Six reasons you should not worry about NAFTA’s future

We are at a point in the NAFTA renegotiations where it is easy to be negative.

Some insiders and experts believe it is only a matter of time before President Trump withdraws from the agreement. Whether that is to get to a bilateral deal or a better multi-lateral is still up for debate, but the current form of the agreement seems to be on very thin ice.

At the same time, there are also reasons to believe Trump is unlikely to follow through on his threats to withdraw.

Since it is the Christmas season, I thought it would be beneficial to look at NAFTA from a more positive viewpoint. As you discuss trade policy at your Christmas parties, here are six reasons to share on why we shouldn’t be worried about NAFTA’s future:

U.S. tax reform approved — As the first major legislation approved in President Trump’s presidency, the ability to provide tax cuts will lift the President’s mood on NAFTA talks.  Tax reform could also address a major trade obstacle — the U.S. trade deficit — as described by the Wall Street Journal.  With Trump and U.S. Trade Representative Robert Lighthizer so focused on trade deficits as one of the main indications that America is losing within NAFTA, the new tax rules bring more offshore income home to the U.S., which will lower the deficit and appease the President’s major trade gripe.

The timeline is working against withdrawal — With a Mexican election on July 1, 2018 and the U.S. midterms in the fall, the bulk of 2018 lies out of bounds for further negotiating rounds until the election cycle is completed. If the President intends to issue a withdrawal as a negotiating tactic, he must act swiftly in the new year. With round 6 in the third week of January, time is very tight to execute this strategy. Trying to re-negotiate a withdrawn-from NAFTA during the midterms could backfire against the President and his desire to maintain a majority in the House of Representatives and the Senate.

China will be a new, shiny object — Lighthizer has been well known for his hawkishness on China. Taking Canada and Mexico to task on trade deficits is small potatoes in comparison to the opportunity in trade disagreements that China provides. With China being so important to Lighthizer, NAFTA could find a soft landing as the USTR team moves on to a country that is much easier to start a trade war with.

Potential bilateral U.S. trading partners are watching — Other countries, including Asian TPP11 countries that the U.S. wants to strike bilaterals with are watching the actions of the U.S. in the NAFTA renegotiations very closely.  The paraphrased sentiment according to some reports: if the U.S. will treat their neighbours Canada and Mexico so poorly, how will they treat us across the Pacific Ocean?

No moniker for Trudeau yet — Maybe the safest of all our points is that President Trump has not laid down a nickname for either of his Canadian or Mexican peers. Most of the President’s greatest foes have a nickname. There’s Crooked Hilary, Little Rocket Man and others. Canada and Mexico will know they are in the crosshairs when a nickname is established.    

They haven’t pulled the trigger up until now — In this trade negotiation dance, one can find possible solace in the fact that the agreement still sits whole after six exhaustive and turbulent rounds where nothing contentious has found agreement and only easy wins can be celebrated. There’s been a whole lot of talk, and little action, so why would that change?

From day one, Canada’s Chrystia Freeland said there would be rocky times in this whole process, but time will tell if we have seen rock bottom and if 2018 will bring brighter days ahead for NAFTA.

Jim Wiesemeyer, Washington analyst for Pro Farmer and Farm Journal, joined RealAg Radio to discuss NAFTA’s prospects heading into 2018 — listen here:

 

Shaun Haney

Shaun Haney is the founder of RealAgriculture.com. He creates content regularly and hosts RealAg Radio on Rural Radio 147 every weekday at 4PM est. @shaunhaney

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