Nafta And The Canadian Economy

Canada and the United States have had a very old closeness where the two nations live serenely together. The borders are open to one another, not armed and the residents of each nation have value for the other. Like any other friendship, The United States and Canada have also had their share of troubles in the past. One of the problems between the two nations deals with the finances of each country. The North American Free Trade Agreement also known as NAFTA, is sometimes called in to mediate between Canada and the US. NAFTA has been positive on helping the Canadian economy in general. "By 2004, Canadians could look back on fifteen years of experience under the new arrangement. Michael Hart asked what have we learned from that experience?" (Hart, 2004)

NAFTA was designed to be able to level the playing field for the three nations when it comes to import and export business. The agreement calls for the mediation of disagreements and the three nations that belong agree to allow NAFTA's mediation decisions to stand. The NAFTA attempts to level the playing field in international trade by allowing certain equalizing tariffs much in the same way racing cars qualify for starting position in a race.

The trade disputes between the two countries have been mediated and settled through use of the arbitration panel that was established under the North American Free Trade Agreement with varying results along with outcomes. Usually the NAFTA agreements and rules have been favorable for the economy of Canada (Trade, 1996). One example of such profit allowing decisions was reached in 1996 when Canada and the US had a dispute about Canada's marketing boards that regulate prices for eggs, dairy products and chickens. The US fought the ability for Canada to maintain the regulations stating it would cost the US about $1.billon dollars, but the mediating panel of NAFTA ruled Canada was within its rights to use its marketing board. The NAFTA ruling in Canada's favor provided continued revenue for the Canadian economy.

"U.S. dairy, poultry, egg and barley interests filed the original complaint Jan. 22, objecting to Canadian tariffs ranging from 180 to 350% on U.S. dairy, barley, eggs and other products. Drinking milk in the U.S. that fetches $14 to $15 per hundred pounds would sell in Canada for $16 to $17 for each hundred pounds, thus pricing U.S. milk out of the Canadian market, the U.S. industry said (Trade, 1996). "

This ruling came three years following the threat by Canada not to become members of the Northern American Free Trade Act (Seek, 1993). At the time of the threat Canadian national economists were warning the Canadian government that signing the agreement would lead to the economic ruin of the nation. There were many concerns about how the agreement would impact manufacturing and other aspects of the nation's economy. The opposite has proved itself to be true. The economy of Canada has improved under the watchful eye of NAFTA and its decisions, rules and boundaries.

The biggest accomplishment that NAFTA has done to improve the Canadian economy is to provide an agreed upon mediator for disputes between Canada and the United States. Before the NAFTA implementation when there were trade disagreements it often threatened the trade relations across the board between the two nations (Launches, 2002). Without a mediator the two governments were left to argue out the situation and try to resolve it. The NAFTA implementation gave each nation an avenue to pursue complaints in the trade transactions. Canada's economy has improved because of NAFTA because it has placed rules and trade agreements in place that all members have agreed to abide by. This eliminates many possible disagreements that would occur without the prearranged agreement (Launches, 2002).

Since the inception and implementation of NAFTA Canada has had a recourse if it did not agree with a decision being made by the other members. In addition to allowing Canada to precede with its own trade actions it also protects Canada from being subjected to any unfair trade practices from the other member nations.

A study that was conducted concluded that the North American Free Trade Agreement has improved as well as raised overall the standard of living for Canadians. The experts who conducted the study concluded that claims NAFTA has hurt the Canadian economy are misleading and false (Fraser, 1998).

The study debunks many of the previously believed myths about the impact NAFTA has had on the economy of Canada. There are several ways that NAFTA has improved the economy of Canada including employment increases. The study concluded that NAFTA caused an increase in trade opportunity which in turn helped to provide more jobs. The Fraser institute says that "Total employment has been rising in Canada over the past several years, not falling. Total non-agricultural employment has risen from 12.4 million jobs in 1988 to 13.22 million in 1996. In 1997, the Canadian economy created an additional 324,000 full-time jobs (Fraser, 1998)."

Objections to NAFTA by some Canadian economists were that the Mexican workers, who were willing to work for lower wages, would take trade opportunity away from Canada. This has proved itself to be a false concern (Fraser, 1998). Experts believe the answer lies in the productivity levels of each nation. Canadian business and labor employees are statistically more industrious than Mexican workers, which equaled out the trade outcome through NAFTA. Research reveals that the Organization for Economic Cooperation and Development display that Canada's labor costs are lower than Mexico's and labor wages have risen since 1993. (Fraser, 1998)

Another concern about NAFTA that has proved to be inconsequential is the belief that Canada's industrialized jobs will be gone as a result of NAFTA. After this was studied, it turned out not to be the case for several reasons. One of the most important reasons was that the total output of manufacturing has remained extremely constant for the past few years. United States exports doubled from $81.9 billion to $164.7 billion between 1988 and 1996 (Fraser, 1998). This proves that there has not been any job losses and decimation in the Canadian manufacturing industry (Fraser, 1998).

NAFTA was accused of hurting the Canadian agriculture sector. As time pushed on, that concept was studied it was found to be false. Canada's agriculture has become more competitive instead of less so. (Fraser, 1998) This has been directly linked to the North American Free Trade Agreement according to experts. Experts do agree there has been a marginal number of losses to producers because of the NAFTA but overall those losses are overcome by the gains to the trade through lesser proves and an enlarged selection in products available.