WASHINGTON: President Donald Trump will have the chance to turn a key campaign promise into reality with this week’s start of official talks to renegotiate the North American Free Trade Agreement.
After threatening during the campaign to rip up the agreement, Trump has softened his stance a bit and spoken more recently of renegotiating the agreement as the most efficient course for the US, Canada and Mexico.
But talks to redo the controversial 1994 agreement, which eliminated trade barriers among the three countries, are expected to be thorny. The first round takes place from Wednesday to Sunday in the US capital.
Trump made NAFTA a defining issue of his campaign, frequently lambasting the deal as a “disaster” that sold out US workers and dismissing supporters who touted the deal’s benefits.
“For Donald Trump this was so central in his campaign that he felt he has no choice but proceed,” said Edward Alden, a senior fellow at the Council of Foreign Relations, a leading think tank.
“I think at some point the President Trump has to walk away with something that he can call victory. I don’t think he could just walk away.”
Trump’s biggest gripe with NAFTA has been the dramatic shift in the US’ commercial balance with Mexico, which since the treaty’s inception has gone from a surplus of $1.3 billion to a deficit of $64 billion.
NAFTA has been a bedrock of the Mexican economy, with 80 percent of that country’s exports going to its Northern neighbor, an especially impactful relationship for Mexican manufacturers and farmers.
The agreement has significantly boosted Mexico’s auto sector, which has grown because of its supply of cheap labor as US automakers have shuttered some factories in their home country.
“Too many Americans have been hurt by closed factories, exported jobs, and broken political promises,” US Trade Representative Robert Lighthizer said last month.
The US trade balance with Canada is more even, but that trade relationship also has points of tension in some sectors, including dairy, wine and grains.
Long road ahead
While the US under Trump has been the party to force NAFTA back onto the agenda, all three countries agree there will be benefits to revisiting an agreement nearly a quarter of a century old that was crafted prior to the internet era.
“Each country feels they have a lot to gain from pursuing these negotiations,” said Jeffrey Schott, a senior fellow at the Peterson Institute for International Economics, a think tank.
Trump administration officials have said they want a swift outcome to the talks, but experts think a speedy deal is unlikely. Next week’s opening salvo will be followed by a second round of talks beginning September 5 in Mexico.
“The first round is basically to put forward some initial ideas and to explain them and probably the negotiators won’t cover the most controversial issues in the first round,” said Schott, who warned a strident “America first” push by the Trump team could cause problems.
“All three countries are committed to successful negotiations that revise and improve the NAFTA, but there is a risk that if United Stated is pushing the controversial ideas too hard that the talks could run off,” Schott said.
A consideration from the Mexican side will be the 2018 presidential election. But Alden, who predicts the talks will require about two years, noted it also has an experienced negotiating team, as well as a strong consumer market for some US sectors, such as agriculture.
“Mexico has a lot of leverage too,” Alden said.