NAFTA Isn’t Dead Yet, But Trump’s Vision Of One-On-One Trade Deals May Be

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The fourth round of trade talks between the United States, Canada, and Mexico, which concluded Tuesday, were as contentious as they were expected to be. U.S. negotiators tabled a raft of controversial proposals. Mexican and Canadian negotiators refused to take the bait; they did not storm off in protest. But there was a decision by all three parties to postponethe next scheduled round of talks.

Negotiations will pick up in Mexico City Nov. 17-21, rather than resuming at the end of October. This delay came with an acknowledgment that it would be impossible to conclude this renegotiation of the North American Free Trade Agreement by the end of the year and that the talks would spill over into at least the first quarter of 2018.

These timing issues are important not just for the NAFTA talks themselves, but for U.S. commercial relations with the rest of the world. Let’s take each in turn. For NAFTA, there were two concerns about a delay. First, there was a concern about optics. What if a delay looked like a breakdown? Could that be the opening the President was waiting for to terminate NAFTA? It remains to be seen whether that will happen.

The second NAFTA issue was the Mexican presidential election in July 2018. The worry was that allowing controversial negotiations to overlap with the election run-up could cause trouble (e.g. promoting the candidacies of NAFTA opponents). However, with the U.S. introduction of unpalatable proposals in this latest round, the Mexicans were left with some unsavory choices. They could abandon the talks, but that would almost certainly have led to NAFTA’s premature death. They could have asked for the talks to go quiet until after their election. That would have been entirely normal for any other U.S. administration, but it would have required a degree of patience and tact that the Trump administration was not prepared to offer. So the remaining option was to soldier on with the talks, even as the elections draw nearer.

Ostensibly, the delay will allow Mexican and Canadian negotiators to return to their capitals and consider the radical U.S. proposals on topics like a sunset clause, rules of origin, and dispute settlement. There is nothing unusual about taking extra time to consider proposals in trade talks, and the original schedule would have been very difficult even in more conventional negotiations. In this case, however, the main question for Mexico and Canada will be how to say “no” in a way that does not destroy the negotiations and the original deal. Not only do Mexico and Canada consider these proposals unacceptable, but the proposals do not seem to have much backing in the U.S. private sector nor in Congress.

If the delay is unlikely to bring Mexico and Canada closer to the U.S. position, it is no more likely to bring the United States back toward its partners. In theory, the Trump administration might use the pause to scale back its demands, but this seems unlikely. At best, it seems like a play for time. Perhaps something will happen over the next month to save a dire situation. Anything…

Meanwhile, the rest of the world is watching closely. It is worth remembering that, back in January, the United States was engaged in free trade negotiations with 39 countries. That count includes the 11 other participants in the Trans-Pacific Partnership talks (a deal that was promptly killed by President Trump) and the 28 European Union countries collectively engaged in the Trans-Atlantic Trade and Investment Partnership talks (a deal that seems to have gone into hiding). Had both agreements been concluded and put through Congress, there would have been new rules governing a very large fraction of world trade.

But both the TPP and TTIP fell prey to President Trump’s aversion to multilateral trade talks. He clearly and repeatedly expressed his preference for bilateral dealings. In principle, lots of bilateral talks could be conducted in parallel. In practice, the Trump team has barely been staffed enough to carry on the NAFTA talks. This meant that all the other countries joined the queue, waiting to strike their own deals with the new regime.

That queue points out two broader problems with the developments in the most recent NAFTA round. Other countries were watching closely. Japanand Chile clearly did not like what they saw in terms of a U.S. approach. Japan, at least, is not eager to do a bilateral deal with the United States, though there is clear U.S. interest. The queue is dispersing. This means, for example, that those U.S. farmers who had been promised new access to the Japanese market under the TPP are going to keep waiting – and watching as other countries do deals and get preferential access to Japan.

The last point about the queue is that none of this is set to work anytime soon with the U.S. legal requirements for striking trade deals. Even for NAFTA, the administration’s timetable did not work for the current Congress. For all the other countries, the administration has not even notified Congress of the intent to negotiate – the mandatory start of a long process.

Thus, the reworking of global trade rules that seemed within reach not so long ago, now appears to be years away. The demise of NAFTA, meanwhile, may only have been pushed back a little bit.

Source :

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