Why the USA wants a deal within weeks — NAFTA

Mar 23, 2018

The Midwest has a complicated history with trade.

Many Republican lawmakers, who so far are standing by the bombastic GOP president, are extremely frustrated by Trump’s tariff talk.

As my Brookings colleague Joe Parilla noted last spring, more than half of North American trade occurs in intermediate goods-materials or components that companies import and integrate into the production of a final good. That date turned out to be wildly unrealistic.

It’s unclear why NAFTA’s top negotiators opted for chumminess in response to Trump’s sulky tweets.

Cliffod Sosnow is a partner in the Canadian-based law firm of Fasken Martineau. “It’s a huge opportunity to make NAFTA complete, if we can find a way forward on it”. The elected leader of the nation to our south wanted Trump to publicly affirm that Mexico in fact would not pay for the construction of a border wall.

The list of targeted US goods – including motorcycles, jeans and bourbon whiskey – sends a political message to Washington about the potential domestic economic costs of making good on the president’s threat.

However, he said the deal has benefited the USA, which he said has about 9 million jobs that depend on free trade with Canada. And when the latest round of talks ended this week in Mexico City, U.S. negotiators signaled they were in a hurry to get an agreement between the three countries in writing, which the Globe and Mail called avoiding “political headwinds later this year”. That’s similar to the estimate offered by his former American counterpart Mickey Kantor – Clinton’s first USA trade czar foresees at least six months more of negotiating. On the creation of reciprocal procurement agreements, a “dollar-for-dollar” match would actually give Americans less access to that lucrative market. “It would be a hard one to manage because of disruption [to industry]”.

Prior to Trump’s tariff action, cross-country discussions had produced plans to pressure China over steel, an issue that affects the European Union as well as the United States. That is why the single largest trading location by value on earth is the bridge and tunnel crossing between Detroit and Windsor, Ontario, where well over $100 billion in goods crosses the worldwide border annually. While the Canadian embassy declined to comment on Trump’s tweets, Prime Minister Justin Trudeau has previously praised supply management and argued that Canada is not to blame for the problems of dairy farmers in the U.S. Speaking to the press during an Oval Office meeting, Trump said that exceptions to the tariffs could be included in a new NAFTA deal.

US, Canadian, and Mexican officials finished their 7th round of talks on NAFTA in Mexico City on Monday.

As for a sunset clause, “Canada has a lot of difficulty with that one”, Sosnow notes. The early consensus is that the tariffs would cost many more jobs than they will keep or create.

Other key issues, such as customs rules and digital trade, appear to be less contentious. “It’s time we build a new agreement with Europe”.

Given the size of America’s trade deficit, Trump said the country would not be a loser in any fight. But we are at the point where we have very important decisions to be made.

So what happens now? The share of Michigan’s exports to Mexico ranks third-highest in the country.

Lighthizer pointed out that the presidential election campaign in Mexico will begin next month. That has become a major concern to US dairy producers, who accuse Canada of dumping on the world market. Then, in 2019, Canada’s election season gets underway. “We don’t have exact details – it’s too soon”, said Rio Tinto Canada’s manager of media relations, Claudine Gagnon. “But what it will look like – who knows?” “And I think that’s likely the concern all of us have”. You’ve been involved in past trade negotiations. “Trade wars are lost by both sides”, Sen. Specifically, Minister Morneau was pressed on why the government didn’t respond in his budget to big USA corporate tax cuts that slashed corporate rates to 21% from 35%.

Why the USA wants a deal within weeks — NAFTA


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