NAFTA Vulnerable as U.S., Canada, and Mexico Struggle to Find Common Ground

iStock.com/ronniechua

The fourth round of the North American Free Trade Agreement (NAFTA) negotiations are close to an end, with little progress being made on some of the more aggressive proposals from the U.S. government while the private sector in the U.S. and Congress are increasingly pushing back against a U.S. withdrawal from the landmark free trade agreement.

President Donald Trump has long championed trade deal negotiations as a cornerstone of his presidency, claiming that many countries were getting the better of the U.S. in those deals. NAFTA was often touted as a major sticking point for the president, who said that he believes a renegotiation or even a cessation of the trade deal would be beneficial to American workers.

As such, Trump has gone on record repeatedly saying that he is not afraid to walk out on these negotiations if he feels they are not progressing as he would like them to. To that end, the U.S. has offered several onerous proposals for a new NAFTA deal that Canada and Mexico are finding hard to swallow.

One of the main contentions revolves around increased regulations proposed for the auto industry, which would require steel tracking in order to source the materials and also raise the share that needs to be produced in the U.S.

Advertisement

The U.S. wants to implement a “sunset clause,” whereby the three members of the agreement would have to ratify the deal every five years, and without full support from all three countries, the deal would cease.

Perhaps the biggest point of contention between the negotiating parties is America’s push for a weakening of review panels, which Canada and Mexico rely on to help moderate deals between the nations and therefore view as indispensable.

The tone has been uneven from the countries, with some striking more optimistic notes regarding NAFTA, while others say that we must be prepared for a world without the trade deal.

Thousands of jobs rely on NAFTA. The U.S. enjoys a $7.0-billion trade surplus with Canada when services are factored in, while Mexico enjoys a large surplus over the U.S. Canada and the U.S. still have a bilateral trade agreement on the books were NAFTA to fail, while Mexico would need to restart negotiations from scratch.

While NAFTA negotiations continue, mounting pressure from within the U.S. is building to keep America in the agreement. The U.S. Chamber of Commerce and members of Congress have both come out in support of the U.S. remaining in NAFTA.

The next round of negotiations will resume around the first week of November in Mexico City. While the countries were hoping to have the deal settled by December, that outcome is appearing unlikely.

 

Source

Nafta Talks Left Reeling After Aggressive U.S. Proposals Land,” Bloomberg, October 16, 2017. 

Advertisement

Advertisement