The current NAFTA negotiations are set to founder as both Canada and Mexico reject the US proposals. The US Chamber of Commerce has referred to American demands as ‘poison pills’. They are set to fail to gain any agreement from Canada and Mexico. Fundamentally, the talks have failed before they have begun due to US protectionism.
The United States is demanding an agreement that favors US manufacturing, and that it will expire after five years if not all countries agree to renew it. There is no chance of an agreement on these terms. It is now up to the White House how the talks will proceed if they proceed at all.
It is well known that President Trump looks upon NAFTA unfavorably, and it is equally well known that he may well simply scrap the free trade agreement if he does not get his way. He reiterated this to Canadian Prime Mister Justin Trudeau during a White House meeting last week. He threatened that he would scrap it if the sides cannot come to an agreement. Presumably, that means an agreement to his own demands.
It is debatable that Trump’s protectionist proposals would get enough support in Congress to get approved. Additionally, many business interests in the US, including the retail industry and car manufacturers, are for retaining NAFTA. They may like to see some modernization of its terms, but they do want to see it scrapped.
After all, Canada and Mexico are two of the US main trading partners. They have close borders available by road haulage. They have common industrial and agricultural interests. Should the NAFTA negotiations fail and NAFTA be disbanded, it would lead to price increases to American consumers. It would also lead to disruptions in the US manufacturing and agricultural industries.
Donald Trump has a specific antipathy to trade deficits. These totaled $63 billion and $12 billion last year for the US for trade with Mexico and Canada respectively. Perhaps trade deficits would be better reduced by the US focusing on its own agricultural manufacturing shortfalls than by disbanding the trade association.
There are still three rounds of talks scheduled this year before the end of year deadline for an agreement. The final NAFTA negotiations in Washington in December will determine the future of NAFTA. Should it be disbanded, the US will have a massive export shortfall to fill. Otherwise, US consumers will go without right at the beginning of the Holiday season.
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