Ending NAFTA Would Hurt Growth: Bank Report

NAFTA cog

CBJ — A report issued by the Bank of Montreal concludes that ending the North American Free Trade Agreement would harm the U.S. and Canadian economies, while simultaneously hurting their competitiveness against regions such as Europe and Asia.

According to the bank’s report, “The Day After NAFTA,” dropping the 20-year trilateral free trade agreement would result in a 0.2% net reduction in U.S. gross domestic product over the next five years and a 1% decrease for Canada.

The Trump administration has continually been a fly in the ointment, threatening to withdraw from the pact altogether if the U.S. doesn’t get better terms moving forward.  Financial experts are split as to whether President Trump is merely blustering as part of an aggressive negotiation tactic to get as much as possible or whether he really wants to end the agreement. Those who believe the latter point to the fact he has mentioned an interest in doing a deal with Canada — but not Mexic0, where the U.S. is currently dealing with a $60 billion trade deficit.

Doug Porter, chief economist of BMO Financial Group and one of the report’s authors, said that while the three North American economies would adjust to a new reality, a shift in low-wage work to Mexico enabled by NAFTA had made them collectively more competitive on the global stage.

The United States, Mexico and Canada concluded a fifth round of talks to update NAFTA last week with major differences unresolved, casting doubt on whether a deal could be reached by the end of March 2018 as planned.

@CanBizJournal

Recommended