What will happen with NAFTA?

Xavier Trudeau
Août 17, 2017

But that won't be simple for Trump; like most things in D.C., a cast of competing characters and interests can make new trade talks a long slog.

In a new report titled "Successful NAFTA talks alone will not fix structural impediments to Mexico's growth", Moody's says the current export-focused growth model reliant on access to the U.S. market through NAFTA has failed to offer a cure for Mexico's low productivity, low wages and low growth over the last three decades, even outside periods of economic crisis or recession. Some of its major customers, Detroit's automakers, are just on the other side of the border with the U.S.

Fullerton says it's crucial that the USA remain a part of NAFTA - not a sure thing, since the president continues to threaten to leave the agreement if he isn't satisfied with renegotiation efforts.

But he soon tore into NAFTA, Trump-style.

In 2016, trade with Canada and Mexico is said to have accounted for about 10% of Cargill's US$110 billion in revenues in fiscal 2016. Lighthizer said that at least 700,000 Americans have lost their jobs because of the way NAFTA rerouted commerce. "If the negotiations can be kept out of the public eye, they are much more likely to succeed".

The stakes of renegotiation are high.

"We highly encourage (negotiators) to get it done and get it done fast", he said of NAFTA.

On the other hand, major tech firms such as Microsoft and Cisco, have ramped up lobbying with the hope of eliminating technology goods tariffs and to avoid future trade restrictions on cloud storage. They have in turn cautioned that they'll retaliate against any USA tariffs.

This free trade framework began with the US entering into NAFTA in 1994, NFU said.

U.S. Sen. Sherrod Brown, a Democrat from Cleveland, shared what he wants to see happen with NAFTA in an op-ed for USA Today.

Canada and Mexico come with their own objectives; Canadian Foreign Minister Chrystia Freeland announced that she will push for NAFTA countries to abide by stronger labour and environmental standards, while Mexico has proposed a new anti-corruption clause. Freeland also delivered remarks in Spanish, which appeared to be a gesture of goodwill toward Mexico.

"The United States has a more intransigent position and believes that job losses in many sectors were due to the treaty, so its aim in the negotiations is to win in some sectors or withdraw from the bloc", she said.

Leaders admitted that's the easy part.

After modernizing, the tough work begins. They will resume in Mexico next month before coming to Canada.

Thorny issues surround several topics, including where and how auto companies manufacture vehicles. Its citizens, however, simply can not afford to buy things at the same rate and quantity that Americans do from Mexico. USA officials will likely aim to raise that level, though it's unclear how much.

"While the three governments laid out the topics to discuss in the ongoing meetings, the USA administration was the one to publish the most extensive and detailed document about the changes it wants to propose", said Peralta.

"We are a seamless manufacturing platform, and it would be extremely hard to unwind that", John Bozzella, Association of Global Automakers CEO said during a forum here last week.

Another challenge facing the negotiators: Time.

There also appears to be little if any congressional support for Mr Trump's threat to withdraw from the trade deal if Mexico and Canada protest to changes.

Lighthizer listed examples of the deal which need to be changed.

"So if we ratify the agreement, which could very well happen, we enter the negotiations and the Mexicans enter the negotiations with everything the Americans want", he said. If they don't ratify it, there's no new deal.

But for countless Americans, this agreement has failed.

"You'd start to put those jobs at risk if you simply get rid of the agreement", said Wilson. "It depends on the will of the parties".

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