Bloomberg
is reporting this week that administration efforts to tie NAFTA talks to a
Mexico wall may create a new “danger zone.” The group says the talks are
entering a pivotal moment as the U.S. turns up the pressure on Canada and
Mexico to radically alter the trade pact in favor of American interests.
In the
run-up to the sixth round of talks that are now underway in Montreal, there’s
been plenty of saber-rattling and posturing from the three countries, Bloomberg
says. Through it all, a somewhat consistent pattern emerged: U.S. President
Donald Trump kept threatening to withdraw from the pact while Canada and Mexico
suggested they’d bring fresh thinking to the table to try to resolve some of
the touchiest issues. The question now is whether they can move forward fast
enough to salvage the deal before electoral politics overwhelm the agenda later
this year.
“We’re
reaching the danger zone right now,” said Stephen Moore, a visiting fellow at
the Heritage Foundation who was an economic adviser to President Trump during
the 2016 campaign. “This is a pretty important meeting, because if there’s
still no progress, the White House could become very frustrated and just throw
up their hands and say, ‘We’re pulling out.’"
The
latest session to revamp the North American Free Trade Agreement began Sunday
in Montreal and is scheduled to last through Jan. 29, making it the longest
round yet. Talks have continued despite the U.S. government shutdown that’s
consumed Washington.
The
24-year-old trade pact is a linchpin for the US, Canada and Mexico, which trade
more than $1 trillion in goods annually. Any of the three can quit after
six-months’ notice, though President Trump is the only one to regularly
threaten to give it.
President
Trump has lately tied the talks to his push for a border wall with Mexico,
while the U.S. is also growing impatient with Canada’s perceived unwillingness
to compromise. At the same time, there are pro-NAFTA signals coming from the
administration, including Agriculture Secretary Sonny Perdue who said last week
that Trump shares his view that NAFTA has benefits for U.S. farmers.
The
Montreal round is likely to feature more substantial discussion on the five
“poison pills” from the US, particularly autos, Brett House, deputy chief
economist at Scotiabank, said, adding mounting pressure from NAFTA supporters
in the U.S. is a signal that Canada and Mexico’s strategy is working.
“Rather
than the notion where we’re getting to some kind of point where Canada and
Mexico are over a barrel and have to blink, I actually think we’re seeing the
beginning of fruit from the approach they’ve both taken so far,” House said.
There
are signs of possible progress, as well. Mexico hinted it could bend on
automotive rules, one of the most explosive issues, while also saying that
officials agree broadly on 40 percent of the pact. Canada, meanwhile, has said
it will bring “new ideas” to the talks, and that several topics, known as
chapters, are close to being concluded, even as Canadian officials said the
chance of a U.S. exit is seen as increasing.
Bloomberg
emphasized that there are a handful of key disputes over U.S. demands,
including autos, where the U.S. wants to raise the amount of a car that must be
built in the three countries to be traded under the deal. Another hot button
issue includes adding a sunset clause to terminate the pact after five years
unless all three countries agree to renew it.
“It’s
very important to continue to make progress both with the United States and
with Canada,” Mexican Finance Secretary Jose Antonio Gonzalez Anaya said last
week. “Mexico will not pay for a wall. It’s not a negotiation stance for
Mexico; it’s an issue of national sovereignty and dignity.”
Canada’s
chief central banker said the ongoing talks are already hurting business
investment. “I would believe that it would be net negative for both Canada and
for the United States, but to actually quantify that is very difficult,”
Governor Stephen Poloz said. Prices for consumers would rise and it would reverse
the “income effect” that free trade deals create by boosting purchasing power,
he said.
Canadian
Foreign Minister Chrystia Freeland and Mexican Economy Minister Ildefonso
Guajardo will hold talks in Toronto on Monday. The two ministers along with U.S.
Trade Representative Robert Lighthizer are scheduled to meet on the closing day
of round six, while the seventh session of talks is set for February.
A major
looming risk to the negotiations is the political calendar. Mexico holds a
presidential election July 1 and U.S. congressional midterms take place in
November. Trump indicated this month that he could be flexible with talks ahead
of the Mexican election -- and then repeated his threat to withdraw if he can’t
reach an agreement that’s “fair” for America.
Well,
the good news seems to be that there are additional voices speaking up in favor
of ag trade, but the bad news seems to be that the threats continue to persist.
So, we will see. These talks will continue to be extremely important for
producers and should be watched closely as they continue, Washington Insider
believes.