There Must Be No Turning Back on NAFTA – McGuinty

(The Financial Times – Ontario Premier Dalton McGuinty)

For the past few months, we Canadians have had our ears pressed to the border, listening with great interest as our American friends discuss the North American Free Trade Agreement.

As a partner in the agreement, we have a tremendous stake in how this conversation plays out, of course. But we also have a unique perspective on the agreement. For us, NAFTA works. That is because NAFTA allows trade to flow more naturally and fluidly across our shared border and has helped turn the Great Lakes region into one of the largest concentrations of economic might in the industrialised world.

The numbers are significant. The eight Great Lakes states plus Ontario account for 30% of North America’s employment and output and a healthy 36% of its manufacturing employment. Every day, about $900m worth of goods travels between Ontario and our Great Lakes partners. At the Detroit-Windsor gateway alone – the busiest in the world – $122.8bn worth of goods, 6.5m trucks and 6m cars cross each year. This has helped create an integrated Great Lakes economy where products are made – not on the Canadian side, or the American side, but together as a region.

For example, a part produced in Ohio could find its way into a car assembled in Ontario, which in turn could be shipped to Europe. Resources produced in Ontario can be sold in the U.S., turned into products and sold again in the Canadian market.

Canada is the largest trading partner for 36 of 50 U.S. states. Pennsylvania exports more to Canada than its next seven markets combined. Cross-border trade supports 221,500 jobs in Michigan alone. The regional trade relationship is complex, dynamic and, ultimately, good for our shared economy.

A 2004 study in the American Economic Review concluded that, while there was short-term job loss in manufacturing in the early days of NAFTA, the lost employment was offset by employment gains in other parts of manufacturing. Overall, wages increased, as did productivity. In fact, labour productivity in manufacturing increased by a remarkable 0.93% annually. Overall, Canada and the U.S. increased their trade with each other, forming a more cohesive North American market.

Since NAFTA was introduced, merchandise trade between Canada and the NAFTA partners has increased 122%, to $597bn in 2006. In a world where greater economic integration is the order of the day, NAFTA has helped preserve competitiveness by pooling our shared strengths and resources.

However, manufacturing across the Great Lakes region continues to face challenges from low-cost competitors in China and India. The current oil price shock is accelerating the adjustment. In Ontario, we face the added pressure from a high Canadian dollar and a struggling U.S. economy, which has cost us jobs in the manufacturing sector.

Ontario remains strong because we have a modern, diversified economy. We have chosen to capitalise on the opportunities provided by NAFTA. For example, we have chosen to invest in infrastructure so that we can speed up the flow of goods and services across the Great Lakes region.

We have cut taxes, invested in innovation and partnered with key industries. But our biggest and most important investments have been in education. We have committed ourselves fully to strengthening our greatest competitive advantage – skills and education. Ontario now has the highest percentage of people with a post-secondary education in the western world.

Our choice has been to invest in our people – so the next BlackBerry, the next breakthrough in biotechnology or the next big thing in green technology happens in the Great Lakes region. When it happens the entire region will benefit. We will ship parts across the border, exchange information, ideas and labour and share the opportunities among workers and their families.

We are interdependent. What is good for one is good for all. To go backwards, when competitors in the European Union and South Asia are becoming increasingly integrated and productive, would be a mistake. Canada and the U.S. are joint stewards of a valuable economic partnership. But we are also stewards of something far more valuable – one of history’s great political friendships. For a century and a half, that friendship, in spite of the odd crack, has been a rock-solid example to the world. I believe our choice – the only choice – must be to deepen and strengthen our relationship so that we continue to grow, together. We owe nothing less to businesses and families on both sides of the border.