The uncertain future of NAFTA

The uncertain future of NAFTA

The 8th round is coming on the NAFTA negotiations and Mexico is most likely to put more pressure.

By Oso Oseguera

“The NAFTA countries are nowhere near close to a deal,” U.S. Trade Rep. Robert Lighthizer said last Thursday.

Lighthizer cited “gaping differences” on issues ranging from farm trade to labor standards to intellectual property protections. “We, of course, will continue to engage in negotiations, and I look forward to working with my counterparts to secure the best possible deal for American farmers, ranchers, workers, and businesses,” Lighthizer said.

If negotiators can’t agree on a revamped North American Free Trade Agreement soon —House Speaker Paul Ryan set an informal Thursday deadline— the talks could drag into 2019. Or Trump could carry out his threat to abandon the agreement he’s labeled a job-killing “disaster” and throw commerce among the three NAFTA countries into disarray.

“The window is closing rapidly,” said Dan Ujczo, a trade lawyer at Dickinson Wright in Columbus, Ohio. Really fast. In July 1st, Mexico will have general elections and the leading candidate is López Obrador -from a leftist oriented party- who has been telling media that he will put the trade under the magnifying glass.

On the meanwhile, Trump is confronting Chinese authorities about steel and aluminum tariffs. NAFTA is by far the only urgent matter item on the US administration’s trade agenda.

For example, in some other ring, the US and China, locked in a conflict over Beijing’s demand that American companies turn over technology to gain access to the Chinese market, have threatened to slap tariffs on $50 billion of each other’s goods. And Trump has asked Lighthizer to find an additional $100 billion in Chinese products to tax.

NAFTA has been a focus of Trump’s ire. For good NAFTA brought American farmers the possibility to export corn and other products. But many US manufacturers notably automakers, moved production to Mexico to capitalize on low labor costs and shipped their products back to the United States. The influx of imports swelled America’s trade deficit with Mexico, which amounted to $69 billion last year. (The United States posted a nearly $3 billion trade surplus with Canada in 2017).

The Center for Automotive Research, an independent research organization, estimates that as many as 125 types of cars could lose their NAFTA benefits under the US wage requirement and become subject to tariffs.

“The tariffs would add between $470 and $2,200 to the cost of these particular vehicles,” the center concluded in a report last month.

How will this affect consumers? Ann Wilson, senior vice president of government affairs at the Motor & Equipment Manufacturers Association, which represents auto suppliers, argues that the US proposal could drive up the average of price of new cars, which already exceeds $35,000. “This amount is a lot of money for most Americans,” Wilson said.

The Mexican general election and US laws (that command that trade agreements must follow to go before Congress for an up-or-down vote, with no amendments allowed) are the perfect cocktails for the delay the deal. Some optimists, like Canadian Prime Minister, Justin Trudeau, says that they feel positive. Some others, like Will Hurd, Texan Republican Rep., mentioned that “we are running out of time”.

The impasse in the NAFTA talks is commonly viewed as a setback for the three countries. Some other says it is not.


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Oso Oseguera
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