Trump May Terminate NAFTA, Reaffirms Plan to Build Wall

Thursday, 24 Aug, 2017

The worldwide trade critic for the NDP was left shaking her head after Donald Trump's latest statements about NAFTA.

The president's threat itself is no surprise. Canada's alternative to a successful renegotiation may thus be a return to the old Canada-US FTA of 1989 or, even worse, to the World Trade Organization conditions.

The debate over NAFTA's effectiveness is probably endless, and it has been exacerbated by the after-effects of the Great Recession. The President has made his deep dissatisfaction with NAFTA abundantly clear - most recently during his Phoenix rally speech when he spoke about "terminating" the agreement.

Speaking after the first day's talks, US Trade Representative Ambassador Robert Lighthizer claimed US President Donald Trump is "not interested in a mere tweaking of a few provisions and a couple of updated chapters".

Whether we like it or not, Trump's NAFTA bluster matters, and it's going to make any kind of deal much more hard to attain. The first session of negotiations took place over five days last week in Washington. Mexico has presidential elections next July, and the USA holds congressional elections next November. "Mexico will remain at the table with calmness, firmness, and in the national interest".

Senior government officials, however, say the threat has come sooner in the process than they expected. It's his main source of power to force the other countries to reach an agreement. Then you have to give another one, then you have to wait a long time.

"The strategy of building a wall seems a losing one, even ignoring its moral repugnance", said John Taylor, Jr., president and founder of Taylor Global Vision, a global macro and FX research firm in NY. "The U.S. should not allow protectionist elements in undermine a market opening made possible by NAFTA".

"We're going to stay focused on what we've always known and what we've always said, that the North American Free Trade Agreement has resulted in millions of good jobs on both sides of the Canada-US border and is of benefit to both Canadians and Americans", he said during a news conference in Montreal.

"It was, at a minimum, awful timing", said Holleyman, Obama's deputy US Trade Representative. And if he does play it, it won't be as strong as it would've been... "And especially for a border state like Arizona", Taylor said.

"The main story in currency markets is that people are keeping their powder dry - we're definitely not seeing any big directional moves in any G10 currencies at the moment", said Karl Schamotta, director of global markets strategy at Cambridge Global Payments.

That's because the president can't just erase the 1994 NAFTA Implementation Act passed by Congress. In other words, this move would make it voluntary for the NAFTA countries to opt into the investor-state dispute settlement system (ISDS, which functions as an alternative to domestic court systems and lets corporations sue governments if they feel the value of their foreign investments have been diminished by governmental actions), meaning, more or less, that foreign investors would have to take any disputes through the US court system.

"The obstructionist Democrats would like us not to do it, but believe me, if we have to close down our government, we're building that wall", Trump said to the crowd.