The Daily Update - NAFTA

In addition to the continued political uncertainty in Washington, the North American Free Trade Agreement, NAFTA, negotiations start in a couple of weeks,  on 16th August. Trump, who had threatened to rip up the agreement ahead of the presidential election last November has since decided to renegotiate the deal. However, as he describes the deal as ‘the worst trade deal in history’ his starting point may be fairly different from the other members, Mexico and Canada.

In reality Trump is more upset with Mexico than Canada, as the existing deal doubled Canada’s exports to the US to $278bn annually, while in the case of Mexico exports to the US jumped seven fold to $294bn annually resulting in the US having a goods and services deficit of $63bn last year with Mexico against a $7.7bn surplus with Canada.

The initial deal started as a trade negotiation between the US and Mexico back in the early 1990’s but Canada joined the talks to protect its own trade agreement with the US signed just a few years earlier. In essence the deal is all about the other two member’s relationship with the US rather than with each other. There have been a few spats between the junior partners to the deal, in 2009 Canada put a visa requirement on Mexicans claiming that false refugee claims by Mexicans was accelerating, but this has been offered to be cancelled by Canada in exchange for Mexico lifting Canadian beef restrictions.

What could be interesting is if Canada and Mexico start to divide in the negotiations rather than stick together, each trying for the best deal for themselves. Safety in numbers would appear to be the best option for them both but fireworks maybe forth coming should they decide to sell each other out as the issues unfold as they do both seem to have individual topics of importance not shared with each other.

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