The NAFTA talks just got even harder

Cheryl Sanders
January 24, 2018

Ministers from Canada, the US and Mexico will gather next week in Montreal for the latest round of NAFTA talks. Nor do Canadians want to be viewed by other people around the world as camp-followers to the U.S.

"Canadians want us to be constructive".

Given the president's itchy Twitter finger and his record of vacillating in the midst of negotiations, no agreement is safe until the ink is dry.

In a sign of its hardening protectionist stance, the USA administration on Monday imposed duties on washing machines manufactured in Mexico and South Korea, as well as on solar panels imported from China.

But the mood is decidedly more upbeat than it was even six weeks ago, when industry officials seemed resigned to NAFTA's downfall.

A new paper by Susan Houseman of the Upjohn Institute argues that US manufacturing took a much bigger hit than is widely understood, and that trade competition (not automation) was the primary culprit.

He said there was "a very close personal" friendship between U.S. President Ronald Reagan, a Republican like Trump, and Canadian Prime Minister Brian Mulroney, a conservative in whose cabinet Beatty served at the time as defense minister.

Minister of International Trade and Francois-Philippe Champagne and Quebec's Minister of the Economy, Science and Innovation Dominique Anglade meet with stakeholders as NAFTA talks begin in Montreal on Monday January 22, 2018.

Trump made NAFTA a core campaign issue.

Creating more balanced outcomes depends mostly on US domestic policies-support for innovation, new investments in infrastructure, educating and training the workforce of the future.

General Motors CEO Mary Barra also expressed optimism that NAFTA will get updated without disruption.

Trump, who entered office a year ago pledging to undo what he described as disastrous trade deals, has portrayed NAFTA as grossly unfair to the United States and its workers. Mexico has signaled that it would leave the talks if the United States moves to withdraw.

U.S. Trade Representative Robert Lighthizer has been explicit that the goal of the NAFTA talks is to negotiate a "rebalanced" agreement that will do more to favor the United States.

Ford is the most prepared for any unexpected changes.

"Tuesday will be the first formal response by U.S.A., Mexico to that new chapter, and so it's very important".

Canada and Mexico, which initially dismissed most of Washington's demands as unworkable, now say there is room to maneuver.

FCA is following in Ford's tracks.

"These plants are planned for a minimum life of 20 years, hopefully 50 years", said Associate Dean Samuel Addy. "That's a 2.5-percent tariff on cars and parts, and a 25-percent tariff on trucks".

Trump hailed the announcement in a Twitter message as "more great news as a result of historical Tax Cuts and Reform". "We see engaging American businesses as a positive thing". It's "likely negotiations are going to go on well beyond the March deadline", he said.

"When it comes to what the US may or may not do, our approach is to hope for the best and prepare for the worst", she said.

Under the current NAFTA, 62% of the parts in a auto sold in North America must come from the region.

There are a handful of key disputes over US demands. This could be a classic win the battle, lose the war for the USA, both in terms of the WTO and the many American businesses and employees who are NAFTA dependent.

The solution, he added, ultimately lies in counting inputs where the US has a comparative advantage, such as the products and services of research centers in Silicon Valley and MI.

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