April 24, 2018

Mexico, Canada economies set to emerge from NAFTA talks intact: Reuters poll

24 September 2017, 12:56 | Lionel James

Dingell: Eliminate NAFTA's offshoring incentives

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Indeed, in 1993, after the North American Free Trade Agreement (NAFTA) between the United States, Canada and Mexico had been concluded but not yet approved by Congress, 175 US agricultural organizations placed an ad in The Washington Post, estimating the trade deal would increase American farm exports to Mexico by more than $10 billion.

"If you get much into 2018, the political calendar will overwhelm the trade calendar", Ross said.

In talks that were triggered shortly after the new president took office, the Trump administration is pushing for wholesale changes to NAFTA, which was enacted in 1994 to create a free-trade zone between the U.S., Mexico and Canada.

Under NAFTA's current rules of origin, vehicles must have at least 62.5 per cent North American content to qualify for duty-free movement between Canada, the US and Mexico.

There are reports that the Trump administration wants to raise the NAFTA content to more than 70 per cent and add a requirement that anywhere between 35 per cent and 50 per cent must be made specifically in the United States.

"I met with [Ross] twice and each time we met we both agreed the problem was Mexico and he understands that", Mr. Dias said, who noted that Mr. Ross is the owner of a USA auto-parts company. "That is going to change under President [Donald] Trump, and rules of origin are just the beginning". "Tightening NAFTA's rules of origin on automobiles either by raising the NAFTA-wide threshold or by introducing a USA -specific content requirement, wouldn't bring the production of these components back onshore", Carlos Gomes, a senior economist at Scotiabank, wrote in a September 21 report. One key issue is the US desire to strengthen rules of origin for autos, which dictate how much of a vehicle's components must originate from within North America to qualify for tax free status.

Another potential source of conflict between Canada and the these talks is Canada's "real red line": Chapter 19, the dispute resolution mechanism.

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The U.S. has not gone into any further detail since then.

Speaking at a town hall meeting in Dearborn, Dingell said the Trump administration should seek to renew policies that require companies that do business with the USA government to buy American parts for their projects.

More likely, Scotiabank says automakers would move more production to Mexico or even opt to conduct trade outside NAFTA altogether, preferring to pay the 2.5 per cent tariff on auto imports to the U.S.

Concern has been mounting among trade experts that the year-end deadline for revamping NAFTA will be impossible to meet if negotiators don't start during this round to confront some of the most contentious issues, rules of origin prime among them. So, we're probably gonna keep depressing North America's labor standards for the foreseeable future.

As negotiators sit down, a survey by the Angus Reid Institute shows that Canadians' top priority in the talks is to ensure labour standards are equal across all three countries. They're talking about America first, they're talking in a very protectionist way about the American economy.

Two-thirds of the 38 banks and institutions that responded to the poll expected the outcome of the renegotiation to be largely neutral or positive for both Mexico and Canada. Trade between the USA and Canada is balanced, with the US having a surplus in services and a deficit in goods trade.

"I think it's important that Canadians aren't naive and thinking we are going into these talks...with a partner on the other side of the table that is pro free-trade, perhaps not even pro fair-trade", said Ambrose.

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