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Canada's chief negotiator for the original NAFTA says it would not be the end of the world if the agreement disappeared, suggesting it might be a better outcome than letting the Trump administration rewrite the rules of international trade.
John Weekes told a panel discussion this week that he hopes Canada remains at the negotiating table until the very end and that if talks ultimately break off blame should lie squarely with the Trump administration.
He says the new American administration is trying to distort the purpose of the trade agreement with its proposals: a five-year termination clause, a gutting of the oversight mechanisms and extremely aggressive demands on autos, dairy and Buy American.
The 1990s negotiator says parts of the talks are proceeding nicely, in areas that deal with new, modern chapters. It's the part involving the renegotiated portions that is off to an extremely poor start, he told a panel organized by the U.S. Council on Foreign Relations.
"They're all very problematic," Weekes said of the proposals. "It's the renegotiation where the negotiations are in real trouble. And I think that the proposals from the United States that I've read about... seem to me to be so extreme that one really has to ask the question whether President Trump wants to have a NAFTA or is looking for an excuse to get out of it.
"I think it's very clear from a Canadian point of view that Canadians are going to look at these negotiations from the point of view of, 'Is the outcome better than what we went in with, or worse?' And, you know, the NAFTA's been a very valuable agreement. But it wouldn’t be the end of the world if it disappeared."
He said ending NAFTA might be temporary — maybe a future U.S. administration would re-join. But he suggested that might be better than tailoring a trade deal to Donald Trump's preferences. So waiting out the Trump era might be a better choice.
The last U.S. trade czar pre-Trump agreed with part of his assessment. Michael Froman, who served in the trade role until this year under Barack Obama, said countries will have to take a clear-eyed look at whether it's worth sticking with NAFTA.
"Canada and Mexico are highly dependent on the U.S. market in general terms, but their economies have also changed significantly in the last 24 years," Froman told the same panel.
"There needs to be real analysis over what the costs of the U.S. withdrawal would be. I’m not saying it’ll (be) inconsequential, but there may not be as much leverage there (for Trump) as some people think. I think everyone on all sides of this need to be pretty clear-eyed about what the pros and cons of ... (these proposals) ... versus a withdrawal."
He disagreed with a moderator's question about whether it might be possible to drag things out and out-wait Trump. The countries have just agreed to speak through next March. But Froman said the clock is ticking fast.
"I don’t think (waiting for a new administration) is really an option," Froman said.
"The renegotiation of NAFTA is the administration's top trade priority right now. It's been absolutely clear. And so there’ll be this effort between now and early next year. ... And then there'll be a judgment made about whether there is an agreement on the table to be had, or whether it makes more sense, from the administration’s point of view, to withdraw."
One thing that's very unclear is what happens if Trump walks.
Froman noted the ongoing debate about how much power Congress has to preserve NAFTA. He said he believes Trump could make many changes alone. He also took a shot at Congress, suggesting it's misguided to expect bold action there: "So far, there haven't been a lot of profiles in courage."
It's also unclear what would happen to the original Canada-U.S. Free Trade Agreement — the 1987 deal NAFTA replaced. Some commentators expect it will snap back into place, but the 1994 U.S. NAFTA implementing legislation offers no guarantees.
It simply describes the earlier deal as "suspended," until such suspension is "terminated." Washington trade consultant Eric Miller says his congressional sources tell him they believe restoring the 1987 deal would require votes in Congress.
The end of free trade in North America would mean new tariffs averaging 3.5 per cent in the U.S., 4.2 in Canada, and 7.1 in Mexico, and some analysts say it would reduce Canada's GDP by 2.5 per cent.
Comments
This analysis is very helpful as many of us have been wondering about such consequences if NAFTA were to 'die'. Although we might suffer a decrease in GDP, might we not gain by not having to pay the substantial costs of Chapter 11 suits against the government ( ie our taxes)? And might we not gain even greater benefits if NAFTA goes down as we will be able to pass and implement legislation on health, agriculture, wildlife conservation, stopping fracking, etc for the benefit of us all?
Ruth's questions are exactly those I have. Why would we not just let the US degrade in it's self-imposed isolation while we adjust to a slightly lower standard of living that our seniors have always been familiar with? The economic argument is not the answer to happiness in my opinion.