Can Trump terminate NAFTA?

Anna Jefferson
September 1, 2018

Canadian Prime Minister Justin Trudeau said Wednesday that a deal to re-work the North American Free Trade Agreement (NAFTA) may be possible by the U.S.'s Friday deadline, but that he'd rather leave the table than accept a subpar proposal.

The U.S. and Mexico agreed workers earning at least $16 an hour should make 40 per cent to 45 per cent of autos.

These are expected to continue for Mexico despite the new trade deal between the two countries.

In addition to dodging that bullet, the agreement marks a significant backtrack from some of the initial proposals that the Trump administration floated in Nafta negotiations, including an 85 percent Nafta-sourced parts content requirement and a 50 percent USA -sourced provision.

Canadian Foreign Minister Chrystia Freeland interrupted a trip to Europe to rush back to Washington to begin talks with US Trade Representative Robert Lighthizer.

"We believe this is a positive development for Canadian auto parts suppliers since the North American automotive industry will stay intact, and Mexican assembly plants will need to source parts from high-wage jurisdictions such as the USA and Canada", BMO Capital Markets analyst Peter Sklar wrote in a note to clients.

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Freeland will be on the call, as will Canada's ambassador to the U.S., David MacNaughton, and Dominic LeBlanc, the federal minister responsible for intergovernmental affairs. Trump said Monday he'd like Canada to join, but will move ahead without us if necessary.

The goal is to have the new deal signed by outgoing Mexican president Enrique Pena Nieto before his recently elected successor, Andrés Manuel López Obrador, takes office December 1.

Freeland said the higher Mexican wages would result in "better conditions for working people in Canada and also in the United States in high wage countries".

But the TPA also says the final text of the deal doesn't have to be released until 60 days before signing.

Trump threatened to impose 25 per cent tariffs on Canada if a deal isn't reached, but Nantais said it still seemed to be a negotiating tactic.

"The sooner we can have these reassurances, the better position we are as MI agriculture, especially as we move into our harvest season", Kran said. I think it's important to note that the Mexicans have been negotiating with the US for over five weeks - a little unrealistic, perhaps, some might say, for Canada to sign on in, you know, four days. Trump told reporters at the White House.

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But that will mean compromises on both sides on issues that have created friction between the neighboring countries, notably Canada's dairy trade rules and mechanisms to settle disputes and intellectual property protections, as the leaders each try to claim victory.

Specifically, Trump called to congratulate Peña Nieto and himself on replacing NAFTA with what Trump called the United States-Mexico Trade Agreement.

Freeland's spokesperson, Adam Austen, said the announcement was "encouraging".

However, if Trump wants to include Canada into the U.S. -Mexico trade deal, he has until Friday to do so.

Ottawa could offer U.S. dairy farmers a small increased share of the market as it did with the European Union in a free trade pact a year ago. What he didn't say is he wants an end to Canada's supply management system. The U.S. -Mexico agreement stipulates a 16-year NAFTA that would be reviewed and possibly extended every six years. What's the rollback in the other areas, and what does Mexico think they agreed to?

U. S. ambassador to Canada Kelly Craft, who also attended the Wednesday meeting, told The Washington Post discussions were very positive.

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