The possibility of the North American Free Trade Agreement collapsing is on the horizon, so a Calgary-based think tank has launched a guide to help small businesses in Western Canada prepare with what it calls “The ‘Just in Case’ Plan.'”
The guide — released Thursday by the Canada West Foundation — helps businesses prepare for four scenarios that could unfold should the U.S. choose to withdraw from NAFTA:
- The U.S. issues a withdrawal notice, likely as a negotiating ploy, but the withdrawal is stopped by legal action and ultimately the U.S. remains.
- The Canada-U.S. Free Trade agreement (FTA) is resurrected.
- The U.S. withdraws, and World Trade Organization (WTO) tariff rates and rules automatically apply.
- The U.S. withdraws, and President Donald Trump uses emergency powers to impose higher than WTO rates on Canada.
Carlo Dade, director of the centre for trade and investment policy with the Canada West Foundation, said if the U.S. does withdraw and WTO tariff rates are applied — a situation the guide notes is the most likely scenario — the resulting confusion and chaos would make for the worst possible time for business owners to try to figure out a plan, or have a conversation with their U.S. customers or suppliers.
“The U.S. is entering uncharted constitutional and legal territory for a host of reasons that we briefly explain in the guide,” Dade said.
He said he’s hoping the guide alleviates worry for business owners.
“Some businesses are going to discover they don’t have a lot to worry about,” he said.
“Other businesses are going to know exactly what issues they may have and can take steps.”
The guide, which is available at the Canada West Foundation’s website, explains in a step-by-step fashion how business owners can navigate different tariff scenarios by using case studies, either in a do-it-yourself fashion or with a customs broker.
“One of the examples in the guide is a company selling jam to the U.S.,” Dade said.
“Not only is there suddenly a tariff on jam, there’s no tariff under NAFTA, but there’s one tariff for cherry jam, another tariff for lingonberry jam, another tariff for raspberry jam and a different tariff for strawberry jam.
“So the complexity for firms, you’ve really got to look at not just, ‘I sell fruit’ or ‘I sell agricultural products, what will the tariff be?’ You’ve got to go down to the line item.”
The sixth round of NAFTA negotiations wrapped up in Montreal on Monday. The next round of talks will be held in Mexico City in late February.