23-year-old North American Free Trade Agreement in peril as Trump meets with Justin Trudeau: ‘If we can’t make a deal, it’ll be terminated and that will be fine’
The North American Free Trade Agreement could be on the verge of disintegration after coming under sustained attack from Donald Trump, a longtime critic of the three-nation deal.
In comments made at the White House with Justin Trudeau, prime minister of Canada, ahead of the start of fourth round of talks, Trump warned it was “possible” that the US would drop out of the 1994 deal.
“I think Justin understands this, if we can’t make a deal, it’ll be terminated and that will be fine,” Trump said. “We have to protect our workers. So we’ll see what happens with Nafta, but I’ve been opposed to Nafta for a long time, in terms of the fairness of Nafta.”
Trudeau later said he was optimistic that an agreement would be reached. “Nafta has benefited millions of people and can benefit millions more,” Trudeau said, although he added that Nafta could use a “much-needed upgrade”.
Enrique Peña Nieto, Mexico’s president, has also called for the modernization of the 23-year-old deal. But Mexican leaders have also warned that talks must conclude early next year before their presidential election campaign gets under way.
If the deal falls apart, the United States, Canada and Mexico would go back to a system of low tariffs on imports. But some agricultural products would be slapped with with far higher duties, including a 25% hike on shipments of beef, 45% on turkey, 75% on chicken, potatoes and high fructose corn syrup sent to Mexico from the US.
“Let me be forceful and direct,” Tom Donohue, president of the US Chamber of Commerce, said earlier this week. “There are several poison pill proposals still on the table that could doom the entire deal.”
The Chamber estimates that about 14m US jobs depend on trade with Canada and Mexico, and more than $1bn in commerce is conducted daily across the southern and northern borders.
But US business groups have expressed grave concern over Trump’s threat to pull out. More than 310 state and local chambers of commerce sent a letter to the administration urging the United States to improve but not end the trilateral agreement that, they said, has contributed to $1.2tn annually in trade.
“We recognize that this agreement is a quarter-century old. It makes sense to modernize it,” said Glenn Hamer, president and CEO of the Arizona Chamber of Commerce. “But for the love of God don’t do any harm to something that has been so economically beneficial to states all across America.”
US proposals include limiting the number of federal government contracts that Mexican and Canadian companies can win, a provision that would cause the deal to automatically expire in five years unless all three countries vote to renew, and changes in how much of a product needs to be made in North America to come under Nafta protections.
Under current rules, at least 62% of the parts in a car sold in North America must come from the region to avoid being hit with taxes at the border. Under the US proposal, America would require more to be made in the country and less sourced from other members of the bloc.
But US union leaders, including representatives at the AFL-CIO and the United Steelworkers, have expressed support for the deal’s demise, a position shared by some Democrats.
On Friday, Senator Sherrod Brown of Ohio offered his support, saying it was “about time” US trade negotiators “took the pen away from corporate lobbyists and started writing trade policy that puts American workers first. Any trade proposal that makes multinational corporations nervous is a good sign that it’s moving in the right direction for workers.”
But there is still some uncertainty whether Trump is deploying tough negotiating bluster or is seriously considering scuppering the agreement. After Donohue made his comments supporting the Nafta, Emily Davis, spokeswoman for the Office of the US Trade Representative, reiterated the administration’s position.
“The president has been clear that Nafta has been a disaster for many
Americans,” she said, and acknowledged that changes to the deal would “of course be opposed by entrenched Washington lobbyists and trade associations. We have always understood that draining the swamp would be controversial in Washington.”