Reworked North American Trade Deal Good For Local Tourism

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On Sunday it was announced that Canada joined with the United States and Mexico for a reworked North American Free Trade Agreement (NAFTA). The new deal, called the United States-Mexico-Canada Agreement (USMCA), replaces the 24-year old agreement that governed $1.2 trillion worth of trade.

The U.S. and Mexico reached a bilateral trade deal in August. U.S. President Donald Trump threatened to proceed with a revised NAFTA with or without Canada. Such an act, and potentially imposing a wide range of tariffs on Canadian exports, would have been extremely disruptive to the North American economy.

And no one doubted Trump’s willingness to do so. He has used tariffs to impose America’s will on friend and foe alike.

For The Bahamas the consensus reached between these large economies is good news. In August, the Ministry of Tourism reported that international arrivals to The Bahamas were up 10.2 percent for the year. The overall arrivals growth trend began last October.

Strong economies in the United States and Canada, the loss of rooms in the Caribbean due to storm damage from the last hurricane season and the opening of Baha Mar all contributed to the growth. However, strong growth in the hemisphere’s two largest economies – the U.S. and Canada – is the major reason for the boom tourism market. The U.S. economy grew by 4.2 percent in the second quarter. Canada’s grew by 2.9 percent.

Last month, Minister of Tourism Dionisio D’Aguilar noted the North American root to our success. He said the double-digit increase in stopover visitors is largely driven by an uptick in arrivals from the United States of 8.4 percent, and from Canada by more than 30 percent.

Stopover visitors come by plane and stay at hotels or residences. They eat regularly at restaurants and shop more in stores.

When they are here in large numbers hotels hire more staff and extend existing employee hours. Taxi drivers have people to take around.

Tourism officials estimate the average stopover visitor spends upwards of $1,500. Cruise ship passengers spend around $70.

The new North American trade framework helps protect our bullish tourism market, extending growth.

Moody’s projected in its August 14 report that the Bahamian economy would grow by two percent in 2018, and 1.7 percent in 2019. Consecutive years of growth, even modest growth, is something to celebrate after a tough decade due to the financial crisis and its aftermath.

While the U.S. resolving its issues with Canada and Mexico is good news, its trade war with China is concerning.

Trump announced in September tariffs on $200 billion worth of Chinese imports, in addition to the original list of $50 billion. China has retaliated. It has placed tariffs on $110 billion worth of American goods.

Further escalation between the two largest economies puts global growth at risk.

Trump, however, appears to have a strategy beyond chaos. He starts with a painful act, the purpose of which is to demonstrate his country’s power. He then wants to force the other side to the negotiating table to accept a deal that’s mostly in his country’s favor.

The American economy is too big and developed for China to win a trade war. It will eventually have to capitulate to a reworked trade framework with the Americans on terms friendly to the Americans.

But for now, for The Bahamas, having the powers in our hemisphere on good terms should be enough to continue our better economic times. The North American deal is good news for us, too.

The Nassau Guardian
October 4, 2018