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Money Canadian companies struggle to plan for post-NAFTA world

16:22  12 january  2018
16:22  12 january  2018 Source:   reuters.com

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Canadian industries that would be most acutely impacted by the death of the North American Free Trade Agreement are unable to meaningfully plan for a possible post - NAFTA world given the uncertainty of what could replace it, analysts and executives said.

Canadian industries that would be most acutely impacted by the death of the North American Free Trade Agreement are unable to meaningfully plan for a possible post - NAFTA world given the uncertainty of what could replace it, analysts and executives said.

a flag hanging on a wall: FILE PHOTO: Flags are pictured during the fifth round of NAFTA talks involving the United States, Mexico and Canada, in Mexico City© REUTERS/Edgard Garrido/File Photo FILE PHOTO: Flags are pictured during the fifth round of NAFTA talks involving the United States, Mexico and Canada, in Mexico City

Canadian industries that would be most acutely impacted by the death of the North American Free Trade Agreement are unable to meaningfully plan for a possible post-NAFTA world given the uncertainty of what could replace it, analysts and executives said.

Quotes in the article

Magna International Inc

MG

The terrible part of NAFTA that Canada wants to keep — for now

  The terrible part of NAFTA that Canada wants to keep — for now Canada is going all-out to save the North American Free Trade Agreement. The ruling Liberal government has even enlisted the help of the opposition Conservatives in this crusade.Rumours suggesting that U.S. President Donald Trump might kill the pact have cast a pall over official Ottawa.Yet a new study shows that in at least one key area NAFTA has been terrible for Canada.That study, written by trade researcher Scott Sinclair for the Canadian Centre for Policy Alternatives, examines how Canada has fared under a section of the pact that, in effect, allows foreign firms to overturn Canadian laws.

Canadian industries that would be most acutely impacted by the death of the North American Free Trade Agreement are unable to meaningfully plan for a possible post - NAFTA world given the uncertainty of what could replace it, analysts and executives said.

Canadian industries that would be most acutely impacted by the death of the North American Free Trade Agreement are unable to meaningfully plan for a possible post - NAFTA world given the uncertainty of what could replace it, analysts and executives said.

72.33
+0.89
+1.25%
Linamar Corp

LIMAF

59.12
-0.88
-1.47%
Martinrea International Inc

MRE

15.51
-0.31
-1.96%
Canadian National Railway Co

CNR

101.95
+0.08
+0.08%

With three quarters of Canadian exports landing in the United States, the terms of that trade are key to Canadian industries ranging from automotives to agriculture, energy and aluminum, as well as the railways and pipelines transporting their goods.

Yet if the United States does decide to walk away from the trade deal that tightly links the U.S., Canadian and Mexican economies, a scenario seen as increasingly likely, it is unclear what tariffs might apply to which exports, and what timeline might apply.

"The problem with it is, even if they pull out of NAFTA what comes next and that's unclear," said David Tyerman, a transportation and industrials analyst at Cormark Securities. "So you are hitting at a straw man that is not defined at all."

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Canadian industries that would be most acutely impacted by the death of the North American Free Trade Agreement are unable to meaningfully plan for a possible post - NAFTA world given the uncertainty of what could replace it, analysts and executives said.

Canadian industries that would be most acutely impacted by the death of the North American Free Trade Agreement are unable to meaningfully plan for a possible post - NAFTA world given the uncertainty of what could replace it, analysts and executives said.

Without NAFTA, the terms of trade could default back to a bilateral agreement which NAFTA replaced or to World Trade Organization rules, or could be created afresh.

The lack of clarity means that auto part companies such as Magna International Inc, Linamar Corp and Martinrea International Inc have little choice but to focus on delivering existing commitments and winning new contracts, Tyerman said.

"It's almost like it's business as usual," he said. "The parts companies are continuing to win business from the auto makers."

Aluminum producers in Canada, the world's biggest supplier to the United States, worry about "collateral damage" from changes that could pinch the flow of Canadian exports, said Jean Simard, CEO of the Aluminum Association of Canada, who said the current system "works beautifully".

Railway operators may also face lower volumes in the aftermath of a NAFTA breakup, but also need a better sense of how any new rules will affect their customers' decisions.

Trudeau to push ties in California, Chicago

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Canadian industries that would be most acutely impacted by the death of the North American Free Trade Agreement are unable to meaningfully plan for a possible post - NAFTA world given the uncertainty of what could replace it, analysts and executives said.

Canadian industries that would be most acutely impacted by the death of the North American Free Trade Agreement are unable to meaningfully plan for a possible post - NAFTA world given the uncertainty of what could replace it, analysts and executives said.

"In a worse-case scenario with double-digit tariffs you will still only see incremental change in traffic patterns", said Rick Paterson, an analyst at Loop Capital Markets who covers companies including Canadian National Railway Co and Canadian Pacific Railway Ltd.

An end to NAFTA would not immediately hurt Canadian grain exporters, since any new tariffs would require Congressional approval. But it could sting exporters and farmers longer term since the United States is Canada's biggest wheat, hog and cattle export market.

The country's energy industry does not expect tariffs to be imposed on oil and gas exports, said Nick Schultz of the Canadian Association of Petroleum Producers, given that would amount to an additional cost to U.S. refiners, which import 3 million barrels a day of Canadian crude.

(Reporting by Alastair Sharp, Susan Taylor and Fergal Smith in Toronto, and Nia Williams and Rod Nickel in Calgary; Editing by Sandra Maler)

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