Due to aggressive political rhetoric from incoming US President, Donald Trump, many executives in North America are concerned that NAFTA may be overhauled or renegotiated. Trump has made such a proposition central to his campaign, yet there are few decision makers actually pushing for NAFTA renegotiations. Not all member nations support such a drastic move.
US Most Likely to Support NAFTA Renegotiations
Donald Trump’s new government may make the push for NAFTA renegotiations. His campaign has certainly been the primary catalyst for reconsidering the North American Free Trade Agreement. His supporters fear Mexico is taking their jobs, thanks to the agreement, which reduced or eliminated virtually all tariffs between the three North American countries when it was implemented in 1994. Yet the US Congressional Research Service concluded in 2015 that the overall impact of NAFTA on the US was negligible:
In reality, NAFTA did not cause the huge job losses feared by the critics or the large economic gains predicted by supporters…The net overall effect of NAFTA on the US economy appears to have been relatively modest, primarily because trade with Canada and Mexico accounts for a small percentage of US GDP.
Canadian and Mexican Sentiment Mixed
Canada seems poised to go along with the US either way, but Canadian Prime Minister, Justin Trudeau, is certainly an advocate for trade. He has only gone as far as saying Canada is open following the US lead on this in the interest of modernizing the deal. He recently commented:
I think it’s important that we be open to talking about trade deals…If the Americans want to talk about NAFTA, I’m more than happy to talk about it.
But NAFTA renegotiations are certainly not on the table for the third member of NAFTA, Mexico. The 2nd largest economy in Latin America has made it clear they are not in favor of NAFTA renegotiations, but that they would consider discussing the agreement in the interest of better appreciating it. Economy Minister, Ildefonso Guajardo, recently stated:
We’re ready to talk so we can explain the strategic importance of NAFTA for the region…Here we’re not talking about… renegotiating it, we’re simply talking about dialogue.
80% of Mexico’s exports go to the US, and in many ways, the US relies on Mexico as a regional partner more than a competitor. In 2015, the two countries exchanged approximately $531 billion USD in goods. Mexico is the United States’ 3rd largest trading partner, and Donald Trump’s administration may well discover that unravelling such an integrated and complex relationship is not worth the trouble. Canada seems ready to support the US decision either way, but Mexico would pose a formidable obstacle in the road leading to NAFTA renegotiations.
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