US-Canada Bilateral Trade In View If NAFTA Talks Fail

New rounds of re-negotiations to promote NAFTA’s benefits have begun near Washington and Canadian Prime Minister, Justin Trudeau was in the White House on Wednesday discussing bilateral relationship with the United States president, Donald Trump. According to the United States president, if a deal is not reached on the North American Free Trade Agreement (NAFTA), it would be dismissed.

The stall in the new renegotiation on trade bloc arose from Mexico’s opposition to the move by the United States to increase the percentage of US-made components in car manufacturing. President Trump’s stance on the negotiation has been criticized by US businesses because of its potential doom to NAFTA.

The U.S. Chamber of Commerce on Tuesday made a strong statement accusing Donald Trump’s administration of attempting to sabotage the talks with “poison pill proposals,” including a frivolous demand for a more favourable treatment of the U.S. side on car production.

Reacting to the matter, Luis Videgaray, the Mexican foreign minister said terminating NAFTA could harm US-Mexico relations especially on issues related to security like fighting drug trafficking.

It is likely that Trump is planning a free trade with Canada if NAFTA talks go sour with Mexico. Reacting to a similar question thrown at him by a reporter, president Trump said,

“Oh sure, absolutely. It’s possible we won’t be able to reach a deal with one or the other, but in the meantime we’ll make a deal with one. We’ll see if we can do the kind of changes that we need. We have to protect our workers, and in all fairness, the prime minister wants to protect Canada and his people also.”

Speaking to reporters at a news conference later, Trudeau expressed optimism that there is still a chance that the 1994 trade pact would be modernized. He said,

“I continue to believe in NAFTA… so, saying, we are ready for anything, and will continue to work diligently to protect Canadian interests.” Reacting to Trump’s unpredictability he said, “That is certainly that we are very much aware of and very braced for and conscious of but at the same time, Canadians expect us to work in a thoughtful, meaningful way towards getting a good deal.”

Although one of Trump’s top trade adviser and U.S. Commerce Secretary, Wilbur Ross, has downplayed the possibility of NAFTA collapse,

“We don’t hope it will, we don’t believe that it will, but it is at least a conceptual possibility as we go further,”

U.S. and Mexican corporate chief executives gathered in Mexico City have concluded that it was better to terminate NAFTA than to settle with the burden of a “bad agreement”.

The U.S. proposal which is due to be presented this week calls for North American overall content to rise from 62.5 per cent to a staggering 85 per cent. Also, the United States wants to add a new 50 per cent U.S.-made components in car manufacturing – a pact lacking in the previous agreement.

“These will be met with widespread opposition from Canada and Mexico,” said Wendy Cutler, the former U.S. negotiator for the Trans-Pacific Partnership trade deal and Asia Society’s Washington policy director.

In all, the trade between the three NAFTA partners reached $1.1 trillion (£832bn) in 2016. Trudeau also presented the Bombardier-Boeing trade dispute before the US president.

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