Trump could pull the trigger on NAFTA termination just to get more out of Canada and Mexico
U.S. President Donald Trump has threatened four times in the past week to pull out of NAFTA, just as negotiations are set to restart on Friday.
Most analysts believe the heated rhetoric is a negotiating tactic – but that doesn’t mean Trump won’t actually start the process of terminating the agreement.
Under Article 2205 of NAFTA, any of the three member countries can withdraw provided it gives the other two six months notice. And nothing in the treaty would prevent a country from changing its mind to save the trade deal at the last minute.
So could the president declare the U.S. is officially abandoning NAFTA just as a way to impose a hard six-month deadline on Canada and Mexico in order to extract bigger concessions from both of them?
According to Gary Hufbauer, a veteran trade expert in Washington, that scenario is “highly plausible.”
“Trump is not a very patient person, and he loves the headlines,” he told Global News.
An actual termination of the free trade agreement would face formidable opposition from U.S. businesses and hurt a significant chunk of Trump voters, especially those with jobs in the agricultural industry, which strongly supports the pact.
But the president may be thinking he can please his constituents who truly hate NAFTA and force Canada and Mexico’s hand by acting as if he’s going to scupper the trade agreement only to save it at the 25th hour, said Hufbauer.
Such a move, if it happens, likely isn’t imminent, he added.
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The round of talks that starts tomorrow, the second of seven scheduled meetings until the end of the year, will likely run relatively smoothly.
“They will likely get closer to an agreement on which chapters [of the NAFTA] treaty are not contentious,” said Hufbauer.
Tensions, however, will likely rise later in the fall, as negotiators move onto the thorniest issues, such as Trump’s request to eliminate NAFTA’s trade dispute panel and increase buy-American provisions in government contracts, he added.
“My guess is this termination scenario plays out in November or December.”
Still, setting that process in motion would be a risky and possibly counterproductive tactic.
“The focus would shift to what happens the day after [the end of NAFTA],” noted Hufbauer, which could prove to be a significant distraction for negotiators.
And neither Prime Minister Justin Trudeau nor Mexican President Enrique Pena Nieto is likely to capitulate to Trump’s demands.
The move would likely provoke a particularly harsh reaction from the Mexican administration, which faces elections in July.
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Pulling out of NAFTA would likely trigger a hardening of the Mexican position, said Hufbauer.
Asked on Wednesday if Mexico would continue negotiating if Trump started the process of withdrawing from the trade deal, Foreign Minister Luis Videgaray responded with an emphatic “No.”
Videgaray said he, U.S. Trade Representative Robert Lighthizer and U.S. Commerce Secretary Wilbur Ross agreed on Wednesday to continue with a “serious” renegotiation process. At around the same time, during a speech at a Missouri factory, Trump repeated his threat to shred the deal.
Videgaray and Economy Minister of Mexico Ildefonso Guajardo travelled to Washington following Trump’s near daily threats.
The upcoming round of NAFTA talks will be held in Mexico Sept. 1-5.
– With files from Reuters
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