As the dust begins to settle around the 11th-hour deal to pull North America’s continental trade alliance from the brink, the initial sense of relief will be tempered by the realization that Canada didn’t gain much from this new United States-Mexico-Canada Agreement on trade. Except, maybe, the sense of comfort that the biggest element of doubt hanging over its economic future has been removed.
That’s not only enough, it’s huge. For a Canadian economy that has grown increasingly handcuffed by trade uncertainty even as it gained momentum over the past year, the removal of the dark cloud looming over the North American free-trade agreement brightens Canada’s growth prospects significantly.
Canadian businesses have been operating in a shadow of doubt over how dramatically the trade landscape might shift beneath their feet. Even going into this past weekend, employers didn’t know if they would return to work Monday morning to find the North American economy tossed into the chaos of a failed negotiation, or, worse, tumbling toward the black hole of an all-out NAFTA dismantle.
That fear of the unknown, and the risk that the worst-case scenarios might still unfold, has kept Canadian companies much more cautious than they would normally be in an economy that is approaching the peak of its cycle. Many key sectors are already operating at or near full capacity; a wide range of businesses are having a hard time finding enough skilled labour and are hard-pressed to meet growing demand. And yet the paralyzing trade doubts have made them hesitate to spend on expanding their operations, when all other logic says they should.
That fear factor has had a quantifiable effect on Canada’s growth outlook...
This was excerpted from 1 October 2018 edition of The Globe and Mail.