NAFTA, the tripartite North American Free Trade Agreement between Canada, Mexico, and the United States, is in the process of a significant overhaul. On the heels of a deal between the US and Mexico, US and Canadian officials are negotiating their own deal to complete the NAFTA agreement. But with recent acrimony between Ottawa and Washington and the tight deadline set by the US for completing the negotiations, there is growing concern that NAFTA will eventually become a two-party agreement that excludes Canada.
This is not empty talk. The US administration has threatened to eliminate Canada from the agreement in an attempt to pressure it to compromise. For its part, the Canadian delegation, led by Foreign Minister Chrystia Freeland, is “optimistic” of a successful outcome to the negotiations. She stated that their primary goal is to “stand up for the Canadian national interest, and for Canadian values while looking for areas where we can find a compromise.”
Several observers believe that Canada’s optimism may be misplaced. Peter Mackay, former conservative Canadian foreign minister, believes that Canada has been “painted into a corner”, while one US congressional aide noted that the timeframe set for negotiations does not give Canada the capacity to reach an accord. With Trump setting up the possibilities, Canada is very much on the clock.
However, Canada does have strong support from which it can draw some leverage of its own. US Congress has made it clear that it will not provide approval or allow expedited procedure if the agreement excludes Canada. Prominent Republicans have also come out strongly against the proposal, prompting the US administration to silence these concerns via the President’s Twitter account.
Moreover, US businesses have also thrown their weight behind Canada’s inclusion. The US Chamber of Commerce stated that “In order to do no harm to the 14 million US jobs that depend on trade with Canada and Mexico, the agreement must remain trilateral”. Despite the position of the US administration, most economists agree that an agreement without Canada will also be harmful to US economic interests.
Trump’s platform of “Make America Great Again” was promoted for its focus on targeting foreign trade tariffs, increasing US employment and improving existing trade conditions for the benefit of the US. The NAFTA agreement negotiated with Mexico includes an increase of the minimum earning a wage to $16 an hour. This requirement fulfills Trump’s agenda, as it provides protection to US low wage jobs. It was even lauded by the Canadians as a strong step forward for both countries. The main knock on the US’ position on trade has come from economists, who point out that the more restrictions placed on trade agreements, the more isolationist the US will become, which will take a toll on the economy and job growth overall.
So while a bipartite US-Mexico agreement will follow the current US blueprint, internal pressure makes it unlikely that such trajectory will be followed. Both the US and Canada stand to lose from not being part of the deal. From this perspective, Trump’s deadlines and tariff demands appear to be no more than tactics. Unless Trump is willing to take on the business community and Congress, it is likely that a tripartite agreement will be struck.
With this expectation, a new NAFTA which includes the Mexican wage agreement has already provided benefit to both Canada and the US. With the motivation for both sides to move forward, it seems probable that each will work in their own best interests to improve their countries positions. While the US administration is not seeking to make all of North America great, a renewed NAFTA agreement will likely provide a good deal of mutual benefit.