Negotiations for the NAFTA
reform are moving quickly, two five-day long meetings have already come to an
end. These three countries rely heavily on each other and it is essential for
them to come to an agreement for trade to continue smoothly. Without NAFTA, not
only would relations between these countries be torn, but various imports and
exports would decline within each country. Some progress has taken place so
far, but only the less controversial topics. The key issues are still left
unresolved. This is where there are most of the difference of opinions.
Canada
and the United States are pushing a raise in Mexico’s wages, although, Mexico
is arguing “that salaries cannot be harmonized yet, that a growth in trade and competitiveness
will eventually raise salaries to higher levels.” (Report
on the first round of negotiations to update NAFTA) The US and Mexico
heavily rely on each other in their agricultural trade and trade between them
is only increasing. The US is looking to reduce the trade deficit with Mexico
and pursue more dairy sales in Canada. Trump wants to eliminate Chapter 19 (Review
and Dispute Settlement in Antidumping and Countervailing Duty Matters) from
NAFTA, which Mexico and Canada have already shown strong opposition to. Trump
has also expressed his willingness to completely abandon NAFTA. He also raised
a threat to “kill an amnesty program for young immigrants brought illegally
into the US…more than 622,000 Mexican born people registered for the program
after Barack Obama created it.” (NAFTA
Negotiations: Second Round Of Talks Ends With 3 Countries Saying Some Progress
Made).
What could happen if Trump decides not to agree with Mexico or
Canada and in turn cancel the NAFTA negotiation? How would trade between the three
countries differ?
If NAFTA was cancelled, it would hurt companies that either operate in these other countries or trade heavily with these other countries. Some companies have proposed loopholes such as using Foreign direst investment to side step possible tariffs. About one-fourth of all U.S. imports (especially crude oil, machinery, gold, vehicles, fresh produce, livestock and processed foods) comes from Canada and Mexico, which are the United States’ second- and third-largest suppliers of imported goods. The elimination of NAFTA could have huge effects on the US economy.
ReplyDeleteWorse case scenario is that relations between the countries become so bad that it escalates into a tariff war. Before WTO was founded and before the WWII was the last heavily tariffed era. This helped increased the severity of the Great Depression.
I would agree that cancelling NAFTA would not only have negative effects on relations between countries but would also greatly affect the trade between countries. Trying to eliminate Chapter 19 from NAFTA is not a good move for the U.S. This was put into place to place because Canada didn’t trust the U.S. court systems and didn’t think that they would objectively review the duties that the U.S. imposed on Canada. Without this agreement Canada might go as far as backing out of NAFTA which would create a lot of problems for the U.S. If The U.S. backed out of NAFTA like President Trump wants to do import tariffs would rise considerably between the three countries. Even if the U.S. backs out, it is possible for Canada and Mexico to keep the terms of NAFTA between themselves and still receive the benefits that it provides. When looking at all the negatives of leaving NAFTA it makes little to no sense and I don’t believe that it will happen.
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