CME’s Darby Calls for modernization of NAFTA and comprehensive government plan during MMP keynote

Free trade agreements are crucial to economic stability

President and CEO of CME talks with MPP Expo attendee.

Dennis A. Darby, P.Eng., ICD.D, president and CEO of CME, on the right, discussed the importance of manufacturing to Canada’s GDP with an attendee at the MMP show in Abbotsford, B.C., in March.

Dennis A. Darby, P.Eng., ICD.D, president and CEO of Canadian Manufacturers & Exporters (CME), shared the work his organization is doing both on national and international levels to move Canadian manufacturing forward during his keynote address, Manufacturing Matters, at the Metalworking Manufacturing & Production expo in Abbotsford, B.C., in March.

Ensuring that free trade agreements (FTAs) benefit each of the participating nations is a key objective of the association. CME serves as an advising organization during re-negotiation efforts for the North American Free Trade Agreement (NAFTA).

Darby began by emphasizing the “critical importance of manufacturing” to the economy in British Columbia and across the country. “In 2017 over 10 per cent of our GDP nationally and about 8 per cent in B.C. is due to our strong manufacturing capabilities--the ability to produce and export goods. In B.C. alone there are over 170,000 direct jobs in manufacturing and in the supporting industries about 290,000 more jobs. Manufacturing output in the province reached $45.9 billion last year and it was $615 billion nationally.”

Manufacturing today, he said, presents a “much different landscape than just a few years ago” because advanced, state-of-the-art technology and equipment like robotics, artificial intelligence, and 3-D printing are helping companies leverage the human natural resources and innovation capacity for economic growth. And it is at a turning point.

“The future is here now. What makes our sector so hungry for doing things differently seems to come down to one thing—international trade and global competitiveness—because Canadian manufacturers haven’t backed down in the face of competition or adversity. There is no way we could have survived and thrived the cutthroat global market in 25 years of free trade with the U.S. and Mexico without the thoughtful adoption of technologies.

“And manufacturers have been and continue to be at the front and center as trade discussions are initiated,” said Darby.

“Most of our exports continue to go to the U.S., our biggest trading partner. In addition, Canada is the biggest foreign market for 35 U.S. states. The trade relationship with the United States alone was worth $627 billion in 2016 and it continues to grow.

Working on NAFTA

Darby credits NAFTA with helping small and mid-sized manufacturers that might not have the economic means to engage in North American trade become active in the expanded regional market of Canada, Mexico, and the U.S. NAFTA continues to be necessary, he said, but it needs revision, and today’s environment offers the opportunity to revise the agreement and bring it in line with today’s technology.

“The NAFTA agreement has not evolved in sync with innovation. It hasn’t changed. It’s outdated. Things that are key to businesses today like software engineering, digital trade, or computerization of borders were not addressed in the original agreement in 1994 because none of them even existed.

“We have this historic opportunity to modernize NAFTA … We have the opportunity to learn from more modern agreements like the Comprehensive Economic and Trade Agreement (CETA) and the Trans-Pacific Partnership (TPP).”

MMP Expo attendees listen during Dary keynote address.

Manufacturers and exhibitors at at MMP Expo in Abbotsford, B.C., learn about CME’s efforts to modernize NAFTA.

Finding common ground for the revisions, Darby said, is a challenge. At the time of the presentation, CME had participated in seven rounds of talks with the U.S. and Mexico.

Making FTAs Work

Before signing any free trade agreement, Darby said, five specific points must be met that lay out a comprehensive plan for Canadian companies. They are:

  1. Ensure FTAs create a level playing field for manufactured goods. “Today managing global trade is far more than dealing with tariffs. Other barriers to trade emerge, including restrictive product regulations, direct export subsidies, government procurement exemptions, and even currency manipulation in some markets. All of these would provide an advantage to the domestic industry over imports.”
  2. Focus FTAs on countries with natural business ties. “We need to pick our business partners like businesses pick their trade partners so there is a mutually beneficial agreement that will realistically boost the economic performance of all parties. This should start with countries with deep historical connections and similar business cultures and legal frameworks.”
  3. Leverage existing integrated supply chains. “Roughly 85 per cent of Canada’s value-added exports are production parts that feed into finished consumer goods and industrial goods. We have to make sure we are making decisions on actual industrial capacity for the global supply chain—not strive to create new segments.”
  4. Support the global growth of SMEs. “Ninety-five per cent of manufacturers in Canada have fewer than 10 employees, and many don’t have the internal expertise or financial ability to expand. Our governments have excellent programs, but we need to find ways to consolidate them to ease access for small companies.”
  5. Improve the domestic business environment competitiveness. “Our wide range of policy, tax, and regulatory regimes are contributing to a very relentless increase in the cost of doing business in Canada. We are calling on the federal and provincial governments to take decisive action to look at a range of tax reforms, similar to the U.S., to boost investment and growth. They should include things like reducing federal and corporate taxes to a combined 20 per cent; improving accelerated capital cost allowance depreciation rules to allow companies to write off their capital investments in one year; introducing an investment tax credit of between 10 and 15 per cent on purchases of equipment and software; introducing patent box innovation tax support that would help turn innovations into commercial successes; lowering the top marginal personal income tax rate from 33 to 31 per cent to help businesses attract and maintain top talent; and reforming and modernizing the Scientific Research and Experimental Development (SR&ED) tax incentive to make it easier for participants.”

Working for Economic Stability

Darby said, “I know this is a long list, but we believe these combinations of actions will be a significant step to create a stronger, more globally competitive, and active manufacturing sector. By working together with government and industry, we can create those conditions for manufacturers to succeed beyond North America and to grow our economy and new jobs.

“What I’ve learned through these trade negotiations is that they show our vulnerability. If something changes, we are poorly positioned to react quickly, so we have no time to wait to start making the changes we need in our economy. We’re very hopeful that this is going to happen; we know that we’re on the right path.”

For more information on CME’s ongoing initiatives, visit www.cme-mec.ca.

Associate Editor Sue Roberts can be reached at sroberts@canadianfabweld.com.

MMP Expo attendees in Abbortsford, B.C.

Following the keynote address, more than 400 attendees filled the aisles at the MMP show, interacting with nearly 100 OEM and supplier representatives.

About the Author

Sue Roberts

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Elgin, IL 60123

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Sue Roberts, associate editor, contributes to both Canadian Metalworking and Canadian Fabricating & Welding. A metalworking industry veteran, she has contributed to marketing communications efforts and written B2B articles for the metal forming and fabricating, agriculture, food, financial, and regional tourism industries.

Roberts is a Northern Illinois University journalism graduate.