Garneau and transportation industry ‘cautiously optimistic’ about NAFTA: minister

Transport Minister Marc Garneau (pictured) says he shares the cautious optimism of Canada’s transportation industry that a deal will be reached to modernize NAFTA. (Photo: Marc Garneau/Facebook)

MONTREAL—Transport Minister Marc Garneau says he shares the cautious optimism of Canada’s transportation industry that a deal will be reached to modernize NAFTA.

The minister said the sustained efforts by the federal and provincial governments to reinforce the importance of the trade deal to American politicians are bearing fruit.

He points to the U.S. Chamber of Commerce president and House Speaker Paul Ryan, who have talked about the importance of continuing negotiations despite a threat from U.S. President Donald Trump to pull out of the continental trade pact.

“I think those are playing a role in overall mood and the overall negotiations between the three countries,” he told reporters Wednesday after meeting behind closed doors with representatives of the transportation sector.

For them, the impact on volumes of merchandise and people that cross the border is key, he said.

Garneau’s first meeting with the sector to discuss NAFTA comes days before difficult negotiations are set to resume next week in Montreal.

He said their comments reinforced his thinking about how the industry feels about negotiations and how it could potentially impact them.

“Some of their businesses depend heavily on the amount of merchandise that they’re going to bring across the border so obviously they want to see a successful negotiation,” Garneau said. “But I would say that the mood was cautiously optimistic as we go into the sixth round.”

The meeting followed a warning from the Bank of Canada about growing uncertainties about the 24-year-old continental trade agreement.

The central bank raised its trend-setting interest rate Wednesday to 1.25 per cent and said uncertainty regarding the future of the North American Free Trade Agreement — and the potential negatives for Canada — were casting a widening shadow over its outlook.

Transportation analysts have said that the potential dismantling of NAFTA poses the biggest risk to Canada’s railways, which would miss out on the benefits of healthy economies and higher demand for oil transportation.

Kevin Chiang of CIBC World Markets said what keeps him up at night is NAFTA renegotiations.

Chiang wrote in a report that the earnings implications of the U.S. government’s move to disband the agreement are unknown, but an almost immediate 10 per cent drop in values in the aftermath of the Brexit vote in the United Kingdom could be a guide post for Canada’s industrial and transportation sectors.

Fadi Chamoun of BMO Capital Markets wrote that a repeal of NAFTA could create significant uncertainty and potentially weigh on the valuations of Canadian National Railway (TSX:CNR) and Canadian Pacific Railway (TSX:CP).

Last week, Foreign Affairs Minister Chrystia Freeland said Canada would be bringing some “creative” new proposals to the sixth round of talks next week in Montreal, in response to the “more unconventional” American demands.

During a visit to Washington on Wednesday, Conservative Leader Andrew Scheer said Canada speaks with one voice when it comes to the negotiation of the North American Free Trade Agreement.