As we move into the final sprint of the US election, it
bears as always to pay attention to the economic implications for Canada. Whatever one’s political priors or favorites
may be in this election, in the end it needs to be realized that when it comes
to US trade and economic interests, it does not matter whether Trump or Harris
wins– American interests trump (no pun intended) Canadian ones. And in the case of the economy and our trade
relationship with the United States, be prepared for some tough
bargaining. While 2024 marked the 30th
Anniversary of NAFTA, it has since 2020 been replaced by the USMCA or CUSMA
agreement with renewal
talks beginning in 2026.
Along with perennial sticking points like milk and dairy or
softwood lumber, in the United States, despite what economists
and evidence might say about economic growth and the benefits of trade in
the wake of NAFTA and CUSMA, the debate will be shaped by the widespread belief
that NAFTA in particular resulted in job losses and wage stagnation. In the case of manufacturing, the
accompanying graphic summarizes quite nicely why the Americans are going to be
playing hardball. In many respects, US manufacturing
job losses did coincide with NAFTA.
Figure 1 presents annual Canadian and American manufacturing
employment from 1976 to 2023 using a dual scale since US employment and
population in general is about ten times ours.
In 1994, there were nearly 19 million Americans employed in
manufacturing and 1.8 million in Canada. In the decade afterwards, by 2005, US
manufacturing employment fell to 16.2 million while Canadian manufacturing grew
to 2.2 million. In the wake of NAFTA, American
manufacturing employment fell by 14 percent while Canadian manufacturing
employment rose by 20 percent.
Since 2005, American
manufacturing employment has declined slightly to 15.6 million while Canada’s declined
to about 1.8 million where it has stabilized somewhat. In other words, over thirty years, Canada has
stayed flat in terms of total manufacturing employment (notwithstanding the rise
and fall from 1994 to about 2010) while the US has seen a decline. The good news is that since about 2019, as
evidenced by the 5th order polynomial smoothing line, both countries
have seen a slight increase in manufacturing employment as a result of fallout
from the pandemic, trade issues with China and the rise of onshoring production
activities.
Yet those same polynomial smooths show a pretty consistent
decline for the US since 1976 with Canada doing somewhat better. True, Canada is not to blame for the decline
in US manufacturing. Both countries have
seen a decline in manufacturing employment over time both in absolute numbers
as well as a share of total employment.
It is not 1960 anymore. There
have been productivity issues in both countries as well as intense competition starting
in the 1990s from China and other Asian economies as well as Mexico which is/was a part of CUSMA/NAFTA. However, that does not matter. For the United States, creating jobs in manufacturing
will mean looking at all the players – including Canada. It will not matter whether Harris or trump
becomes President in this regard. Notice
has been served.
