NAFTA’s success in question
Its impact in Canada merely ‘mildly positive’
The Associated Press
January 2, 2004
TORONTO-- The BlackBerry, the increasingly popular electronic organizer and e-mailer, is one of the most visible symbols of how Canada has benefited from the North American Free Trade Agreement.
"I stand up when I give speeches, hold up my BlackBerry, which everybody in the world has, and say, " ‘Canadian technology,’ " said Pamela Wallin, Canada’s consul general in New York.
Blackberry manufacturer Research in Motion had $153.9 million in profits during the quarter ended Nov. 30, earned in part from the U.S. market opened by NAFTA, which turned 10 on Thursday.
The agreement to lower trade barriers among Canada, the United States. and Mexico has shaped the world’s largest trading partnership -- Canada-U.S. trade alone is valued at $1.4 billion a day. But despite Blackberry and other Canadian high-tech achievements, observers say NAFTA has been only mildly positive for this country.
Canada still relies on resource-based industries for 45 percent of all exports, according to Andrew Jackson, senior economist at the Canadian Labor Congress.
The country’s investment in research and development as a percentage of gross domestic product is less than half the U.S. amount. That and Canada’s smaller, under-utilized factories mean its production of high-tech goods accounts for just 13.5 percent of manufacturing compared to 34.8 percent in the United States, Jackson said.
Peter Pauli, associate dean at the Rotman School of Management at the University of Toronto, said that while Canada has had gains from NAFTA, they’ve been limited because productivity goals have not been reached and there has been little cushioning for industries to survive greater competition.
But, Pauli, said, "We needed access to U.S. markets."
When NAFTA was proposed in the 1980s by the governments of Ronald Reagan and his Canadian counterpart Brian Mulroney, among its stated aims were to eliminate the gap in productivity between Canada and the United States, and boost wages and living standards.
It never happened in Canada, Jackson said. Between 1992 and 2002 productivity grew by 51.9 percent in the U.S. compared to just 17.9 percent in Canada. Employers, not workers, reaped the benefits of Canada’s higher hourly output, according to the book "Lessons from NAFTA: the High Cost of Free Trade," published in November by the Ottawa-based Canadian Center for Policy Alternatives.
During NAFTA’s first nine years, employment in Canada grew by 19 percent, representing a gain of 2.7 million new jobs. But fewer than half these new jobs were full-time, the book says.
But The Canadian government is upbeat about the treaty and its impact.
"NAFTA has been a great success for Canada and its North American partners, and we are committed to ensuring that it continues to help us to realize the full potential of a more integrated and efficient North American economy," federal trade spokesman Andre Lemay said.
Between 1989 and 2002, Canadian exports to the United States rose by 221 percent, while imports from the United States rose by 162 percent. Canada’s trade with Mexico has doubled in the last 10 years.
Maude Barlow, chairwoman of the Council of Canadians, Canada’s largest public advocacy organization, acknowledged there had been gains in sectors such as high tech, but she gave NAFTA an overall poor grade.
In addition to low wages, Barlow cited a 2001 study by the Organization of Economic Cooperation and Development which said net social spending in Canada declined by 15 percent of GDP over the previous decade to 18.9 percent.
"Opening those doors helped some highly skilled workers and managers in some sectors but overall the jury is very clear we created an entrenched poverty class," Barlow said.
"We feel there’s been a dramatic race to the bottom. The promised quality of jobs has not emerged and we find ourselves a much more divided nation 10 years into NAFTA."
As an example of Barlow’s argument about the growth of low-paying jobs, clothing manufacturer Peerles employs 3,000 unskilled and almost entirely immigrant workers in its Montreal factory.
But Peerles President Elliot Lifson champions NAFTA, which wiped out weaker clothing manufacturers and consolidated the industry.
"The biggest advantage Canada has is its proximity to the United States. We are always going to be closer than China," said Lifson, who is also head of the Canadian Apparel Federation.
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