Talks to renegotiate the North American Free Trade Agreement (NAFTA) between Canada, the United States, and Mexico are dragging, with few solutions in sight.
The seventh round of the talks started on Sunday in Mexico City and were aimed at fixing what President Donald Trump has referred to as “the worst deal ever made” (as he often describes most deals and policies crafted by his predecessors). Whether Trump has the authority to pull out of the deal via executive decision in the first place is unclear, given that the deal passed with Congressional approval in 1993.
Still, what the president can do is get the ball rolling by issuing a six-month notice to leave NAFTA, a deal currently stalling on a number of grievances, including dispute resolution mechanism and currency manipulation.
But leaving the deal will be messy. U.S. neighbors to the North and South are significant players in the domestic economy; Canada is the largest market for U.S. exports, and Mexico is the second, with a massive market for U.S. agricultural goods.
Experts told ThinkProgress in August, when the first round of NAFTA renegotiations kicked off, that ditching the deal would destabilize global markets and ultimately harm U.S. automotive, electronic, and agricultural sectors. In fact, Reuters on Thursday reported that Mexico imported 10 times more corn from Brazil in 2017 amid concern that NAFTA renegotiation could disrupt their U.S. supplies. Dairy and soybean farmers in the United States also have reasons to worry.
The Lone Star State will be one of the biggest losers in the event that the United States walks away from NAFTA. According to Business Roundtable (BRT), a conservative business group, Texas exported $125 billion worth of goods to Canada and Mexico in 2015, and supported nearly 1 million jobs in the state.
In fact, in a January study done by BRT showed that the United States would be worse off without the “worst deal ever”:
Termination would re-impose high costs of tariffs on U.S. exports and imports, which would reduce the competitiveness of U.S. businesses both domestically and abroad. U.S. exports would drop, both to Canada and Mexico and globally, as U.S. output becomes more expensive and therefore U.S. businesses would be less competitive in these markets.
Foreign purchasers would shift away from U.S. goods and services in favor of lower — cost goods and services made in other international markets, particularly those made in Asia.
Not only would leaving NAFTA and re-imposing most-favored nation duties on trade with Canada and Mexico make the United States less competitive, it would also damage the productivity and employment rates — the BRT estimates that 1.8 million jobs would be lost in the United States in the first year alone.
And that’s not all: The study — which isn’t an outlier — estimates that, in the long run, the country’s GDP would remain permanently depressed by 0.2 percent.
Given President Trump’s preoccupation with stock market performance (he likes taking credit for the spikes, but not the dips) it seems possible that he would refrain from doing anything as drastic as try and pull out of NAFTA. In January, the markets dipped after fresh reports that Trump would walk away from the deal.
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When The Wall Street Journal asked Trump about this, he said he wasn’t worried about U.S. markets and reiterated that he felt “the United States has been treated very, very badly” in the deal. Still, when asked about ending the deal, he said, “Now, do I want to? No, I’d rather leave it.” He also gave the WSJ no timeline for a decision. He said “flexibility” would be required to move forward.
But flexibility is what Steve Verheul, a Canadian negotiator, said the United States is lacking.
“They do not come to the table — our counterparts — with a lot of flexibility. This is being driven to a large extent from the top, from the administration, and there’s not a lot of flexibility,” Verheul told the Canadian Global Affairs Institute.
The CBC reports that Verheul see U.S. proposals in Trumpian terms — “the worst offer ever made by the U.S. in any trade negotiation.” Indeed, according to Verheul, what the United States wants would put Canada is “a position where the country of Bahrain would have far better access to U.S. procurement markets than Canada would, or that Mexico would.”
This, he said, makes the offer “impossible.”