All you need to know about the possible new NAFTA

By Elton Gomes

Canada’s top trade negotiator, Chrystia Freeland, will be in Washington DC to discuss a new North American trade pact. The move comes after United States President Donald Trump secured a deal with Mexico and threatened to eliminate Canada from the trilateral trade deal.

All eyes will be on Canada after the US and Mexico agreed to overhaul the North American Free Trade Agreement (NAFTA). Canada’s Foreign Minister Freeland rejoins the year-long talks after she was optimistic that Mexico’s ”difficult” concessions would pave the way for productive talks.

“These concessions are really going to be important for workers in Canada and the United States,” Freeland said to the media after a meeting with US Trade Representative Robert Lighthizer.

What is NAFTA, and what does Trump want from it?

NAFTA is a trade agreement between Canada, Mexico, and the United States. It was put into effect in 1994 under President Bill Clinton. NAFTA essential eliminated almost all tariffs among the three countries – thereby permitting the free flow of goods and supplies.

Trump has pointed fingers at NAFTA for wiping out jobs in the US manufacturing sector, as the deal allowed companies to shift factories to Mexico where labour is cheap. Trump threatened to pull out of the agreement in April 2017 but agreed to stay in it after Canada and Mexico insisted the deal be renegotiated.

Canada and the US have seen more NAFTA dispute cases than Mexico. Tensions between Canada and the US have heated up, while Mexico has seen a relatively calmer NAFTA deal with the US. The US and Mexico recently reached a deal, wherein Trump claimed to eliminate Canada.

USA and Mexico reach a new trade deal

On Monday, the US and Mexico reached an accord to revise important portions within the NAFTA. Trump indicated that he was prepared to eliminate Canada from the trilateral trade pact if the country did not get on board quickly.

Speaking from the Oval Office, Trump hailed the agreement with Mexico. He hinted that the new deal could replace NAFTA and threatened to hit Canada with tariffs in the automobile sector if it did not “negotiate fairly.”

“They used to call it NAFTA,” Trump said. “We’re going to call it the United States-Mexico Trade Agreement.” Trump added that NAFTA was the “worst” trade deal in history, the New York Times reported.

Trump told reporters in the Oval Office: “We’ll be starting negotiating with Canada relatively soon. They want to negotiate very badly,” the Guardian reported. Even if Trump hinted at eliminating Canada from NAFTA, actually doing so would be extremely difficult, as it would first require approval from Congress.

How real is this threat?

Trump’s threat is not likely to be taken seriously, as there are numerous legal constraints and political hurdles to simply replace NAFTA with one or two bilateral accords. Meanwhile, Mexican officials have given mixed signals whether they would be prepared to sign a deal without the presence of Canada.

Trudeau and Trump have “constructive conversation”

Canadian Prime Minister Justin Trudeau and Trump reportedly had a “constructive conversation” about the talks on Monday, as per a statement by the Prime Minister’s Office (PMO). “The leaders welcomed the progress that has been made in discussions with Mexico and look forward to having their teams engage this week with a view to a successful conclusion of negotiations,” the PMO said in a statement, CBC reported.

Experts opined that things were looking good for Canada and that a new NAFTA deal could be finalized soon. Maryscott Greenwood, CEO of the Canadian American Business Council (CABC), was of the opinion that Canad would join the arrangement: ”There is only a handful of tough issues left. Mexico is already there. I think we can get there this week, I really do,” she told CNBC.

Elton Gomes is a staff writer at Qrius