News ID: 241073
Published: 0253 GMT April 07, 2019

New NAFTA deal 'in trouble', bruised by elections, tariff rows

New NAFTA deal 'in trouble', bruised by elections, tariff rows
REBECCA COOK/REUTERS

More than six months after the United States, Mexico and Canada agreed a new deal to govern more than $1 trillion in regional trade, the chances of the countries ratifying the pact this year are receding.

The three countries struck the United States-Mexico-Canada Agreement (USMCA) on Sept. 30, ending a year of difficult negotiations after US President Donald Trump demanded the preceding trade pact be renegotiated or scrapped, Reuters reported.

But the deal has not ended trade tensions in North America. If ratification is delayed much longer, it could become hostage to electoral politics.

The US has its next presidential contest in 2020, and Canada holds a federal election in October.

The delay means businesses are still uncertain about the framework that will govern future investments in the region.

“The USMCA is in trouble,” said Andres Rozental, a former Mexican deputy foreign minister for North America.

Though he believed the deal would ultimately be approved, Rozental said opposition from US Democrats and unions to labor provisions in the deal, as well as bickering over tariffs, made its passage in the next few months highly unlikely.

Canada’s Parliament must also ratify the treaty and officials say the timetable is very tight.

Trump, a Republican, has shown frustration with the Democratic-led US House of Representatives for failing to sign off on the USMCA. He has threatened to pull out of the old pact, the North American Free Trade Agreement (NAFTA), if Congress does not hurry up.

If Trump did dump NAFTA, the three nations would revert to trade rules in place before it came into effect in 1994.

 

Tariffs

 

Canada and Mexico are seeking exemption from US tariffs on global metal imports imposed last year.

The metals tariffs were not included in the USMCA and Mexico and Canada are impatient to resolve the issue. Mexico has repeatedly threatened to target new US products by the end of April in retribution if tariffs are imposed.

Meanwhile, Trump on Thursday threatened to slap tariffs on Mexican auto exports unless Mexico does more to stop drug traffickers and illegal immigration.

Mexico’s government is in the final stages of completing a new list of potential US imports to be targeted, said Luz Maria de la Mora, a Mexican deputy economy minister.

De la Mora would not be drawn on whether Mexico could refuse to ratify USMCA if steel tariffs are not withdrawn, saying only: “All options are on the table.”

In Ottawa, Canadian Foreign Minister Chrystia Freeland said this week her government was “constantly” looking at its own retaliation list, noting that Trump’s tariffs left the country over C$16 billion worth of space to strike back.

Prime Minister Justin Trudeau, who faces a tough reelection battle, on Thursday rejected accepting quotas on Canadian steel and aluminum in exchange for US tariffs being dropped.

Trudeau was criticized during the USMCA negotiations for giving ground to Trump on access to Canada’s dairy sector.

US Democrats have threatened to block the USMCA unless Mexico passes legislation to improve workers’ rights, a demand shared by the Canadian government.

Trump blamed NAFTA for millions of job losses in the US as companies moved south to employ cheaper Mexican labor. Trump is running for reelection in 2020, and his ‘America First’ policy will likely feature prominently in the campaign.

Canadian officials say they fear that if one part of the treaty were reopened, it could spark clamor for other sections to be renegotiated as well.

 

   
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