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The news hit like a lightning bolt at a recent conference on North American trade — New Hampshire, a state that borders Quebec, now does more trade with Mexico than it does with Canada.


New Hampshire Sen. Jeanne Shaheen’s revelation during the recent Canadian-American Business Council meeting caused a stir, prompting many in the crowd to wonder if it illuminated strains in the Canada-U.S. trading relationship.


“We have seen one worrying trend in New Hampshire over the last year,” Shaheen said.


“In 2009 — and for the first time since I can remember — Mexico actually overtook Canada as our state’s largest market for exports.... For a border state that has historically held extremely close economic ties with Canada, this is quite disconcerting.”


Exports to Canada dropped nearly 30 per cent in 2009, Shaheen said, while exports to Mexico rose nearly 40 per cent — a puzzling trend given New Hampshire businesses have such close and easy access to the Canadian market.


George Bald, commissioner of New Hampshire’s department of resources and economic development, said the drop was mostly in trade of wood products and aircraft parts between Canada and New Hampshire.


“This started between 2008-2009, and when you look at the U.S. economy during that time period, that’s when it really started to slow down,” he said Monday.


New Hampshire traditionally ships lumber to Canada, he added, and Canadian companies send finished wood products back that are used by the state’s housing industry — a sector that was in serious trouble at the onset of the recession.


Meanwhile, there was a large increase in electronic components exported from New Hampshire to Mexico, Bald said.


“I think what’s happened is not so much that Canada has fallen off, but that Mexico has increased,” he said.


“We’re starting to see signs lately that Canada is coming back as the economy improves. But it’s a reflection of how much Sen. Shaheen respects Canada and trade with Canada that she would bring it up and express concern about it.”


Birgit Matthiesen, the Washington-based senior adviser to Canadian Manufacturers and Exporters, said Shaheen’s remarks were troubling.


“The senator from the state of New Hampshire came there to tell us that Mexico has now surpassed Canada as New Hampshire’s top trading partner. What’s worrisome to me is the fact that the senator now thinks it, has been told it, and believes that Mexico is No. 1,” she said.


“This is something we have to pay serious attention to.”


One participant at the conference — entitled “Whatever Happened to the North American Market?” — said the New Hampshire news came as little surprise. R. Scott Miller, the director of global trade policy for Procter and Gamble, said he believes economic integration between the U.S. and Canada is disintegrating due to a thickening border and increasing regulatory red tape.


The North American Free Trade Agreement isn’t working anymore, Miller said in an interview. While in its heyday, the portion of U.S.-Canada trade that met what’s known as “NAFTA preference” criteria was as high as 67 per cent in 1998, it’s now fallen to 50 per cent, he added.


“To me that’s evidence that we have a problem,” Miller said.


“Agreements are always negotiated at a point in history. But economies evolve, and the nature of trade changes, but the structure of the agreement doesn’t. We have a trade agreement that no longer reflects our own commercial realities. We haven’t dealt with how we now do business.”


U.S. and Canadian trade negotiators have to sit down and construct a modernized deal, he added.


“They should undertake a 21st-century version of a trade agreement. Let’s look at our economies today, and work out an arrangement that reflect those modern, up-to-date conditions. No one had a cellphone in ‘88, RIM did not exist when the trade deal was negotiated. It doesn’t make sense that we aren’t looking at substantial ways to update it.”


Matthiesen agreed.


“What we need is not a tariff agreement, we need an agreement that moves the North American business climate into the 21st century,” she said.


“We need a collaborative agenda on innovation, commercialization in research and development funding, a skilled workforce and a plan to create a business climate in Canada and the U.S. that really creates a platform for us globally. We need to bring back manufacturing to North America, attract more companies back here and make it viable for them to manufacture their goods here.”


(Courtesy of The Canadian Press via. The Star)

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