Writing Off NAFTA.

The North American Free Trade Agreement (NAFTA) is still on the operating table. While it appears that the gurus at Canada’s banks are giving poor odds, that seems to be what banks always do. They do appear to like spreading doom and gloom. Despite their predictions, nobody is willing to announce time of death at this stage.

If any party is about to walk out on the negotiations, it is the Mexicans. They have suffered the most insults and the most scurrilous pressure. They are also the country that cannot afford to lose NAFTA. It has become a critical factor in the country’s economy.

Mexico also has the growing concern that Canada might just be a fair-weather friend. There is just too much talk to be heard about Canada and the United States going back to the NAFTA that existed before Mexico was brought on board. And then Trump really would need that wall to keep angry Mexicans seeking redress from coming to Washington to visit him.

Mexico needs those automotive plants and the easy access to American markets for their farm products. Tourism in ‘olde’ Mexico does not cut it.

The next round of the negotiations takes place in Mexico starting this week. All the signals at this time are that the American negotiators are passed the negotiating stage. They are expected to get tough.

Canada’s quest for labor law equalization and environmental concerns have fallen on deaf ears. Neither the Americans nor Mexicans are interested. It seems nobody has any conditions to trade to make the deal.

The essential ingredients of any trade negotiation seem to be missing from this series of trade talks. Those ingredients are good will and an eagerness for success by all parties. With the good will down the tubes as signalled beforehand by Donald Trump, the resentment of the Mexicans and the obvious preparation for failure by the Canadians, we hardly want to be the odds maker in this situation.

But the key question is whether the American President can unilaterally cancel or change NAFTA without the concurrence of Congress? (And do not bet on help from the U.S. Supreme Court.) The Canadians have been working the system hard across the U.S. with governors, representatives and senators, seeking support for NAFTA. It takes six months to cancel NAFTA and Canada might just have to find out how many American legislators really are friends.

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Copyright 2017 © Peter Lowry

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