At year-end, there will always be those who proclaim the closing year “annus horribilis.” And yet 2016 seems to have more than its share of haters. Globally speaking, this year witnessed Brexit and the election of Donald Trump, who, at least in election rhetoric, vowed to write an obituary on the Trans-Pacific Partnership and “rip up” NAFTA.
ExportWise consulted three experts on what they see as 2016’s top trade stories.
The rise of populism
This story came up again and again in 2016, reaching its pinnacle in November when Donald Trump won the U.S. presidential election.
“I think the No. 1 story of 2016 is the rise of populism, which is causing countries to pull back from globalization,” said Perrin Beatty, president and CEO of the Canadian Chamber of Commerce. “The victory of Donald Trump, the possibility of renegotiating NAFTA and the president-elect’s opposition to TPP are key elements of that. But it has to be seen in the broader context. A lot of people are tempted to look upon this as sui generis, but it’s not — it reflects a bigger trend.
Jan De Silva, president and CEO of the Toronto Board of Trade, and Peter Hall, chief economist for Export Development Canada, agree with Beatty. De Silva also put Brexit into that category.
“Brexit is a sign of the times,” she said. “The whole election, and the rejection of NAFTA and the TPP really shows the middle class is feeling they’ve been left behind. A lot is being blamed on globalization when, in fact, it’s automation and robotics in the workplace that are eliminating jobs. Brexit was more about not liking the government and where it was taking them from an opportunities point of view than about leaving the EU. That’s played out in the U.S. election as well, but it’s not about jobs going to China and Mexico, it’s about automation and efficiencies.”
The Great Hesitation
From a market point of view, Hall calls the result of populism “The Great Hesitation.”
“We have some fundamental strengths in the U.S. and Western Europe,” Hall said. “But at the moment we see the market kick up, we’re questioning everything — and that’s out of frustration with mediocre growth and the failure of policy remedies. It’s manifesting itself in votes like Brexit and the U.S. election. It’s ushering in The Great Hesitation. Businesses are saying: ‘Now is hardly the time to plunge into the market; we have to see how this shakes out.’”
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CETA success and NAFTA/TPP redux
Trade agreements and their future were another big story. In spite of the shakiness around NAFTA and the TPP, Canada remains determined to reach international agreements and continues to fight for open borders, Beatty said. De Silva lauded Chrystia Freeland for seeing CETA through to completion.
Canada’s shaky performance
Hall also named the disappointment in Canada’s trade performance as a top story.
“We started off with a bang and then we had a very quick and very big fizzle. In the late summer, we actually saw a decent bounce-back and we have, in the last couple of months, not seen much of anything,” Hall said. “The fizzle was out of nowhere and there are reasons for that, but it was still pretty jarring.”
Beatty said he expects NAFTA will continue to exist as it’s “far too beneficial to all concerned.” His preference would be to keep the TPP, but barring that, he’d suggest Canada pursue bilateral trade agreements with would-be TPP partners, such as Japan and Vietnam.
Meanwhile, from her desk in Toronto, De Silva sees city-to-city arrangements as the future.
“Cities will start to step forward and be more convincing federally on the importance of keeping trade ties open,” she said. “Increasingly, in today’s world, it’s about global cities competing against global cities.”
The silver linings
Along with the doom and gloom of 2016, the experts ferreted out some positives.
Beatty noted that with no hope in sight for a U.S.-Europe deal, North American companies looking to ship to Europe would be wise to come through Canada, given CETA. The same applies for Europeans coming to North America. Immigration influxes are another boon. “With some countries closing their doors, we will see more coming to Canada,” he said. “Canada is swimming against the stream with a government that’s strongly internationalist.”
Hall said that in spite of the disappointments of 2016, the global situation is strong.
“You have a U.S. market with 74 uninterrupted months of strong employment growth,” he said. “It’s taken the unemployment rate to 4.6 per cent. Western Europe is showing signs of a construction revival after years of substandard investment. That shows there’s significant pent-up demand in the market. These are the twin engines of the world economy. If their fundamentals are pointing upwards, ceteris paribus, things look good for us.”