U.S. negotiators are pushing for some kind of agreement on a new trade deal between Canada, the U.S. and Mexico by mid-April but insiders say it would be a token agreement lacking substance.
Political and financial pressure for an announcement
The Trump administration may be looking for a symbolic win for three reasons, say analysts. First the U.S. president may want to appease his base which is showing signs it is unsettled. Second, he may wish for agreement in principle before the upcoming election in Mexico and before mid-term U.S. congressional elections that could change the balance of power leaving him less room to manoeuvre. And finally, a NAFTA announcement might help curb the wild volatility of the financial markets.
Chances of a deal called ‘slim and none’
While Canada’s Foreign Affairs Minister Chrystia Freeland has said Canada is prepared to work on a new NAFTA deal “24/7,” intensive negotiations in the coming weeks could probably cover only seven of about 30 negotiating issues and there is virtually no chance of a deal being done. “In my personal opinion, I think there’s two chances: slim and none,” says Michael Manjuris, professor and chair of global management studies at Ryerson University in Toronto.
ListenMajor roadblocks exist
Manjuris says the issues are simply too complex and there are several roadblocks. One is in the auto sector where current rules require vehicles contain 62.5 per cent North American content. The U.S. would like to change that to 80 per cent but the sides could conceivably agree on something in between. Vehicles are manufactured in all three countries and may travel over borders at different stages of their production.
The U.S. also wants to change the dispute resolution system from one that is neutral to one that would favour U.S. interests. And the U.S. is also seeking a five-year limit on NAFTA, which Canada and Mexico say is untenable for businesses and their planning needs.
China-U.S. trade dispute could affect NAFTA talks
Beyond that, Manjuris says the current war of words and duties between the U.S. and China could have a negative impact on the NAFTA renegotiations. “It may permit the American negotiators to think that they can become more entrenched in in their positions and less likely to negotiate a compromise position on the three roadblocks we just talked about.
“That would then either jeopardize a negotiated settlement for a new NAFTA or at least prolong it before we come to an agreement.”
A global trade war possible
Perhaps a greater concern, says Manjuris, is the possibility of a global trade war which would be good for no one. “It would increase the price of goods and services that are brought into any jurisdiction which would ultimately fuel inflation which will lead to job losses. I think that both the Americans and the Chinese are aware of this. But hopefully they allow…calmer heads to prevail in determining how to better look at their trade relationship.”
Canada has fall-back position
Meanwhile, should NAFTA collapse, Canada and the U.S. will still be governed by the pre-existing bilateral trade agreement between them. That would allow some unfettered trade in energy and certain products. Manjuris also points out that Canada recently signed a trade agreement with the EU and that it would do well to continue to diversify trade with countries other than the U.S.
For reasons beyond our control, and for an undetermined period of time, our comment section is now closed. However, our social networks remain open to your contributions.