NAFTA renegotiations offer chance to diversify

A Toronto lawyer says uncertainty caused by the renegotiation of NAFTA could be an opportunity for Canadian companies to strengthen their relationships in other foreign markets, and ultimately, lead to a better trade agreement for Canada.

Riyaz Dattu, a partner in the international trade and investment law practice Osler Hoskin & Harcourt LLP, says he is closely monitoring discussions between trade officials from Canada, the United States and Mexico around the North American Free Trade Agreement. The renegotiation talks begin this Wednesday, in Washington.

Dattu says the talks could have implications for different clients, like Canadian companies concerned about potential supply chain issues.    
“They may want to have a back-up plan in case negotiations don’t quite go the way we would like them to go,” he says.

“NAFTA’s been around for 23 years, so a number of manufacturers have supply chains that rely on sourcing products from within NAFTA,” he added.

Canadian companies are aware of rhetoric south of the border about stricter enforcement of trade laws, he says, such as investigations by the U.S. Department of Commerce on steel and aluminum imports.

Then there’s Canadian companies that may be affected by potential changes to U.S. government procurement, or those affected by changing enforcement of customs laws, where Dattu says there have been recent shifts in the United States.

“They’re also concerned about what the renegotiations will end up producing,” says Dattu.

However, there is hope for optimism. Dattu says it’s important to emphasize while the focus right now might be on the NAFTA renegotiation, the Canadian government is aware trade must be diversified.

He says on Sept. 21, the Canada-European Union Comprehensive Economic and Trade Agreement will be coming into force.

“There’s a great opportunity. . .corporate lawyers and others need to point out to their clients that there are other export markets that they should be paying attention to, and the CETA is a great opportunity for Canadians to diversify their trade away from the United States,” he says. Dattu also said the Trans-Pacific Partnership may also be revived, without the United States.

“And again, that’s an opportunity that lawyers need to point out to their clients, in terms of diversifying trade and diversifying their business outreach to Asia,” says Dattu.

He says he expects “a period of uncertainty with NAFTA” but that Canada will emerge from the NAFTA renegotiations “stronger, with a better trade agreement,” thanks to efforts by the Canadian government with state-level governments and business associations in the U.S., as well as Canadian companies with long-standing relationships south of the border.

“Use that [uncertain] period to focus on trade initiatives and business exports in other markets, E.U. and Asia in particular,” he says.  

Milos Barutciski, partner and co-head of Bennett Jones LLP international trade practice, says some clients were already exposed to potential changes in U.S. trade policy, before the NAFTA renegotiation.

He’s advised them to “stay tuned.”

“Every wish list item that the U.S. has had vis-à-vis Canada negotiations that they failed to obtain in previous negotiations is back on the table, so the kind of the things I tell clients is, ‘Where have you been exposed before?,’” he says.

That means potential impacts for protective industries such as financial services or film, cinema or publishing.

“For those industries, they know what the issues are, and the Americans are just going to use the NAFTA renegotiation to try and squeeze more out of it, as they can,” he says.  

Dattu adds that while the U.S. has indicated they want the renegotiation wrapped up by early next year, that would be “historically unprecedented for a trade agreement as complex as NAFTA.”

He anticipates it could take longer, and that by the time the changes are implemented, it could be more than a year.

“We’re looking into probably 18 months, at the earliest,” he says.