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US Stalls NAFTA Negotiations at the Expense of Mexico and Canada

By Patrick Higgins  |  13/10/2017 12:49
Both Canada and Mexico oppose this renewal dubbed the ‘sunset clause’. Both are concerned that the resulted uncertainty could deter international investment. The Trump administration however insists this clause will ensure NAFTA stays current.
The clause was proposed late Wednesday evening, during the fourth round of seven inter-bloc talks. The talks regarded modernising rules and regulations of the bloc - per pressure of the US. News of this only emerged today, through two reports released by anonymous US officials. The negotiators say they aim to have a reaffirmed and redesigned NAFTA by December.
In addition to the sunset clause, Trump’s government wants to increase the percentage of tariffs lobbied on foreign-made cars in the blocs. They’re also suggesting manufacturers increase the amount of North American-made vehicles, in order to qualify for a tax-free status. This proposed increase would rise from 62.5% to 85%, with 50% of this required to originate from inside the US. These rules origin rules have yet to be formally submitted to the negotiating table. Canadian representatives were reported to be frustrated by a lack of response from US negotiators, regarding matters outside the US.
NAFTA racks up $1.2 trillion in trade between the US, Canada and Mexico per year. Various multinational business - especially that within agricultural sectors - are concerned the scrapping of NAFTA could cause economic chaos, severely disrupting cross-border supply chain mechanisms. There is also the possibility that high tariffs may be forced on agricultural products, most likely from Mexico.
Both the Canadian and Mexican negotiating teams have low hopes that the continuing negotiations will prove prosperous or progressive. Speaking from Mexico City, Mexican Finance Minister, Jose Antonio Meade said the Mexican government was exploring tariff alteration plans and market substitutes. Meanwhile, Prime Minister Justin Trudeau said that Canada was preparing for the unpredictability of Trump’s NAFTA plans.
Trump was elected into office on the platform that the NAFTA kills jobs, and put pressure on US industry and manufacturing. This lead to his negotiators seeking the deal most in their interest, at the expense of the other members of the NAFTA. For example, Canada and Mexico had proposed a provision, which would allow Canadian and Mexican companies access to lucrative US government contracts. This proposal was at odds with Trump’s insular economic views, and in return, American negotiators proposed less external access to federal contracts - excluding Canadian and Mexican business. The ‘America First’ mindset is partly responsible for the stalling of negotiations and the rising chance of failure. The process of these talks will be realised in the coming weeks.


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