Printer Friendly

Nothing to fear from deal with Mexico: professor.

Nothing to fear from deal with Mexico: professor

The sides are already being drawn for what could be a short, intense battle as Canada joins the United States and Mexico in tripartite negotiations for a free trade deal which would cover an area stretching from the Yukon to the Yucatan.

However, the battle could amount to only an emotional fire-fight compared to the war waged over the Canada/U.S. Free Trade Agreement in 1988.

U.S. negotiators are lobbying for a "fast-track" process in order to have a general agreement with Mexico in place by the end of the year.

The U.S. Congress is expected to vote on the process by the middle of the month. If it is adopted, then Congress can only approve or kill the final agreement. It cannot add amendments to or delete clauses from the pact.

It is unlikely that Mexico will negotiate a deal if the "fast-track" approach is denied.

For Canada the potentially harmful consequences of staying away from the bargaining table far outweigh the potential harm a trade agreement could cause.

"It's always more beneficial to have free trade, than not to have it," notes Professor Dimitri Sakellariou of the economics department at Laurentian University.

If Canada remains on the sidelines, a U.S./Mexico deal will give the United States unhindered access to two countries by the end of the century.

Meanwhile, Canada will only have unhindered access to the U.S. Investment in emerging businesses will begin to migrate to the U.S. in order to take advantage of the American agreement with Mexico.

By all accounts, if the three-way deal does go through, there will be very little negative impact on Northern Ontario.

Sakellariou notes that the economy of Northern Ontario is independent of the southern Ontario economy because it is directed by two major sectors.

While mining and forestry are cyclical in nature, they are also two sectors which could either benefit or, at the very least, remain untouched by the deal.

The mining sector in Mexico is currently not subject to tariffs. Canada imports approximately $182.6 million worth of precious metal from Mexico.

According to Statistics Canada, the total value of exports to Mexico is approximately $600 million, while Canadian imports from the country total about $1.7 billion.

Forest-related industries stand to reap substantial gains from the deal. Canada's pulp producers send goods worth an estimated $23.5 million to Mexico annually.

There is little competition between the two countries in that sector.

An official with Investment Canada said the pulp and paper sector will probably see long-lasting benefits from any deal. The official, who asked not to be identified, said the benefits will begin to be noticed once money begins finding its way to Mexico's lower classes.

The Canadian Pulp and Paper Association reports that sales of wood pulp to Mexico declined to $23.8 million in 1989 from $36.3 million in 1988. However, that was good news for paper producers because it led to an increase in paper exports to $23.1 million in the first three quarters of last year compared to only $13.5 million for all of 1989.

Producers of lumber and structural board are expected to benefit once investment begins to make its way through the Mexican economy and spurs on the construction sector.

The Investment Canada official said Canada's telecommunications sector stands to benefit the most from the three-way trade deal.

Northern Telecom has seen its sales in Mexico increase almost seven-fold to $27 million between 1988 and 1990. The Investment Canada official said Mexico's infrastructure, including its communications systems, needs a tremendous amount of improvement for the country to take advantage of any trade agreement.

This will open up opportunities for engineering firms and transportation-related companies, as well as construction and equipment firms.

However, even Sakellariou admits there will be drawbacks to the three-way deal.

"There's no doubt that there will be people who are hurt by free trade," he noted.

The sector of Canada's economy most likely to feel the ill-effects from a trade deal with Mexico is manufacturing - a sector predominantly based in southern Ontario.

Canada currently imports such manufactured goods as automobile components, telecommunications equipment and industrial machinery from Mexico. However, Sakellariou predicted that the flexible nature of Canada's hightech sector will allow it to adapt to changes and lessen the impact of any labor changes.

Sakellariou added that Mexican wages, a keystone in organized labor's opposition to any free trade deal, will be under pressure to increase, just as Canadian firms will be under pressure to become more efficient in order to be more competitive.

Analysts say that there is little chance companies will close up shop in Canada and relocate in Mexico. Labor only accounts for an average of 15 per cent of the cost of a product, and any firm operating in Mexico will have to contend with added transportation costs, an unreliable infrastructure and an employee turnover rate of almost 20 per cent.

In addition, the relatively stable political climate of Canada will also help retain companies.

Any job losses can be mitigated by the creation of a supernational committee which would formulate retraining and skills development programs. A similar safety net was adopted by the European countries which are forming the common market.

"There will be minimum damage to labor force if it is a good deal," noted Sakellariou. "If, on the other hand, everyone is gung ho for a deal no matter what happens, then there will be problems."

COPYRIGHT 1991 Laurentian Business Publishing, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:proposed tripartite trade negotiations involving the United States, Canada and Mexico evaluated; Professor Dimitri Sakellariou, economics department, Laurentian University
Author:Krejlgaard, Chris
Publication:Northern Ontario Business
Date:Mar 1, 1991
Previous Article:Retail sector battles out-shopping phenomenon.
Next Article:Professor says MNR lacks clear policy direction.

Related Articles
The human costs of NAFTA.
Is this land really our land? Impacts of free trade agreements on U.S. environmental protection.
Protectionist racket.
When it comes to NAFTA ....
NAFTA numbers don't add up.
15 minutes with ... Pedro Noyola.
Steeling home: the new U.S. tariffs on steel imports bode ill for the future of free trade. (Close-Up).
Trade and environment in the Western Hemisphere: expanding the North American Agreement on Environmental Cooperation into the Americas.
Nafta's birthday party: on its 10th anniversary, revolutionary trade deal remains an enigma--has it been good or bad for Mexico?

Terms of use | Copyright © 2016 Farlex, Inc. | Feedback | For webmasters