Questions and Answers

 

Questions and Answers

How much does Saskatchewan export to the United States?
The United States of America is our biggest customer – by far. In 2016, Saskatchewan shipped nearly half of our total exports to the U.S (about $12.5 billion).  This is lower than our historical proportion (around 60%) in part due to the reduced value of oil exports to the U.S.   Saskatchewan has been successful in diversifying our international markets and reducing our reliance on the U.S market. In 2016, 76% of total Canadian exports were shipped to the United States.  Saskatchewan’s exports into emerging markets such as China and India have doubled since 2010.

What does Saskatchewan export into the U.S.?
Our exports to the U.S. reflect the propulsive sectors of our economy.  The most significant Saskatchewan export into the U.S. is oil at approximately $4.4B in 2016. Other major commodities and resources exported include potash, canola (seed, meal, and oil), livestock, uranium, and wheat.  Significant manufactured goods shipped include steel, wood products, and farm machinery (seeders and planters).  (See Appendix A.)

What does Saskatchewan import from the U.S.?
In 2016, we received $7.5 billion in goods from the U.S.  Reflecting our integrated supply chain, oil is the number one import from the U.S.  Recreational trailers, herbicides, agricultural machinery (e.g. harvesters), and motor vehicles also figure prominently.

Which states receive most of our exports?
Minnesota, Illinois, Montana, California and Texas are the top five states for Saskatchewan exports.  They receive about half of all we produce.  Saskatchewan sources just under half of our total imports from North Dakota, Texas, Illinois, Iowa, and Indiana.  (See Appendix B)

What about our trade with Mexico?
Canada shipped $7.6 billion in goods to Mexico in 2016 with just over 9% of that ($696 million) originating from Saskatchewan - mostly in the form of canola products, wheat, line pipe, canary seed, potash, oats, and pulses.   Saskatchewan imported a variety of products from Mexico including trucks and truck tractors, casings for oil and gas drilling, railway tank cars, motor vehicles, and herbicides.  The most significant food product brought in from Mexico was fresh tomatoes.  Total imports amounted to $204 million.

What is NAFTA?
NAFTA is a comprehensive agreement signed in 1994 that sets the rules for international trade and investment between Canada, the United States, and Mexico.   Prior to NAFTA, Canada and U.S. trade relations were governed by the 1989 Canada-U.S. Free Trade Agreement.

When implemented, NAFTA immediately lifted tariffs on the majority of goods produced by the NAFTA partners and called for the phased elimination of most remaining barriers to the movement of goods and services between the three countries. On January 1, 2008, the last remaining tariffs were removed within North America.

How have we benefited from NAFTA?
Most economists and analysts agree that NAFTA has been economically beneficial for the U.S., Canada and Mexico.   Between 1993 and 2015, trade between the three members quadrupled, from $297 billion to $1.14 trillion.  That increase in trade boosted economic growth, profits, and jobs for all three countries.  The U.S. Chamber Commerce notes that 14 million jobs in America are supported by the increase in NAFTA trade.

It’s estimated that more than $3 billion of trade takes place every day between the U.S. and its NAFTA trading partners and the three countries have become increasingly integrated over the last 22 years.

Lower tariffs have also reduced prices and increased choices for consumers.

Has the U.S. applied protectionist tariffs in the past?
Using similar arguments expressed by President Trump today, the United States implemented the Tariff Act (Smoot-Hawley) in 1930 which increased duties on nearly 900 American imports.  Canada retaliated by imposing new tariffs on 16 products that accounted for approximately 30% of US exports.  22 other trading partners also implemented retaliatory actions.  The Tariff Act brought international trade almost to a standstill and exacerbated and lengthened the Great Depression.

On 15 August 1971, President Richard Nixon imposed a 10% surcharge on imports in an effort to force other countries to revalue their currencies against the US. dollar. The import surcharge was lifted four months later.

Are there other U.S. trade issues that are of concern?
There are trade issues not directly covered by NAFTA that Saskatchewan needs to be concerned about – protectionist polices including Buy America, the Softwood Lumber Agreement, and Country of Origin Labelling (COOL).

What happened to the Softwood Lumber Agreement (SLA)?
Most forests in Canada are provincially-owned, while in the U.S. they’re privately-owned. The U.S. has alleged that that allows Canadian producers to sell their lumber at a lower price, undercutting American producers in the process. The Americans say that amounts to a subsidy, a claim Canada has successfully fought at the World Trade Organization.

While we’ve been able to secure trade peace over lumber for periods of up to eight or 10 years, softwood lumber has largely remained a “managed trade” issue.  The last SLA ended in October of 2015 and negotiations toward a new agreement did not produce a successful outcome. In November of 2016, the U.S. launched a countervailing duty and anti-dumping investigation against Canadian imports On April 24, 2017; the U.S. Department of Commerce issued a preliminary determination on subsidy and assessed preliminary countervailing duty rates of around 20%.

While most of Saskatchewan’s wood product exports to the U.S. are in Oriented Strand Board ($219 million in 2016) and not part of the SLA, softwood lumber is a significant business component of some of our lumber mills in Saskatchewan.  In 2016, dimensional lumber shipped to the U.S. amounted to $83 million.

What is the “border tax” that is being considered?
Republican legislators have suggested a plan that would lower the U.S. corporate tax rate to around 20 percent and exempt businesses from paying taxes on profits they earn internationally. Domestically produced products that are exported would not be taxed (no tax on export sales) but would no longer allow U.S. companies to deduct the cost of imported inputs (products or services) as a business expense.

President Trump originally dismissed the idea saying it was too complicated.  However some Republicans in congress continue to support a border adjustment tax.

What can business or industry do to help?
While trade negotiations are a federal responsibility, each province is providing input and the Government of Saskatchewan has developed an engagement strategy.  Premier Brad Wall has already visited Iowa and Washington D.C. and lobbied legislators on our behalf.  Businesses and industry associations must also join the effort and communicate key messages in this document whenever and wherever they meet with their American partners.

As well, businesses may participate in the consultation process launched by the federal government.  More information can be found here:

 http://gazette.gc.ca/rp-pr/p1/2017/2017-06-03/html/notice-avis-eng.php#na8

or

www.international.gc.ca/nafta