The announcement last month, the proven fact that the United States and Mexico reached an agreement to interchange NAFTA without Canada surprised trade experts around the world. The deadline for Canadians to affix was set for August 31 on August thirty first stay out in the cold – and hit fresh tariffs.
The news was stunning because negotiators in all three countries had been attempting to broker a new deal for greater than a 12 months, since President Donald Trump implemented his campaign threat demand the abolition or substitute of the North American Free Trade Agreement.
After the deadline passed arbitrarily, with none concessions from Canadians, let alone the finalized deal, Trump again endangered to exclude Canada from the new NAFTA via Twitter.
While his boast included a threat to finish NAFTA altogether, that is all bark and no bite. What trade researchers like me It is evident that Trump has no leverage in these negotiations.
Interest groups on both sides of the border will ensure that Canada is roofed by the agreement – legally, it could be bothersome make a deal that excludes Canadians.
Interest groups often win
In his tweets, Trump said there was “no political necessity to keep Canada in the new NAFTA agreement.” But Canada doesn’t appear to feel any impending doom – and for good reason.
After Trump’s threats – said Prime Minister Justin Trudeau compromise “will depend on whether a very good deal for Canada can be reached in the end. No NAFTA is best than a nasty NAFTA.
As part of my very own research, I even have examined how interest groups influence trade policy, particularly in initiating disputes and litigation inside the World Trade Organization. My work illustrates how countries depend on industry interest groups – and in some cases, corporations themselves – to shape trade policy.
This study draws on the work of Princeton politics professor Andrew Moravcsik, who theorized it countries – especially democracies – represent primarily the preferences of domestic interest groups during international negotiations and will rarely bow to the desires of trading partners.
In other words, governments need to stay in power and be re-elected. To achieve this goal, they need votes and campaign contributions, and corporate and industry interest groups can provide both.
That’s why Trudeau continues to insist that any take care of the U.S. and Mexico will protect Canadian middle-class jobs by protecting domestic milk and poultry production, and that is why he’s pushing for the so-called cultural exemption which protects national television and radio from takeovers by American media conglomerates, will be included in the new NAFTA.
Trudeau and his team of negotiators aren’t going to sing to the tune of Trump’s tweets. Rather, they’re following the standard playbook of political economists: protect those industries and sectors that may also help Trudeau achieve one other federal election victory in 13 months.
Reuters/Reinhard Krause
First the Americans
On the other side of the table is Trump.
He he confesses to maintain American interests in mind because it deals with Canada in the ongoing NAFTA negotiations. And he has framed NAFTA as a disaster and an agreement that delivered “the United States…decades of abuse” at the hands of Canada.
Trump hesitates to acknowledge the interdependence of the U.S. and Canadian economies. Both countries need one another.
Canada is the United States the second largest trading partnerwith a complete of greater than USD 673 billion in goods and services across the border in 2017. The U.S. Department of Commerce estimates that exports to Canada support greater than 1.5 million jobs, mostly in border states that elected Trump in the 2016 presidential election.
Take the auto industry for instance: if Canada were excluded from NAFTA, US automotive prices could rise because of it. proposed new tariffs on Canadian cars. And Canadians they’re already discussing boycott American goods if negotiations break down, which could also end in a decline in American automotive sales.
If consumers in Canada and other countries find yourself buying fewer American cars commercial disputes, which can end in layoffs. The possible downward spiral that might result from this affects both the auto industry and trade unions interested o NAFTA without Canada.
And it is not nearly cars. If Canada is kicked out of the new NAFTA, Americans will see: number of industries negatively, from oil production to retail stores to tourism, as Canadians select buy more domestic products to avoid American ones.
Essentially, NAFTA without Canada is a win-win situation. And while Trump may be willing to disregard the wishes of some interest groups with two years left before re-election, most lawmakers in Congress haven’t got that luxury as the midterms approach.
It’s hard for me to assume that Congress will support NAFTA without Canada, regardless of who controls the House in January 2019.
Three will not be a crowd
The idea of scrapping NAFTA completely is absurd in my view because industries on both sides of the border won’t tolerate it and Congress won’t support it.
Trump can also be subject to legal restrictions. One sec was awarded to him authorizing Congress to renegotiate NAFTA on an expedited basis, it only allows Trump to ask lawmakers to approve an agreement with an up-or-down vote that covers all three countries. If current negotiations fail and Trump presents Congress with only a trade take care of Mexico, the process will be slow and will be significantly stalled — especially if there’s a change on top of things of the House.
Given that manufacturing interests were supporters of NAFTA in 1994 and proceed to profit from the treaty today, North Americans can expect that whatever replaces this agreement will proceed with Canada well into the future, regardless of how long it takes these negotiations.