Given the longstanding close diplomatic and business relationships between, and the highly integrated economies of, the US and Canada, we wish to comment on certain possible outcomes of the election of Donald J. Trump as president of the US on Canadian-based businesses and on other businesses that interact with Canada. Whenever a new US President and Congress are elected and a new US presidential administration is appointed, there are resulting changes in US policies that may impact trade, investment, business, regulation, treaties and mobility between the US and Canada.
At McCarthy Tétrault, lawyers and senior advisers are here to help our clients navigate these likely upcoming changes, and we wish to – in a very preliminary way – weigh in on a few of these.
Investment and Trade:
Looking ahead, there is an opportunity for Canada to position itself more favourably as a destination for investment and trade within North America.
- TPP and NAFTA: Mr. Trump has publicly stated
that he does not plan for the US to move forward with the
Trans-Pacific Partnership (TPP) and that he also plans to have the
US either renegotiate or terminate the North American Free Trade
Agreement (NAFTA). Nevertheless, Mr. Trump's apparent principal
issues with NAFTA to date have been directed at the US relationship
with Mexico, rather than its relationship with Canada. If NAFTA
were to be terminated, the default position for Canada should be to
revert back to the original Free Trade Agreement (FTA) negotiated
by Canada and the US in 1988 to 1989. Of course, the potential
implications on automotive and other industrial and manufactured
products would need to be considered and addressed should the US
decide also to terminate the original FTA. In the last year,
however, Canada has been the largest foreign participant in US
mergers and acquisitions and an important source of investment for
the US, which should help underscore the importance of the
US-Canada economic relationship. As regards the TPP, Mr. Trump has
voiced very strong opposition to the US agreeing to that treaty.
Rather than seeing it disappear altogether, Canada might consider
persuading the co-signatories to proceed without the US, which
would afford Canada a considerable competitive advantage in the
Pacific markets concerned. A similar Canada-alone policy might also
be pursued in relation to Japan.
- Possible Retaliatory Actions: If Mr. Trump
follows through on some of his election campaign promises regarding
trade, these actions will be taken while the US is still a party to
various trade agreements, which would potentially trigger
retaliation from its major trading partners as permitted under
these agreements. Canada is not immune to trade disputes with the
US, as is clear from the ongoing softwood lumber dispute between
the two countries, and Canada is especially vulnerable to US trade
action given the level of investment and trade between the two
countries. To date, however, many of Mr. Trump's election
campaign positions regarding trade have focused on Mexico, China
and other countries, rather than on Canada.
- CETA: Canada has just recently signed the
Comprehensive Economic and Trade Agreement (CETA) with the European
Union, which is considered to be the most advanced trade agreement
in the world. As a result, Canada should be able to position itself
even better as a trade and investment hub within North America for
European businesses and other investors and as an investment
destination for American businesses and other investors seeking
better access to the European market, which market (including the
UK) of 500 million consumers is the richest consumer market in the
world.
- Other Countries: The other potential post-election opportunity is for Canada to become more attractive to businesses and other investors from countries around the world seeking to invest in and trade within North America. In particular, for businesses and other investors from China and Middle Eastern countries which have already been very active in Canada, Canada may potentially be even more attractive today than it was before November 8.
Labour Mobility:
- Mr. Trump was clear during the election campaign about
deportations, restricting immigration and building a wall between
the US and Mexico. Canada, on the other hand, has a different
approach to immigration and continues to recruit well-educated and
skilled immigrants. 20% of Canada's population is born
abroad.
- Canada should continue to attract talented immigrants to counterbalance its aging and shrinking domestic workforce. In the recent Economic and Fiscal Update, the Canadian government announced some measures that will help facilitate the entry of highly skilled temporary foreign workers.
Ongoing Analysis:
- In the days to come, you will hear more from McCarthy Tétrault's experienced lawyers on the US election-related matters outlined above and other issues as they continue to evolve, including with respect to investment flows, tax policy and energy policy. Please do not hesitate to reach out to me, our Trade lawyers John Boscariol and Simon Potter, or any of your contacts at the firm regarding any post-election changes affecting Canada's most important trading partner, closest friend, and ally, and how these may impact your business.
To view the original article please click here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.