Donald Trump has stated to Canadian Prime Minister Justin Trudeau and Mexican President Enrique Pena Nieto that he wants to hasten a renegotiation of the terms of NAFTA (North American Free Trade Agreement) also known as the NAFTA Agreement. This comes after the U.S. left the Trans-Pacific trade agreement back in January.
According to Trump’s advisors and White House officials, The U.S. President had been considering withdrawing from the NAFTA agreement altogether. The agreement formed what is currently one of the largest trading blocs worldwide in financial terms. According to Wednesday’s statement, after a “pleasant and productive” telephone conversion with the president, the Mexican and Canadian leaders have agreed to swiftly arrange a meeting to renegotiate the terms of the NAFTA agreement in a manner that would benefit the three countries.
NAFTA was set up to eliminate trade and investment barriers between the three countries and came into force on January 1, 1994. Over the years, the Agreement has benefitted Mexico significantly more than the USA, and Canada not much at all. It is possible that any renegotiation would consider this imbalance.
Trump has been considering issuing an executive order leaving NAFTA for some time now, but a decision has been delayed due to differences of opinion between White House advisers. Trump’s intention to split or renegotiate the terms of the NAFTA agreement were announced during his presidential campaign. While this newest announcement comes as no shock, most observers were expecting a withdrawal.
The president has recently been bemoaning certain Canadian trade practices. These largely related to energy, timber and dairy farming over the past weeks. Trump stated April 20 that he intended to do something about it. He repeated several times that he is seeking better terms for the U.S. The NAFTA decision is likely what he was referring to. After the announcement, the US dollar dropped 1% on the Mexican peso and 0.6% on the Canadian dollar.
There are many reasons for not withdrawing. The American Corn Growers Association has stated that this would be disastrous for American agriculture, reminding Donald Trump that the American corn growers helped elect him. Trump has repeatedly stressed that NAFTA was destroying American jobs. In addition, withdrawing from NAFTA was one of his major election promises.
Mexico’s foreign minister has stated that his country would unilaterally leave the table if Mexico seemed to be getting a poor deal in the negotiations. However, both Mexico and Canada are keen on a quick start to NAFTA negotiation. Mexico had expected to commence these later in the year
However, an agreement suitable for all three parties is by no means a foregone conclusion. While the USA withdrawal is no longer imminent, that does not mean that the future of the NAFTA agreement is secure. We shall report on this issue as talks proceed.
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