Delaying NAFTA deal is actually a win-win-win

For all three countries, maintaining a trilateral deal is key to supply chains, production logistics and agricultural sales. It’s worth the wait.

Delaying NAFTA deal is actually a win-win-win

By Gina Chon

WASHINGTON (Reuters Breakingviews) - Delaying a revamped North American Free Trade Agreement (NAFTA) is actually a win-win-win. Canada and the United States will keep talking despite missing a Friday deadline to conclude trade talks. Negotiators will need to move quickly to avoid the risk of fresh demands from the next Mexican government. But getting a deal that all sides can sell is more important.

The mood was tense on Friday as U.S. President Donald Trump acknowledged having told Bloomberg he wasn’t going to make any concessions to his northern neighbour. The United States had already shut the Canadians out of talks for weeks while it negotiated with the Mexican government. On Monday, Trump hailed a U.S.-Mexico deal on certain NAFTA provisions and threatened auto tariffs on Canada if it didn’t capitulate by the end of the week.

Ottawa and Washington also appeared to remain far apart on certain issues. Trump has slammed Canadian tariffs of up to 270 per cent on dairy imports. Canada objects to the U.S. demand to eliminate dispute panels for anti-dumping complaints.

That’s why it’s encouraging that both sides will continue negotiations next week. The Friday deadline was set because of the 90-day notice period Congress needs before a deal can be concluded. Meeting it would enable Mexican President Enrique Peña Nieto to sign the pact before he leaves office at the end of November.

But the parties have some wiggle room because the deal text doesn’t have to be released until the end of September. Trump gave notice to Congress on Friday that a trade pact with Mexico would be concluded by the end of November, and Canada could join “if it is willing.” Yet Trump’s threat to do a deal with Mexico alone rings hollow because Congress has signalled it would reject a bilateral deal.

If they miss the text release deadline, NAFTA could then be subject to new demands by Andrés Manuel López Obrador, the Mexican president-elect who takes office on Dec. 1. AMLO, as he is known, has said he favours renewing the pact, but he’s an economic nationalist who could raise fresh issues. For all three countries, maintaining a trilateral deal is key to supply chains, production logistics and agricultural sales. It’s worth the wait.

 

CONTEXT NEWS

- U.S. President Donald Trump notified Congress on Aug. 31 that the United States intends to sign a trade deal with Mexico at the end of November. He said Canada, “if it is willing,” could also be part of the deal. Canada and the United States will resume talks on Sept. 5.

- Canada rejoined the talks on Aug. 28 after Mexico and the United States had held bilateral discussions for about five weeks. On Aug. 27, the United States announced a deal with Mexico on certain NAFTA provisions, such as increasing the amount of regional auto content needed to qualify for tariff-free trade to 75 percent from 62.5 percent.

- Trump had threatened to impose auto tariffs of up to 25 percent on Canada if it didn’t agree to a NAFTA deal by Aug. 31. U.S. and Mexican officials set that deadline because of the 90-day notice period the U.S. Congress needs before a trade deal can be signed. That timing would allow Mexican President Enrique Peña Nieto to sign the revised deal before he leaves office at the end of November. His successor, Andrés Manuel López Obrador, takes over on Dec. 1.

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