Kristian Rouz — The first round of the NAFTA talks between the trade representatives of the US, Canada and Mexico concluded on Sunday after five days of negotiations without producing any significant results. However, all sides expressed their commitment to streamlining the renegotiation of the trade pact, as political pressure from the White House mounts.
The Trump administration is adamant it will quit NAFTA unless the sides are able to fairly quickly negotiate more favorable conditions for the US manufacturing sector. Whilst the "younger partners", Canada and Mexico, are envisioning a tighter bilateral cooperation, the US is aiming to decrease their trade deficit by boosting US-based production of goods and increasing the volumes of US exports within the bloc.
"While a great deal of effort and negotiation will be required in the coming months, Canada, Mexico and the United States are committed to an accelerated and comprehensive negotiation process that will upgrade our agreement," the joint statement released Sunday read.
NAFTA came into effect in 1994, allowing US manufacturers to outsource their manufacturing facilities to Mexico in order to curb input costs and boost the US consumer market by bringing in cheaper manufactured goods, primarily, cars, into the US. Yet, after more than two decades, the trade agreement is deemed obsolete as it has produced desolation in the traditional US industrial regions, now commonly referred to as the "Rust Belt".
The renegotiation of the trade agreement is poised to conclude in early 2018, and the sides envision deeper trade ties between Canada and Mexico in order for them to make up for the losses stemming from increasing US protectionism.
The US representatives have not yet announced their proposals as to how the White House's new protectionist approach would work within the NAFTA framework. The US, however, proposed changes to the cross-border data exchange and a "tweaking" of the e-commerce rules.
E-commerce is gaining momentum in the US, becoming the new driving force in the American consumer market, rendering brick-and-mortar retail facilities redundant, resulting in many shopping mall closings.
The sides said they've agreed with most of the US' proposals on data and e-commerce, but the most important round of talks are still ahead, with manufacturing and trans-border trade of heavy-duty goods in focus.
Currently, the US and Canada are interested in bringing significant volumes of Canadian crude oil from Alberta to US refineries and oil-exporting terminals on the Gulf Coast. The US is opening the Louisiana Offshore Oil Port (LOOP) in early 2018, and by that time will seek any opportunity to boost the operational capacity of the port. Canada, on its part, is lacking oil-exporting facilities, as it is lacking a sufficient amount of oil refineries, whilst the shale oil revolution had made its oil production excessive.
Whilst Mexico and the US are aiming to pass the renegotiation process by early next year, Canada's representatives say it might take up to two years to strike a new agreement. Rising US protectionism might render Canadian manufacturers less competitive in the face of the greater influx of the Mexican goods. Besides, some of Canada's manufactured goods have enjoyed more favorable conditions in the US market due to lower labor costs in parts of Canada such as Quebec.
Despite President Trump repeatedly calling NAFTA a "disaster", the negotiators from all three sides are mainly the people who helped forge NAFTA back in 1994. The White House's new approach to foreign trade, which contradicts the letter and the spirit of the Clinton-era globalist agenda, might not work well with the team of negotiators, and some of the Trump administration's goals may fall short of being achieved.
After all, the US could unilaterally quit NAFTA if the talks begin to falter, sending shockwaves across the Canadian and Mexican economies that have greatly benefitted from their access to the US market over the past two decades.
The next round of talks is scheduled for September 1-5 in Canada.
