NAFTA: The US bite won’t be as bad as its bark

Scotiabank Global Economics

August 15, 2017

A rapid series of talks at three-week intervals to renegotiate the North American Free Trade Agreement (NAFTA) is set to begin on 16 August, the earliest possible date permitted under US legislation, in pursuit of a US administration goal of concluding discussions by mid-December. The compressed timetable implies a hope of achieving a quick deal on points of common interest that can be held up as an achievement that contrasts with the US administration’s delayed domestic agenda—rather than an all-or-nothing wholesale reworking of NAFTA.

The US Trade Representative’s (USTR) 17 July Objectives for NAFTA’s renegotiation feature a mix of broad modernizations that overlap with Canadian and Mexican priorities; some specific updates and narrow technical requests; a few mutually inconsistent elements; and some extreme demands that go far beyond anything to which Canada or Mexico could agree. In the unlikely event that the USTR holds tight to the pursuit of its entire wish-list, NAFTA renegotiations are likely to be drawn out well into 2019, beyond both the July 2018 Mexican Presidential vote and the November 2018 US Congressional elections, with limited
chances of conclusion.

Over the next few months, it would be prudent to look through any major ups and downs during the coming talks in anticipation of an eventual accord on a revised NAFTA whose essential elements will remain intact. NAFTA is getting tweaked, not ripped up: the US administration’s bite won’t be as bad as its bark.

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