To Reduce Our NAFTA Vulnerability, Canada Needs A Strong Industrial Policy


There are steps we can take to strengthen our domestic economy and make ourselves less vulnerable to whatever happens with NAFTA renegotiations.

As NAFTA talks continue, there is growing concern that the agreement may fall apart. U.S. President Donald Trump has mused about making bilateral deals instead of the trilateral NAFTA that exists today (this could actually be good for Canada). Additionally, possible U.S. demands on rules of origin are seen as “poison pills” that could bring negotiations to a total impasse. As usual, Canada’s political class is panicking, and musing about the severe damage to Canada that would take place if NAFTA fell apart, instead of coming up with a clear plan to deal with such a scenario.

And yet, there are some clear and simple policies that could provide Canada with a strong economic cushion from whatever happens in NAFTA talks. While the end of NAFTA would certainly have a serious impact on our economy, there are things we can do to protect ourselves. That means implementing an effective industrial policy designed to strengthen some of our key industries, and build a more powerful domestic economy. Here’s how that could be done:

Eliminate the carbon tax

The key to reducing our economic vulnerability is to strengthen domestic demand. A key way to do that is to lower taxes, particularly by eliminating the carbon tax, and cutting taxes for working-class and middle income Canadians. This would put more money in the pockets of Canadians, and also help Canadian businesses produce at a lower cost, both of which would strengthen our economy.

Incentivize exports and protect manufacturing

Another key way to strengthen our economy is to help our exporters compete against countries that break many trade rules, and protect our manufacturing jobs. The government could provide significant corporate tax rebates for companies that are heavily export-oriented, which would somewhat balance the playing field against countries who devalue their currencies and use cheap labour to undermine competitors. Additionally, we should impose tariffs on countries that are using cheap labour to compete against our manufactures in targeted areas that we deem of high long-term value to the economy. For our country to succeed in the future, protecting and expanding our manufacturing base is essential.

Support the energy industry

The world still needs tons of oil, and oil demand is expected to increase for a long time. That means Canada can gain significant wealth by expanding oil production. We would dramatically reduce our economic vulnerability by building many new pipelines and refineries. By reducing project-killing regulations and taxes, we can build a bigger energy sector that would be a big boost to Canada’s economy, helping us gain market share across the world.

Protect Canadian ownership

Without having Canadian-owned companies, our country is nothing more than an economic colony for others. To stop that from happening, we must impose strong foreign investment restrictions in certain sectors. The defence industry, and sensitive Canadian high-tech companies must be off limits to foreign ownership, and we must also protect advanced manufacturing, our energy industry, other parts of the economy when necessary. Most of the world’s most successful economies do this far more than we do, (including the U.S., China, and Japan), and Canada must not let ourselves get taken advantage of. While we think of ourselves as a small economy, we must remember that we are still among the world’s largest when it comes to GDP, and our domestic market is quite capable of forming the core of a strong and resilient economy.

Build up the defence industry

Another way to strengthen our economy, and reduce our vulnerability to trade problems, is to build up our military and defence industry. Tens of thousands of jobs, billions in research & development (which will benefit all industries, and all Canadians over time), and an expansion of the aerospace, vehicle, and ship manufacturing industry will all flow from a large expansion of our armed forces. It does two important things at once, strengthening our badly under-funded national defences, and creating good jobs across the country.

These are all things Canada could do, and a large part of it could be paid for by cutting the costly federal government bureaucracy, imposing spending restraints in most government departments, and cutting foreign aid. This would save billions of dollars, which would provide the necessary funding for the ideas mentioned above.

While the current NAFTA negotiations are being looked upon with fear, we also need to see the opportunity. We can become a more self-reliant nation, less vulnerable to what happens in the rest of the world, and more in control of our own economic destiny. That doesn’t mean we shouldn’t trade with other countries, but it does mean that we shouldn’t put our fate in the hands of other countries. We have what it takes to chart our own course.

Spencer Fernando

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2 comments Add yours
  1. why are we always drawing out the plans for the government in power ….because they dont have the where withall to do it ???

  2. All good suggestions, Fernando. No oil should leave Canada without being refined here first. Export only finished products, from energy to logs to Eskimo carvings. Several years ago when I ran as a candidate for the Western Block Party, the only political party to actually stand up for the interests of average Canadians, I questioned the Conservative candidate on the planned purchase of new fighter planes from the U.S. I asked why Canada needed such expensive aircraft – could we not find something suitable from other suppliers? Who were we planning to defend ourselves against? The only viable threat I could see was the Americans. Were we prepared to use American arms to defend ourselves against Americans? I reminded those at the all candidates meeting about the Avro Arrow. The Americans stole our technology and had the gall to sell it back to us. We were being stupid enough to fall for that. The only time I have ever seen a Conservative candidate speechless. Liberals and NDP are no better.

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