Should the U.S. withdraw from NAFTA?

Henrietta Brewer
January 25, 2018

Canada's chief negotiator said he's hoping for movement.

It could be clearer by weekend.

Canada's proposal to include a chapter on Indigenous people's rights in the trade deal will be discussed at a formal table Tuesday for the first time in these talks.

Sources say the Canadians will suggest major changes to auto rules, and to the dispute-resolution system under Chapter 11.

A pair of Canadian proposals over the next two days will provide a litmus test on one of the biggest questions looming over this country's politics, economics, and worldwide relations: Can a new NAFTA deal be achieved?

NAFTA has been a big success for USA agriculture. If it shoots down the ideas outright, the countries will remain entrenched in distant positions.

"We have high hopes for making progress this week but of course it depends on the other partners as well". The U.S. has proposed watering down this chapter and essentially scrapping the other two.

"We are thrilled to work with our peers in Canada and Mexico to send a simple message: we must not exit NAFTA in the admirable pursuit of modernizing the agreement", Edward Hamberger, AAR president and CEO, said.

The U.S. has identified autos as a top priority in these talks. The Trump administration wants half of all auto parts to come from the US, and 85 per cent from within North America.

The sixth round of negotiations to update NAFTA is beginning in Montreal the chambers of commerce from all three countries stressed that free trade keeps them prosperous and creating jobs.

The big unknown is how the USA will respond.

"Canada, Mexico and the USA will go back to their respective capitals and they're going to be able to say whether we've actually got something or not - or whether it's a waste of time", said Flavio Volpe of the Canadian Auto Parts Manufacturers' Association. We're here to negotiate.

Insiders view this round as instrumental.

For its part, Mexico continues to reject US suggestions that link the NAFTA talks to a contentious proposal that the Mexican government fund construction of a wall along its border with America.

Trump has suggested he could start cancelling NAFTA to get a better deal, or pause the talks during the upcoming election calendar.

An auto-parts stakeholder says this round is key.

We're asking Canada to improve market access by eliminating tariffs on dairy and poultry going into Canada.

"We believe it is unlikely that the U.S. will exit the treaty in the months to come", the brokerage said.

Insiders say the Canadian and Mexican governments are prepared to be flexible on a USA demand that the amount of North American content in autos be boosted to qualify for duty-free status in NAFTA.

The American auto sector is favourable to the approach. However the Canadian sources said while Canada wants to strengthen the system, the USA demand that it be an "opt-in" system, which would give domestic courts the power to rule if a country did not opt in, would weaken it. The sooner we wrap up the NAFTA negotiations, the sooner our trade officials can turn their attention to negotiating new trade agreements focused not just on improving the markets we already have, but on expanding access to markets that promise growth for USA exports all around the globe. These include irritants over dairy, and the USA desire to eliminate the Chapter 19 dispute settlement mechanism, which allows industries to fight abusive punitive duties. Those provide for bi-national panels to settle challenges over broad claims that a country isn't respecting free trade rules, such as in the ongoing softwood lumber battle between Canada and the U.S.

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