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The Trump Presidency and Canadian Manufacturing

Published by CME Manitoba on January 20, 2017

 


Dear Colleague,

Today is a historic day with the swearing in of US President Donald Trump. During the election campaign and since his election we have heard a lot of rhetoric about trade, NAFTA and many other measures that could positively or negatively impact Canadian manufacturing operations in Canada, in the US and abroad. As a member of CME, I am writing to give you a quick update on this topic, what our actions have been to date, and what we may be able to expect moving forward.

First, we understand that there is a great deal of concern over protectionist trade policies stemming from the new Administration – including rescinding or renegotiating NAFTA, the introduction of a Border Adjustment Tax, and greatly expanded Buy American policies. The challenge at this point is we actually don’t know exactly what the government will do – nobody does.

However, given the discussions to date, we can be certain that there will at minimum be a detailed review of the NAFTA agreement and likely discussion on possible renegotiation, for which we will need to prepare. The discussions on the Border Tax concept seems to be quieting down at this point but may re-emerge through the budget process. Also in the budget process, we expect to see an expansion of Buy American policies, especially as part of a massive infrastructure spending announcement.

In addition to these measures that will impact trade, we can expect a range of pro-business actions from the new Administration. We have already seen this with the pro-manufacturing investment stances of Mr. Trump with many companies, and we can expect that to continue. We also expect a reduction in corporate taxes and streamlined regulatory processes.

Our actions to date are aimed directly at both of these challenges – trying to influence US trade policy and our domestic reaction to a pro-manufacturing business environment.

Over the past several weeks CME staff have been working aggressively with senior bureaucrats and elected officials to shape Canada’s activities and respond to US trade policy. Our position has been simple – we have balanced trade with the US and the integrated manufacturing sector in Canada and the US needs continued market access into each other’s markets for continued competitiveness and success globally. This is a position that the Prime Minister has repeated many times publically and that officials are pushing aggressively in Washington and through various state offices.

At the same time, the US (like Canada) has a trade imbalance with much of the rest of the world and they are looking to address it. They plan to aggressively pursue actions on unfair trade, including likely going after regulatory and labour standards (which can dramatically lower production costs), currency manipulation, and illegal dumping of products. These are all areas that Canada has nothing to worry about. And as such we have been advising our government that supporting the US in these areas, may create support for Canada on other trade areas with the US.

From a domestic standpoint, the issue is about continued manufacturing competitiveness and investment. From our Industrie 2030 consultations we heard loud and clear that manufacturers across the country are frustrated with the business environment, the increased levels of taxation and regulation, the soaring energy costs, to name just a few areas. These frustrations show up in current investment statistics – for every dollar that Canadian manufacturers invest in fixed capital, their US counterparts invest $8.65.

We are greatly concerned that the Trump Administration’s pro-manufacturing, pro-investment positioning, coupled with an increasingly costly and difficult investment climate across Canada could result in even less investment, further undermining manufacturing competitiveness. As a result, stemming from our Industrie 2030 strategy, we continue to engage with government on your behalf and advocate for strong policy measures that support manufacturing investment, including supports for investment, product commercialization and training, along with reduced taxes and improved regulatory environment. We believe Canada’s domestic response to the Trump Administration’s policies may have an equal impact on manufacturing in Canada as the US’s trade policies themselves.

We greatly appreciate your continued support for CME’s ongoing efforts to make manufacturing in Canada stronger, more competitive and growing. If you have any specific questions or comments on CME’s actions on your behalf, on the government’s strategy or on US strategy, please feel free to contact us directly at any time.

Sincerely,


Mathew Wilson
Senior Vice President
Canadian Manufacturers & Exporters

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