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. |
