NAFTA Re-negotiations Ongoing Between Canada, U.S., and Mexico
Long-awaited results of NAFTA talks expected later this week
Key Actors:
- Trump Administration – led by President Trump; initially began the renegotiations
- Chrystia Freeland – Canadian Foreign Minister; representing Canada in renegotiation talks
- Mexican and U.S. representatives
Scenario:
Time is running out for the NAFTA renegotiations that have persisted since August of 2017 between Canadian, U.S., and Mexican representatives. Results are expected to come later this week. If this deadline is not met, the consequences will likely rattle the Canadian economy.
Background
President Trump has been advocating against NAFTA since his campaign in 2016, initially threatening to pull out but later deciding to renegotiate instead. After his election, a series of talks began with the plan of achieving an “agreement in principle” by the end of April.
However, controversial demands were brought up during the fourth round of talks. The Trump Administration wished to terminate Canada’s dairy and poultry supply-management regime – a system of fixed prices, production quotas, and tariffs in place since the 1970s to protect the Canadian economy. Another demand raised was for all cars travelling duty-free between the three countries to be at least 85 percent North American content, versus the 62.5 percent it currently is, and for cars from all three countries to be a minimum of 50 percent U.S. content. Furthermore, the Trump administration proposed introducing a sunset clause, meaning the new NAFTA would expire every five years unless renewed by all its member countries.
Progress was slowed as a result, and the deadline came and passed. The eighth and final round of talks began in Washington last Monday. Sources claim that a text presented to the U.S. Congress will be finalized by May 17th or 18th. If this deadline is not reached, President Trump will need to keep the current agreement until talks can be resumed, or else submit a partial deal to the Congress.
However, if a deal is not struck soon, many worry that Congress will only pass the new NAFTA out of fear of U.S. withdrawal, leading to the doubt of the new NAFTA’s reliability.
Potential Effects on Canada
For Canada especially, the results of the renegotiations could be unpleasant. Ever since NAFTA was signed in 1994, goods and labour have flowed easily between the three countries. Canada is especially dependent on this agreement because of its large quantities of exports to the U.S.; according to The Globe and Mail, trade with the U.S. makes up 49 percent of the annual economic output for Ontario, presenting a stark contrast to the maximum of 14 percent in the states. In addition, steel makes up 90 percent of all Canadian exports, and if the new NAFTA turns out in favour of the Trump Administration, tariffs will be put on the material which will raise the cost of goods in defense, the auto industry, and such. Overall, Canada’s exports and manufacturing would likely plummet.
What now?
Nonetheless, Canadian representatives retain their optimism. Canadian Foreign Minister Chrystia Freeland reassures the public that talk is still happening between the three countries in an attempt to come to a reasonable conclusion.
“What’s really important for us,” she tells reporters, “is to talk through the emerging details with industry, with labor, to it be sure that we are coming up with something that is going to work.” For the time being, we can only hope that results will turn out favourable for Canada.
Statistics
- Trade with US makes up 49% of Ontario’s annual economic output
- 90% of all Canadian exports are of steel
- President Trump demands cars to go from 62.5% to 85% North American content, and to 50% U.S. content
Bibliography
Agence France-Presse. “Canada’s Freeland Says NAFTA Talks Center on Autos.” Yahoo! News, Yahoo!, 9 May 2018, www.yahoo.com/news/canadas-freeland-says-nafta-talks-center-autos-200857151.html.
Reuters. “Mexico Says Time Running Out for Quick NAFTA Deal; Canada Upbeat.” VOA, VOA, 10 May 2018, www.voanews.com/a/mexico-says-time-running-out-for-quick-nafta-deal-canada-up-beat/4388705.html.
Tombe, Trevor. “NAFTA, Trump and Canada: A Guide to the Trade File and What It Could Mean for You.” The Globe and Mail, The Globe and Mail, 12 Mar. 2018, www.theglobeandmail.com/news/politics/trump-nafta-canada-mexico-trudeau/article33715250/#nafta.
Borzykowski, Bryan. “Trump’s Steel and Aluminum Tariffs Last Thing ‘Kicked When down’ Canadian Economy Needs Now.” CNBC, CNBC, 5 Mar. 2018, www.cnbc.com/2018/03/02/trumps-steel-aluminum-tariffs-may-rattle-canadas-economy-and-nafta.html.
Kerr, William A. “New NAFTA or No NAFTA? How Trump’s Ire Could Affect Canadian Agri-Food.” The Conversation, The Conversation, 11 May 2018, theconversation.com/new-nafta-or-no-nafta-how-trumps-ire-could-affect-canadian-agri-food-93632.
http://www.macleans.ca/politics/ottawa/on-nafta-ottawa-struggles-to-keep-its-fragile-peace/
https://www.huffingtonpost.ca/2017/06/06/chrystia-freeland-foreign-policy-speech_n_16968006.html
https://globalnews.ca/news/4031186/trump-steel-tariffs-canada/
http://www.cbc.ca/news/politics/tuesday-nafta-sour-tone-1.4498241
http://jamaica-gleaner.com/article/business/20180307/progress-slow-nafta-talks-after-seventh-round