Ottawa – The protectionist rhetoric of United States President Donald Trump’s administration suggests Canada should avoid being overly reliant on the U.S. market, a Senate committee said Wednesday.

Members of the Senate Committee on Banking, Trade and Commerce released their report, Study on the current and emerging issues of the banking sector and monetary policy of the United States, to provide a snapshot of current and emerging issues regarding economic relations between Canada and the United States.

The report comes after fact-finding missions to New York City, and Washington, D.C. in May 2017, where committee members met with representatives from the U.S. financial sector, federal agencies, regulators, think tanks and trade associations.

These representatives provided varying opinions on the looming changes to the North American Free Trade Agreement (NAFTA). They advised Canada to emphasize during negotiations state governors’ support for NAFTA, as well as the high degree of integration in North American’s auto sector. They also suggested Canada take a generally “friendly approach” but to also hint at potential retaliatory trade measures Canada could take against the United States.

Any renegotiation of NAFTA is likely to have consequences for the Canadian economy through, for instance, delayed investments by businesses due to uncertainty about the status of the agreement.

U.S. corporate tax reform also poses a risk to the Canadian economy, the committee heard. A significant decrease in the American rate could affect Canada’s attractiveness as an investment destination.

In general, the committee heard that hundreds of appointed positions in U.S. federal departments and agencies remain vacant. It was suggested that Canada would have greater success dealing directly with members of the U.S. Congress, instead of with the understaffed administration of President Trump.

Quick Facts

• In 2016, approximately 76% of the total value of Canada’s merchandise exports was destined for the United States.
• The renegotiation of NAFTA could have a negative effect on Canadian banks operating in the United States, as they may be affected by a reduction in both capital and the flow of workers into the United States from Canada.
• When American banking reforms were introduced in 2008, the increased regulation led a number of European banks to leave the U.S. financial market, which was beneficial for Canadian banks operating in the United States.

Quotes

“Canada’s economic well-being is inextricably linked to the United States, our neighbour and biggest trading partner. As our committee received mixed messages about the renegotiation of NAFTA, which provides even more reasons for Canada to not only think about diversifying our international trade opportunities but pursue further our internal trade‎ efforts.”

- Senator David Tkachuk, Chair of the committee

“During the 2008 financial crisis, Canadian banks fared relatively well because of the stringent regulations set in place. To learn that the United States intends to deregulate certain financial-sector activities does raise some concern, and we will be closely following this important matter. We urge our federal government to stay alert to the implications that deregulation may have on the Canadian financial sector.”

- Senator Joseph A. Day, Deputy Chair of the committee

Associated Links

• Read the report, Study on the current and emerging issues of the banking sector and monetary policy of the United States.
• Follow the committee on social media using the hashtag #BANC.
• Sign up for the Senate’s eNewsletter.

For more information, please contact:

Sonia Noreau
Public Relations Officer
Communications Directorate
Senate of Canada
613-614-1180 | sonia.noreau@sen.parl.gc.ca