After months of speculation, talks to update the North American Free Trade Agreement (NAFTA) are set to begin Wednesday.
The trade agreement between Canada, the United States and Mexico was signed in 1992 and gradually eliminated tariffs and trade barriers between the three countries.
After more than two decades, the terms of the agreement are on the table in hopes of modernizing the deal for the current era.
READ MORE: Here’s what Canada wants from the NAFTA negotiations
Jean-Francois Perrault, chief economist at Scotiabank, says each party wants the talks to be short and ideally wrap up before the end of the year — but there are complicated issues at hand.
Perrault laid out what to expect from negotiations.
Why are NAFTA negotiations happening?
Reopening NAFTA was a key part of U.S. President Donald Trump’s election campaign, Perrault explained.
In September 2016, Trump dubbed it the “worst trade deal maybe ever signed, anywhere,” during a pre-election debate with Democratic candidate Hillary Clinton.
Trump has pledged that the revised deal will put “America first,” and said the current version is to blame for a decline in the country’s manufacturing jobs.
WATCH: Trudeau says he’s looking forward to a ‘modernization of NAFTA’
While Canada may not agree with the president’s reasoning for reopening the deal, Prime Minister Justin Trudeau has said he’s looking forward to the “modernization” of NAFTA.
Perrault says modernization would likely see the deal expand to cover new technology and intellectual property.
Who are the key Canadian players involved in the talks?
Bureaucrats carry out trade negotiations on behalf of Canada. Steve Verheul has been named the chief NAFTA negotiator, and will be heading to Washington along with Kristen Hillman, who was Canada’s lead negotiator for the Trans-Pacific Partnership trade deal.
While the bureaucrats are independent of a political party, Perrault says their plan and objectives are in line with what the government desires from the deal.
READ MORE: Who is U.S. lead NAFTA negotiator John Melle?
Foreign Affairs Minister Chrystia Freeland and International Trade Minister François-Philippe Champagne will weigh in on “contentious things,” he explained.
They’ll also help liaison between the federal government and the provinces, and have the job of “selling the results” of negotiations to the public.
Finally, the deal will be up to Parliament to approve.
WATCH: NAFTA renegotiation could make online shopping from U.S. less costly
When will negotiations begin and how long will they last?
There will be between six to seven rounds of negotiations, Perrault says. Each country wants the talks to be short. The U.S. wants them over before the 2018 mid-term congressional election, while Mexico wants them over before its presidential election next year.
READ MORE: NAFTA negotiations to include high-level cabinet dinner, 7 rounds of trade talks
“Trade negotiations are usually very, very complex and very, very long,” Perrault noted, explaining that things may not go exactly as hoped.
“The idea that we renew NAFTA in five to six months is incredibly ambitious.”
Typically, there are disagreements and additional consultations that delay the process, according to the economist.
What will cause the most disagreement?
Perrault suggested the “most critical stumbling block” for NAFTA negotiations is Chapter 19 of the trade deal, which provides the framework for settling trade disputes via bi-national panels.
Washington has said it wants to scrap the rule altogether, as the panels have led to the U.S. losing several cases since it came into effect in 1994.
READ MORE: Talk of climate change may be off the books in NAFTA negotiations
It’s a key chapter for Canada, because it maintains a process to regulate anti-dumping and countervailing disputes, like the one over softwood lumber.
Mexico is expected to back Canada in strengthening Chapter 19, Reuters has reported.
What does Canada want from NAFTA?
On Monday, Freeland set out Canada’s key demands in NAFTA negotiations. The foreign minister indicated Canada wants new provisions on labour and environmental standards, and gender and Indigenous rights.
WATCH: Trudeau says fair trade dispute resolution ‘essential’ in NAFTA
Canada is also looking to protect its supply-management system for dairy, poultry and egg industry. It’s something which Perrault notes America will likely try to change.
“I think Americans would want the ability to penetrate that market more easily,” he said.
READ MORE: Trudeau warns U.S. against ‘politically tempting shortcuts’ ahead of NAFTA renegotiations
What’s Trump hoping to change?
The United States wants to reduce its trade deficit with Canada and Mexico.
It wants American companies to snap up more contracts from the other countries’ governments, but also wants to limit the number of contracts the U.S. government gives to non-American companies.
WATCH: How will the U.S. NAFTA wish list impact Canada?
In a statement revealing its objectives, U.S. Trade Representative Robert Lighthizer said the updated deal will be better for “all Americans.”
“President Trump continues to fulfill his promise to renegotiate NAFTA to get a much better deal for all Americans,” he said. “Too many Americans have been hurt by closed factories, exported jobs and broken political promises.”
How does Mexico factor into the talks?
Mexico has set out its own goals ahead of the negotiations.
Reuters reported last week that the country wants to prioritize free access for goods and services, see greater labour market integration and strengthen energy security.
— With files from Canadian Press, Reuters
Comments