Rais­ing ques­tions

Pre­lim­i­nary U.S.-Mex­ico trade deal leaves trail of un­cer­tainty

The Western Star - - BUSINESS - BY PAUL WISEMAN, LUIS ALONSO LUGO AND ROB GIL­LIES

Pres­i­dent Don­ald Trump’s dec­la­ra­tion of vic­tory Mon­day in reach­ing a pre­lim­i­nary deal with Mex­ico to re­place the North Amer­i­can Free Trade Agree­ment raised at least as many ques­tions as it an­swered.

Can Canada, the third mem­ber coun­try in NAFTA and Amer­ica’s No. 2 trad­ing part­ner, be coaxed or co­erced into a new pact?

If not, is it even le­gal - or po­lit­i­cally fea­si­ble - for Trump to reach a re­place­ment trade deal with Mex­ico alone?

And will the changes being ne­go­ti­ated to the 24-year-old NAFTA threaten the op­er­a­tions of Amer­i­can and for­eign com­pa­nies that have built so­phis­ti­cated sup­ply chains that span the three coun­tries?

“There are still a lot of ques­tions left to be an­swered,” said Peter MacKay, a for­mer Cana­dian min­is­ter of jus­tice, de­fence and for­eign af­fairs who is now a part­ner at the law firm Baker McKen­zie.

Trump was quick to pro­claim the agree­ment a tri­umph, point­ing to Mon­day’s surge in the stock mar­ket, which was fu­eled in part by the ap­par­ent break­through with Mex­ico.

“We just signed a trade agree­ment with Mex­ico, and it’s a ter­rific agree­ment for ev­ery­body,” the pres­i­dent de­clared. “It’s an agree­ment that a lot of peo­ple said couldn’t be done.”

Trump sug­gested that he might leave Canada out of a new agree­ment. He said he wanted to call the re­vamped trade pact “the United StatesMex­ico Trade Agree­ment” because, in his view, NAFTA has earned a rep­u­ta­tion for being harm­ful to Amer­i­can work­ers.

But first, he said, he would give Canada a chance to get back in - “if they’d like to ne­go­ti­ate fairly.” To in­ten­sify the pres­sure on Ot­tawa to agree to his terms, the pres­i­dent threat­ened to im­pose new taxes on Cana­dian auto im­ports.

Talk­ing to re­porters, the top White House eco­nomic ad­viser, Larry Kud­low, urged Canada to “come to the ta­ble.”

“Let’s make a great deal like we just made with Mex­ico,” Kud­low said. “If not, the USA may have to take ac­tion.”

Canada’s NAFTA ne­go­tia­tor, For­eign Min­is­ter Chrys­tia Free­land, is cut­ting short a trip to Europe to fly to Wash­ing­ton on Tuesday to try to restart talks.

“We will only sign a new NAFTA that is good for Canada and good for the mid­dle class,” said Adam Austen, a spokesman for Free­land, say­ing that “Canada’s sig­na­ture is re­quired.”

MacKay added, “There is still a great deal of un­cer­tainty trep­i­da­tion, ner­vous­ness, a feel­ing that we are on the out­side look­ing in.”

Crit­ics de­nounced the prospect of cut­ting Canada out a North Amer­i­can trade pact, in part because of the risks it could pose for com­pa­nies in­volved in in­ter­na­tional trade. Many man­u­fac­tur­ers have built vi­tal sup­ply sys­tems that de­pend on freely cross­ing all three NAFTA bor­ders.

Not­ing the “mas­sive amount of move­ment of goods between the three coun­tries and the in­te­gra­tion of op­er­a­tions,” Jay Tim­mons, pres­i­dent of that Na­tional As­so­ci­a­tion of Man­u­fac­tur­ers, said “it is im­per­a­tive that a tri­lat­eral agree­ment be inked.”

Trump has fre­quently con­demned the 24-year-old NAFTA trade pact as a job-killing “dis­as­ter” for Amer­i­can work­ers. NAFTA re­duced most trade bar­ri­ers between the three coun­tries. The pres­i­dent and other crit­ics say the pact en­cour­aged U.S. man­u­fac­tur­ers to move south of the bor­der to ex­ploit low-wage Mex­i­can labour.

The pre­lim­i­nary deal with Mex­ico might bring more man­u­fac­tur­ing to the United States.

Yet it is far from fi­nal. Even af­ter being for­mally signed, it would have be rat­i­fied by law­mak­ers in each coun­try.

AP PHOTO

Pres­i­dent Don­ald Trump lis­tens dur­ing a phone call with Mex­i­can Pres­i­dent En­rique Pena Ni­eto about a trade agree­ment between the United States and Mex­ico, in the Oval Of­fice of the White House, Mon­day, in Wash­ing­ton.

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