proposed "TPP 11," a salvage of the larger pact that President Donald Trump killed when he withdrew U.S. support earlier this year. Trudeau's muted enthusiasm for a quick deal triggered the harshest barrage of international criticism he's ever faced.

Much of the outrage over Canada's sudden outlier status — a position it frequently occupied under the Stephen Harper Conservatives — emanated from Down Under
.
An Australian television station cited sources who said, "the Canadians screwed everybody." "Justin Trudeau sabotages Trans-Pacific Partnership," the Sydney Morning Herald newspaper flatly declared in a headline.
I have, from time to time, doubted the current government's commitment to freer trade. What are the chances thaqt Canada will find itself increasingly isolated from the rest of the global econ0omy?

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Re: NAFTA is dead. So now what?

Post by Shakespeare » 10 Nov 2017 19:29

You didn't include this section:
Once the headlines faded, the strategic calculation behind why the prime minister decided to slow things down came into sharp focus: jumping quickly into that trade deal would have weakened Canada's hand in renegotiating NAFTA with an even harder-nosed Trump administration.

That view came from some unlikely sources, including some former Harper-era Conservatives who were intimately involved in the original negotiation of the TPP, the Canada-EU free trade deal known as CETA, and many other deals of varying sizes.

"Canada's response is not surprising, given all (previous) outcomes were negotiated with the dominant U.S. economy at the table," said Adam Taylor, a former aide to Conservative trade minister Ed Fast and a principal at Export Action Global, an Ottawa-based trade consultancy.

"It now makes sense to step back, evaluate Canada's long-term offensive and defensive interests and adjust the TPP to present-day realities."
“A wise man should be prepared to abandon his baggage at any time.” -- R.A. Heinlein, The Door Into Summer.

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Re: NAFTA is dead. So now what?

Post by Rysto » 10 Nov 2017 20:36

ghariton wrote:
10 Nov 2017 18:55
I have, from time to time, doubted the current government's commitment to freer trade.
New story: Canada, 10 other nations agree on core elements of TPP. Apparently the intellectual property provisions that the Americans insisted on have been stripped out of the deal, which is exactly what I wanted to see with the US gone.

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Re: NAFTA is dead. So now what?

Post by kumquat » 10 Nov 2017 20:57

Shakespeare wrote:
20 Oct 2017 19:18
Gotta wonder who is at the wheel.
That's what happens when the Great Leader has a 140 character attention span. :lol:
I think it's now 240.
I don't intend to offend anyone, that part is just a bonus.

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Re: NAFTA is dead. So now what?

Post by ghariton » 10 Nov 2017 22:33

Good news. It seems that there is agreement to negotiate a new TPP after all.
In a major breakthrough, trade ministers from 11 Pacific Rim countries said they reached a deal Saturday to proceed with the free-trade Trans-Pacific Partnership deal that was in doubt after President Donald Trump abandoned it.

A statement issued in the early hours Saturday said an accord was reached on "core elements" of the 11-member pact. The compromise was delayed by last-minute disagreements that prevented the TPP leaders from meeting to endorse a plan on Friday.

"Ministers are pleased to announce that they have agreed on the core elements of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership," the 11 nations said in a statement.
George
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Re: NAFTA is dead. So now what?

Post by AltaRed » 11 Nov 2017 00:28

But there are a number of things that are still 'sticky' such as points of origin for auto parts, etc. Canada and Mexico need something that does not clash head on with NAFTA provisions in the event NAFTA survives in an acceptable form.
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Re: NAFTA is dead. So now what?

Post by Shakespeare » 11 Nov 2017 00:37

From behind the G&M pay wall:

On TPP, Trudeau has his Canada-first moment - The Globe and Mail
There were concerns that provisions on cultural industries would create a political backlash in Quebec. And there was an outcry from the Canadian auto sector, including parts makers and unions, who considered the first TPP a bad deal.

Auto-sector interests mounted an intense lobby in the past month. Most notably, Flavio Volpe, the president of the Automotive Parts Manufacturers' Association, called ministers and senior aides. The message: The first TPP was a bad deal for the Canadian auto sector....
“A wise man should be prepared to abandon his baggage at any time.” -- R.A. Heinlein, The Door Into Summer.

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Re: NAFTA is dead. So now what?

Post by ghariton » 03 Dec 2017 14:09

So if NAFTA dies, as seems more and more likely, and Canada has torpedoed TPP Junior, by essentially walking out of the talks, what's left?

China is a large economy, and better access to that market might go some way to mitigating the pain from the loss of NAFTA. So it's a good thing that Prime Minister Trudeau is off to Beijing to negotiate... er... a framework for exploratory talks that might lead to the beginning of formal negotiations (or something like that).

Canada even has its agenda for an eventual deal:
Senior government officials, speaking on the condition of anonymity because of the sensitivity of the issue, say Canada wants China to agree to a framework for free trade talks that will include its so-called progressive trade agenda _ environmental and labour, gender and governance issues.
Unfortunately, this framework may be a tough sell:
Chinese officials have repeatedly said any free trade deal with Canada should be divorced of human rights considerations. But Canada wants to continue to add what it sees as this broader progressive trade agenda that it successfully entrenched in its free trade deal with Europe and in the Trans-Pacific Partnership with Pacific Rim countries, not including China.
The present Chinese leadership has repeatedly said that it sees western liberal democracy as a dead end, and wants to develop a socialist model with Chinese characteristics. It is not at all clear to me what that means, but it is quite clear that it has no room for human rights.

So what is our government up to? Why pursue a free trade agreement approach with China that is guaranteed to fail?

Perhaps this government is anti-free-trade across the board. In that case, we should avoid investing in Canadian companies that heavily depend on exports.

George
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Re: NAFTA is dead. So now what?

Post by AltaRed » 03 Dec 2017 14:42

ghariton wrote:
03 Dec 2017 14:09
Perhaps this government is anti-free-trade across the board. In that case, we should avoid investing in Canadian companies that heavily depend on exports.
I trend toward Canadian multi-nationals that have much of their operational capacity outside Canada, albeit there will be a lot of knock-on effects anyway should exports* 'crash'. Banks, for example, even RY and TD, would suffer despite having a good portion of their business elsewhere.

* We could have a 60 cent loonie though that would mitigate tariffs and duties imposed by others. Another good reason to be currency diversified ex-Canada. It is just seems prudent to more diversified now than ever before.
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Re: NAFTA is dead. So now what?

Post by kumquat » 03 Dec 2017 16:13

Well, it seems the people behind PMJT (god knows he has no original ideas) are not in favour of trade with anyone. First you sorta play "I kinda like" with NAFTA, but you don't try hard (let The Orange one kill it). Second, pretend TPP is ok, then piss off the whole crew and probably derail it. Third, pretend to get on your knees to to Bejing and let Canadians kill it. The key is not to let Canadians kill you because of it.

It's kinda the Trudeau family position. It's ok if PQ's standard of liiving falls 20% if the west's falls 40%. We're twice as good.
I don't intend to offend anyone, that part is just a bonus.

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Re: NAFTA is dead. So now what?

Post by ghariton » 13 Dec 2017 22:02

Another reason to be against NAFTA. It causes obesity.

No, this is not from The Onion, or even Fox News. It's from the New York Times.

George
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Re: NAFTA is dead. So now what?

Post by Taggart » 14 Dec 2017 07:39

ghariton wrote:
13 Dec 2017 22:02
Another reason to be against NAFTA. It causes obesity.

No, this is not from The Onion, or even Fox News. It's from the New York Times.

George
Well, if you can't trade drugs within NAFTA, with lot's of government help, at least you can purposely sell addictive food and get people overweight and sick.

The last sentence in the article says it all:

“Look at us,” the elder Mr. Ruiz said, as he sheepishly polished off the remains of a chocolate sundae. “We’re all educated people but we’re hooked.”

.....and once they've got you hooked, for most people, it's hard to get off the damned stuff. Been there, done that.

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