The fourth round of negotiations of the North American Free Trade Agreement (NAFTA) began in Washington last week, amid concerns that these talks may end in an impasse between the Trump administration and the governments of Mexico and Canada. The talks are scheduled to continue through tomorrow.
Experts have noted that the negotiations may have split into two separate tracks: one that is focused on modernization and one that deals with bigger and thornier policy issues.
Modernization involves streamlining customs, digitization, regulatory alignment, and facilitating trade for small and medium-sized businesses. The more difficult bucket includes issues being demanded by the United States, including a sunset clause which would dissolve the agreement after four years if US expectations to reduce trade deficits are not met. Issues of investor protections and the US proposal on government procurement also represent big stumbling blocks to a successful negotiation.
Gustavo Flores-Macias, professor of government at Cornell University and former director of public affairs in Mexico’s Consumer Protection Agency, says US demands are increasingly unacceptable to Mexico and Canada, which are both facing domestic elections next year.
The fourth round of negotiations “will focus on the most contentious issues so far,” he said. “The US position seems to be designed so that in the end no agreement is reached. Canada and Mexico consider these demands unacceptable, and their margin for maneuver is becoming increasingly narrow as next year’s elections approach in the three countries.”
If the three countries fail to reach an agreement, the consequences could include: increased migration from Mexico because of economic hardship south of the border; higher prices and fewer goods for US consumer; a major opportunity for China to expand its commercial influence in North America; and the strengthening of anti-US candidates in Mexico’s 2018 presidential election.
But Vanderbilt University professor Timothy Meyer points out that there will be substantial pressure from US businesses to remain in NAFTA.
“Neither Mexico nor Canada nor major elements within the US business community and government want to see NAFTA die,” said Meyer. “Withdrawing from the agreement also risks a prolonged legal fight over whether the president can exit from the agreement without congressional consent.”
Many legal commentators believe that since Congress has passed legislation implementing NAFTA, the president cannot quit the agreement without congressional approval.
Making a revised NAFTA deal will require flexibility from all those involved in the deal, Meyer noted. He does not expect the issue to be settled by the end of the year.