A campaign pitch meets reality
As a candidate, Donald Trump scorned the NAFTA trade pact with Canada and Mexico as the “worst trade deal in the history of this country.” But he’s cooling down as talks to rework the deal begin Wednesday.
The 1995 agreement deserves updating, not dismantling, a reality that Trump appears to accept. His angry campaign trail talk is giving way to more practical thinking. At least that’s the view of observers hoping an unpredictable and nationalist president is sobering up when it comes to trade.
Since the deal took force, the economies of the three nations are more entwined than ever. Car parts, timber and food are examples of products that shuttle between the countries. But what about digital products, climate change and the economic threat of China, none of which was visible when the pact was written?
These shifts and swirls plus each country’s internal politics make the talks significant and ultra-touchy. Mexico, for example, is pushing to wind things up by February before its presidential race intensifies and the pro-NAFTA political landscape possibly changes.
Canada is bringing new issues to the table such as gender equality, indigenous rights and climate change, all priorities of Prime Minister Justin Trudeau.
The basics are what to watch. Trump has threatened quotas, duties and other barriers to shave down a $60 billion deficit with Mexico and an $11 billion hole with Canada. Steep as these numbers are, curbing trade with heavy controls would make matters worse, though politically pleasing for Trump.
Early on, the White House axed the Obama-era dream of a Pacific trade agreement as a counterweight to China’s expansive power. But that was a pact with only future impacts, not the baked-in results that NAFTA has notched. Erasing the many crisscrossing links would be an economic bomb blast to all three nations and a gift to Beijing.
Another sore point is trade disputes. Panels review claims of unfair practices, a set up that’s helped Canada and Mexico more than the U.S. in the view of Trump advisers. Any change will need careful consideration.
An issue sure to come up is the definition of where a product is made. Machinery, tech devices and autos are often an assemblage of global parts. If a microwave oven from Mexico has 30 percent of its wires and fasteners from China, does it qualify for NAFTA tariff free status?
The talks are expected to stretch over months with teams meeting in each country’s capital. It all leads to a draft package that each nation will need to approve, meaning Congress in all its divided glory will have the final say. Both Democrats and Republicans in their home districts will have special concerns ranging from plant closings to corn shipments.
It will also be a showdown test for Trump, who badly needs a headline win on a topic he has made important. In a quietly released conversation with Mexico’s president, Trump famously suggested the border wall carried more political importance than actual worth. The best outcome would be for Trump to accept a retooled NAFTA and call it a day.