Canada’s NAFTA Exit Would Cost $6 Billion

The Conference Board of Canada is predicting Canadian motor vehicle and parts exports would plunge by about $6 billion within a year if the North American Free Trade Agreement is terminated.

This story by the Canadian Press appeared in Automotive News Canada.

Overall, the board forecasts a 0.5 percent decline in the country’s economy resulting in the loss of about 85,000 jobs.

As talks to renegotiate the trade deal enter an expected eighth round in the coming weeks, the think tank says in a new report that would be the best-case scenario in a post-NAFTA world.

While the board says its analysis suggests a modest impact on the Canadian economy, it adds several possible reactions are not considered such as further U.S. trade actions including non-tariff barriers and a stronger reaction from businesses.

Its analysis says real merchandise exports would fall by $8.9 billion, or 1.8 percent, in the year following a NAFTA collapse, with food and beverages, chemicals, wood products, and agricultural products being affected less than motor vehicle and parts exports.

Tariffs and a depreciating loonie would also boost the price of U.S. imports into Canada, leading real merchandise imports to fall by a similar $8.8 billion, or 1.8 percent.

Higher import prices, the resulting decline in domestic consumption, and the loss of export competitiveness would lead to a $3.3-billion drop in real business investment spending in Canada in the first year following a NAFTA collapse, the report says.

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