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NAFTA Prospects dim with U.S. Deficit by Hebei Longsheng

NAFTA Prospects Dim With U.S. Deficit Focus, Canadian Rights Demands
NAFTA negotiations start on August 16, with seven rounds of up to 5 days of talks to be completed by year end – assuming a passage before the Mexican elections is desired. The first round will likely focus on what areas may be included in a new deal. An initial review of the issues makes for pessimistic reading – a deal seems unlikely by year end.

U.S. Transactional Aspirations 
The U.S. comes from the starting point that NAFTA is a “failure” because of a rise in its trade-in-goods deficit with Mexico and Canada to $88 billion from $9 billion from the deal’s start. That in itself is a stumbling block. Excluding energy and autos the U.S. actually ran a $36 billion surplus with Canada.

Canada's Big Deal Hurdles
The Canadian government is actually more interested in issues outside trade-in-goods including: dispute settlement; labor, environmental and procurement standards; as well as gender- and indigenous peoples’ rights. There is a risk of clashes with U.S. and Mexican non-trade policies in most of those areas. Canada holds CETA up as a model deal, which took years rather than months to negotiate.

Mexican Auto Answers 
Regulatory liberalization could help build the U.S. services surplus with Mexico, which was equivalent to 6% of the goods deficit compared to 100% for Canada. Meanwhile, $60 billion of the $69 billion trade deficit with Mexico is in autos. That could be partly corrected by increasing the 62.5% rules-of-origin threshold to force Mexican automotive factories to buy U.S. parts. Yet, assessing the consequences of such a move in such a tight timeframe appears difficult.

Panjiva analysis of Mexico and Canada’s top 200 export lines shows there is bilateral or trilateral trade in 43% of products – especially in electronics – where rule-making could be just as complex. There’s also a slew of separate trade cases already ongoing from the U.S. side that will further complicate matters.

Hebei longsheng Metals and Minerals Co., Ltd.


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