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Monday, May 29, 2017

Trump claims he is ready for "massive" renegotiation of NAFTA

(May 13) In an interview with the Economist, US president Donald Trump said that as soon as his trade czar is approved by the Senate he will start a major renegotiation of the North American Free Trade Act NAFTA.

Just today, the US Senate voted in favor of approving Robert Lighthizer as the US Trade Representative. Lighthizer's nomination had been held up by his having to get a legal waiver as he had worked for foreign governments.
Trump said he intends to file a 90-day notice with Congress and would work with it on negotiating priorities. Talks would start with Canada and Mexico later this year. Trum said that the clock started with Lighthizer's nomination. The Trump administration has already said it wanted significant changes in a number of areas that included dairy, auto, and pharmaceuticals as well as the dispute-resolution mechanism. Trump said that he wanted "massive changes" to the system. This may not sit well with either Canada or Mexico who could very well reject Trump's suggested changes and also demand changes of their own. So far, Canadian PM Trudeau has made no comment on the proportionality clause that many critics want changed nor the necessity to ensure that water is not classed as a commodity or service. It should be excluded from the agreement.
It may take ages for a massive renegotiation of NAFTA assuming it is even possible. Negotiations wont start until later this year. Mexico wants a deal by early next year before the Mexican election but most observers think it will take more than a few months to make a major overhaul of NAFTA. Given the problems that appear to be building up for Trump he may be more concerned with other issues than NAFTA, such as surviving as president.
Trump had earlier claimed he was ready to withdraw from NAFTA but after phone calls from Trudeau and the Mexican president urging him to reconsider, he decided not to do so. Trump said:"I have a very good relationship with Justin and a very good relationship with the president of Mexico. It was an amazing thing. They called separately 10 minutes apart. I just put down the phone with the president of Mexico when the prime minister of Canada called. And they both asked almost identical questions: 'We would like to know if it would be possible to negotiate as opposed to a termination.'And I said, 'Yes, it is. Absolutely.' So we did that and we'll start. "
What more likely happened is that alarm bells were going off within the business community and pressure was put on members of the Trump administration to stop Trump from actually withdrawing from NAFTA. Trump's own son-in-law Jared Kushner set up the Trudeau call. Trump may have wanted to take credit for forcing Canada and Mexico into negotiation before his 100 days in office. This is rather ridiculous in that both Canada and Mexico have always expressed their willingness to renegotiate NAFTA. However, Trump's moves being ridiculous are the norm rather than exceptional. However, neither government will step in to spoil Trump's joy in claiming credit for in effect doing nothing except what was planned all along.
Maryscott Greenwood of the Canadian-American Busines Council wrote in an article: "President Trump is eager for some wins. Canada can help provide him with one, while also advancing its own interests. The Canadian government could present the United States with a proposal for aligning a particular set of regulations. This would represent a bilateral victory for what is at the moment a U.S.-only effort to cut regulatory red tape." However, this is a minor issue. Any major overhaul will involve major disputes as well. It remains to be seen if Canada will bring up issues that were very much against Canadian interests in the original NAFTA agreement. Mexico too may want to make substantial change in its own interests. An America First policy may not be agreeable to either Mexico or Canada. There should be public consultation on the issues in all three countries and a transparent negotiation process. Trump has not asked for this but it would seem neither Trudeau or the Mexican president have either.

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