The discussion of the North American Free Trade Agreement (NAFTA) has been popular the month of January with officials from the US, Mexico, and Canada ending round 6 talks in Montreal, Quebec on the 29th. Ever since President Trump made the announcement that NAFTA was the “worst trade deal the US has ever signed” during his 2016 election race, tensions have been high in North America because of uncertainty.
It was early 2018 when the Trump administration began to insist how trade relations with Canada and Mexico are going to be re-calibrated to favor the US’s interests. Since then, we have heard discussions of making changes, and discussions threatening to withdraw from NAFTA if Trump doesn’t get the results he wants.
Last month was one of the most important talks to date for the health of NAFTA. The round was a week-long discussion that came to an end on the 29th. The three countries each had their own vision of the trade agreement, and each was optimistic about the outcome. Chrystia Freeland, the Canadian Foreign Minister, believes that the three countries can come out with a “win-win-win” after a revamped NAFTA.
One of the most controversial topics during the meetings has been the automotive industry, with Ford and GM with facilities in the US, Mexico, and Canada. The US is demanding to have a higher proportion of parts made in the US to fall under NAFTA’s tariff-free rules, with 50% US content of North American-built cars traded under NAFTA. The initial proposal was denied by Freeland during the meeting. Canada, in return, made a few proposals including changing the method of how a car’s value is calculated, autonomous vehicle development, and the use of North American Steel to be used in manufacturing. And likewise, the US Trade Representative Robert Lighthizer denied those efforts which could have made a breakthrough for the automotive topic.
An additional concern brought up by the US. is that the automakers are taking jobs away from the US. According to Ford, their company only uses outside plants for smaller production vehicles and continue to use their plants in the US while maintaining jobs instead of taking them away. So, following the original goal of NAFTA to bring jobs and trade benefits to all three countries, Ford and GM with plants across North America, are only helping to maintain jobs. However, Lighthizer said that the officials are only just beginning to discuss these key areas along with others, and they are moving at a slow pace. They hope to further analyze the impacts automakers have on NAFTA in further meetings.
Additional meetings are planned to continue into 2018 with the next meeting scheduled in Mexico City this month. Mexico’s Economy Minister Ildefonso Guajardo is predicting that topics revolving around telecoms and digital commerce will come to an agreement during this meeting. But time is limited as there is still a lot of progress to be made and Mexico is holding a presidential election in the summer. If talks continue past March, there is a possibility that the talks could be delayed until after the elections and after their new president takes office… meaning no progress until after December 2018.
There is hope that NAFTA makes it through 2018 without a scratch, but Trump was hoping to have things wrapped up by the end of 2017. Now sights are set for the end of 2018 with some predictions of the talks moving into 2019. Both officials from Mexico and Canada are optimistic that NAFTA talks will come to a sound agreement this year either way. Once the talks are concluded in Mexico City, Washington will be the next destination where the US hopes to finalize the agreement with Mexico and Canada.
Be sure to follow our social media pages to stay up to date on our s and relevant information in the industry!
