NAFTA renegotiations continue in a standstill against Canada and the US

Rising political tensions, miscommunications and legal quandaries have brought negotiations of the North American Free Trade Agreement to a standstill.  Since August 16, 2017, the U.S., Mexico, and Canada have been attempting to renegotiate the North American Free Trade Agreement, or NAFTA, to modify it to current economic conditions. However, in the past few days, Canada has failed to come to an agreement with the U.S over the renegotiations, forcing the White House to give Canada more time to discuss the future of NAFTA.

Signed by President Bill Clinton in 1993, NAFTA was created to make North American markets more competitive while also facilitating trade between the three countries to improve economic conditions. Since then, the agreement has continued to shape the politics and economics of Mexico, The U.S and Canada. For the past few years, however, the U.S. government has been considering renegotiating the trilateral deal by calling in representatives from all three countries and “modernizing” the 25-year-old deal in order to consider economic changes such as internet commerce, environmental and labor protections.

Although Mexico has already reached an agreement with the U.S. to modify NAFTA by requiring car companies to manufacture at least 12.5 percent more of an automobile’s value in North America, as well as being required to use more local resources and pay workers at least $16 an hour to make the automobiles, Canada has yet to accept any of the U.S or Mexico’s agreements. President Donald Trump’s threats to jettison Canada from the deal, as well as the U.S. refusal to change tariff policies towards Canada have led to rising tensions between the two countries.

Canada’s willingness to come to an agreement with the U.S. is crucial to the future of NAFTA. The renegotiations cannot go into effect without Canada’s approval, and Mexico’s elected president, Andrés Manuel López Obrador, who officially starts his term in office on Dec. 1, 2018, must ratify the changes to NAFTA. Trump must notify Congress 90 days before signing the NAFTA renegotiations, which will have to be renegotiated before Sep. 2 in order to have Mexico’s current president approve the deal. Similarly, the NAFTA renegotiations are now in close proximity to November’s mid-term elections.

“There is an impact, but in relativity it is very small compared with American major trade partners in other parts of the world. But how much impact, nobody knows,” said Professor of Political Science George Guo, “Mexico does not have a huge resistance against this kind of agreement.”

Mexico’s little resistance against the renegotiations means that a new Mexican president may not impact the future of NAFTA greatly. As for the midterm elections, there is a strong incentive for Trump to have NAFTA renegotiated before the midterm elections. This is because his decisions may have less resistance if the majority of Congress is Republican, which may change during the elections.

“If you think creating uncertainty is a good thing for economic decision makers, the U.S. president is doing a great job,” said Professor of Economics Robert G. Williams. “Usually, however, uncertainty makes executives freeze up from making investment decisions. I would hate to be an auto company executive or worker right now.”