By Patrick O’Brien (AIMS On Campus Student Fellow)
As we near the end of the first quarter of 2018 NAFTA discussions are being prolonged. At this point it seems as if there may be no resolutions or discussions may last continue throughout 2018, into 2019. The new topic that surrounds the NAFTA deal is the implementation of steel and aluminum tariffs imposed by the United States. The duties on imports worldwide into the U.S for steel and aluminum were 25 percent and 10 percent respectively. Canada and Mexico are ironically exempt from this tariff, although that may change based on the outcome of NAFTA discussions says President Trump. According to Finance Minister of Canada, Bill Morneau: “The fact that Canada won an exemption was a positive sign”.
This could be looked upon as a point of leverage in the NAFTA discussions where the U.S can negotiate better terms for their Country, as the tariffs seem more likely to be subject to a better NAFTA for the U.S and could be imposed if their terms in the agreement are not met. To illustrate how much leverage the U.S has with the subjective tariffs, last year Canada shipped over $10.5 Billion dollars’ worth of steel and aluminum combined. If the tariff was imposed roughly $2 Billion dollars of the imports would have been lost to tariffs alone.
What has Trudeau done to combat this in terms of trade negotiations/new opportunities? Besides stating that Canada would not “take any old trade deal” and that Canada would be willing to walk away from NAFTA if the deal was not beneficial, there have been brief discussions of potential post-Brexit talks with U.K of eliminating trade barriers. This would be extremely beneficial to Canada given the case that NAFTA discussions are nimble and little progress grows from the prolonged conversation.
In a fundraising event U.S president Trump has repeatedly stated that they are running a trade deficit with Canada and that terms of the new NAFTA agreement need to reflect upon this and restructure to make it fair. The president falsely states that the U.S runs a “$17 Billion dollar deficit with Canada”. This was backed up by the 2018 Whitehouse Economic Report which showed that the U.S ran a surplus of $2.6 Billion on a balance of payment basis.
While Canada remains optimistic of a deal coming together, and Trump urgently looking to close a deal with recent phone discussions with Trudeau, how will we reach a final negotiation, and what factors may hinder the process? One factor which may prolong the final decision is the Presidential election for Mexico, with voting beginning July 1, 2018. The current presidential nominee Andres Manuel Lopez Obrador is calling for “the suspension of NAFTA discussions” until a new president is elected, as he warns Mexico could be “sold out” in the discussions under the current administration succumbing to U.S pressure.
The certainty of a NAFTA agreement continuing is uncertain. Although if it is to be completed, and all parties are going to come to an agreement it will have to happen soon. Preparation for U.S midterm elections in November of 2018, and upcoming Provincial campaigns in Ontario and Quebec will be a factor in the likelihood of a deal wrapping up quickly.
As we enter what is “perceived” to be the ending months of the NAFTA negotiation due to political constraints, it will be interesting to see the upcoming propositions and if they will benefit all parties mutually for the continuation of NAFTA.