By Teodoro Martinez III | November 22, 2017
The North American Free Trade Agreement, also known as NAFTA, is currently being renegotiated by the countries of Canada, Mexico, and the U.S. The fifth round of negotiations has concluded and with the next round scheduled for mid-December, a renegotiated NAFTA is not expected by the end of the year as originally planned.
In August, President Donald Trump threatened to “terminate” the 23-year-old trade agreement calling it the “worst trade deal ever made”, and claiming it hurts U.S. companies. The threat by tweet was seen as a bombastic negotiating ploy, and although it seems doubtful that the U.S. will completely withdraw from NAFTA, Trump has continued to lead the U.S. into negotiations with protectionist demands that Canada and Mexico have rejected. This unwavering attitude toward the negotiations may have stifled a path to a new plan.
While NAFTA has clearly had negative impacts for Mexico, especially in corn farming and for its environmentalist movement, it would be detrimental for all three countries if the trade agreement were to be terminated. Many businesses and policymakers warn that a withdrawal from NAFTA would jeopardize millions of jobs, interrupt imports and exports that make goods more affordable, and severely disrupt the U.S. agriculture industry. The ongoing deadlock makes a renegotiated NAFTA seem less and less likely.
Among the points of contention in the negotiations is a U.S. proposal to amend the “rules of origin” to only offer lower tariffs to goods that have been 85% produced in North America - and 50% within the U.S. The increase is a non-starter for Canada and Mexico as it would create clear disadvantages to their nation’s production firms. A less divisive approach could be more effective.
In fact, many experts have called for more collaborative reforms that could set the stage for a stronger, united North America. In his essay, “The Role of Institutions in the U.S.-Mexico Relationship”, Center for US-Mexico Studies Director Rafael Fernández de Castro argues that a lack of binational institutions has led to intense conflict, especially when it comes to creating meaningful immigration reforms that would benefit both countries.
“In the 1990s, parallel to the NAFTA negotiations, Mexican diplomacy sought to strengthen the bilateral mechanisms of consultation, such as the creation of the Binational Commission, the Border Governors’ Conference and the U.S.- Mexico Interparliamentary Group. But, in the last 15 years there has been no bilateral mechanism to coordinate immigration policy between the U.S. and Mexico,” writes Fernández de Castro in his October 2017 thought piece.
Other expert commentary notes that comprehensive immigration reform would provide $1.5 trillion in returns over 10 years, raising wages, productivity, consumption, and tax revenue. DACA legalization would provide even higher returns to the U.S. economy at about $3.6 trillion over 40 years. President Trump has threatened to deport over half a million DREAMERS – children living in the U.S. via the deferred action program. Without a platform for dialogue between the countries, these migratory conflicts have been exacerbated and both countries have forgone potential benefits from reform.
Despite calls for collaboration and evidence supporting a path for consensus, the three nations are at a stand-still. The longer it takes for the countries to come together the more politically and practically difficult it will become to reach a deal at all. Next year, Mexico will hold its much-anticipated election in which voters will elect a new president, 500 members to the Chamber of Deputies, and 128 members of the Senate. In addition, a politically polarized United States will hold its congressional midterm elections. If an agreement is not reached before the elections, the political dynamic in these countries could further divide candidates and stymie a workable pathway for NAFTA. In addition, the U.S. Congress has a major tax reform proposal pending in Congress.
However bleak negotiations currently appear, it still seems unrealistic that such a massive trade deal affecting three global economies could be completely unraveled. If Trump decides to withdraw, it would be argued - and likely litigated - that the U.S. Congress holds the ultimate responsibility for making a final decision on the trade agreement.
NAFTA offers a critical opportunity to do right by all three nations, but currently there is little hope that the three countries’ leaders will overcome gridlock and come together to craft a better NAFTA that incorporates reforms that benefit all of North America.
Teodoro Martinez III is a Master of International Affairs Candidate at the School of Global Policy and Strategy focusing on international business and politics. He formerly worked as Communications Director at the California State Assembly and served as legislative staff working on a range of public policy issues including health, transportation, taxation, and housing after completing the California Senate Fellowship. He previously earned a B.A. in Communications at California State University, Monterey Bay where he researched pathways to civic engagement, conflict resolution, and intercultural communication.