Why NAFTA and Canada are important to the U.S. economy

An open letter to President Trump from the Business Council of British Columbia as the U.S. prepares to renegotiate NAFTA


Dear President Trump:

The Senate’s recent confirmation of Robert Lighthizer as the new United States trade representative signals that the work to renegotiate the North American Free Trade Agreement (NAFTA) will get under way soon. Against that backdrop, we hope you and your cabinet will keep in mind a number of important facts regarding the U.S.-Canada economic and trade relationship.

  • Canada is the biggest export market for a solid majority of U.S. states – 35 states in all, based on the most recent count. The list includes Ohio, Michigan, Pennsylvania, Wisconsin, New York, Kentucky, Tennessee, Georgia, Alabama, North Carolina, Montana, North and South Dakota, and Idaho. Last year, American companies sold $2.2 trillion worth of goods and services to customers in other countries. Of those foreign customers, Canadians were the biggest buyers of American-made products and services, supporting millions of U.S. jobs in the process.
  • Trade flows between our two countries are well-balanced.  In 2016, American goods exports to Canada totalled $267 billion (U.S. dollars), while imports of goods from Canada reached $278 billion.  Thus, the U.S. posted a goods trade deficit with Canada of $11 billion last year.  But the United States has long enjoyed large surpluses in services trade with Canada, in the range of $28 to 32 billion annually since 2012.  So in aggregate, the United States has a healthy surplus in its overall bilateral trade with Canada.
  • You’ve often voiced concern over the sharp drop in manufacturing employment in the United States. It’s true that your country has experienced a sizable loss of jobs and capital investment in the manufacturing sector. But you should know that Canada has not benefited from this in any way: indeed, because of the high degree of cross-border integration in many manufacturing industries, Canada has been hurt by the shrinking economic footprint of American manufacturing. And in percentage terms, Canada has suffered manufacturing job losses almost as steep as those in the United States.

If the outsourcing of U.S. manufacturing jobs and production is a problem for your administration, please recognize that Canada is not the cause of it.

  • Canada is one of the world’s leading exporters of oil and natural gas. And we’re a vital source of the energy needed to power the American economy. Canada exports almost as much oil to the United States as all other foreign suppliers combined. In addition, we’re the dominant source of natural gas imports into the United States.

As you know, compared to energy exporters in the Middle East and Latin America, Canada has a well-deserved reputation as a reliable and friendly supplier of cost-effective energy products to the United States.

Sources of American oil and natural gas imports, 2015

Source: Credit Suisse.

  • Finally, it’s useful to remember that over many decades, the U.S. and Canada have forged the largest and most extensive bilateral commercial relationship between any two countries in the world, encompassing the movement of goods, services, data, investment, and people. Two-way trade in goods and services exceeded US$635 billion last year. Every day, U.S.-Canada trade amounts to more than C$2 billion or US$1.75 billion.

Mr. President, we understand your desire to strengthen America’s economy and improve the well-being of the nation’s middle class. Canada is and can remain a valuable economic partner as you move forward with your trade and economic agenda.

Sincerely,
Jock Finlayson
Executive Vice President
The Business Council of British Columbia


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