Trump NAFTA plan ‘workable’ but pitfalls await – analysts

(AFP) – The Trump administration's plans to reframe the landmark North American Free Trade Agreement (NAFTA) faces significant hurdles and includes some elements Canadians and Mexicans may find hard to swallow, analysts warn.

And an aggressive push by the White House on its toughest demands could reduce Washington's ability to achieve a successful outcome.

''If the US pushes Mexico too hard, they might make it impossible to reach an agreement,'' Antonio Ortiz-Mena, former head of economic affairs at the Embassy of Mexico in Washington, told AFP.

The three nations are due to start the talks next month on the 1994 pact that President Donald Trump once called ''the worst trade deal maybe ever signed anywhere.''

In the negotiating goals released Monday, the White House said it will focus on reducing its bilateral trade deficits with each of its neighbors.

But Canada and Mexico already face bigger trade deficits as a share of their economies than the United States. Last year, the US trade deficit amounted to 2.5 percent of GDP, but Mexico's was 2.6 percent and Canada's 3.3 percent.

And economists say there is little that governments can do to make an impact on the deficit in any case.

It is true the US trade balance with Mexico became a deficit under NAFTA – swinging from a $1.7-billion surplus in 1993 to a $55.6 billion deficit in 2016 – but total trade with Canada and Mexico more than tripled, reaching $1.2 trillion by last year.

''I think this issue has been managed from a more emotional than an analytical perspective,'' said Ortiz-Mena. ''It's very difficult to 'force' or 'compel' Mexico to buy more American goods.''

With a presidential election coming in July 2018, Mexico may have severely limited room to give the Trump team what it wants.

''I think you're looking at a threeto-four month period of active negotiations before things get really dicey for Mexico's current government,'' said Scott Miller, a trade policy expert with the Center for Strategic and International Studies.

Also in July of next year, the US administration's fast-track trade negotiating authority – which requires Congress to approve or reject trade deals without changes – will expire. It can be renewed, but it adds additional pressure to the talks.