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Trump Considering Bi-lateral Talks to Update NAFTA

President Trump is reportedly considering pursuing individual trade agreements with Canada and Mexico amid dimming prospects for concluding talks on a revamped North American Free Trade Agreement. The NAFTA negotiations have been underway since last summer but have stalled in recent months as Canada and Mexico have refused U.S. demands on issues such as rules of origin for automobiles, investment protection and a sunset provision that would terminate the agreement automatically after five years absent agreement to continue it.

Press sources indicate that the White House has sought to find leverage to move the talks forward, from Trump’s repeated threats to terminate the NAFTA partners’ preferential access to the lucrative U.S. market to a recent decision to hike tariffs on imports of steel and aluminium from those countries (among others). With those efforts having had little success, White House economic adviser Larry Kudlow said recently that Trump “is very seriously contemplating” a shift to “negotiate with Mexico and Canada separately.” Kudlow said Trump is “not going to leave NAFTA” but instead is “just going to try a different approach” and may do so “rather quickly.”

Threatening such a change could be another effort to advance the negotiations in order to secure a congressional vote on a revised deal by the end of the year, and Kudlow did reportedly say bi-lateral talks could yield an agreement “more rapidly.” On the other hand, it may be designed to signal that Trump is in fact willing to end the quarter-century-old agreement. Trump “hates these multilaterals” and “believes that bilaterals have always been better,” Kudlow said, explaining that “oftentimes when you have to compromise with a whole bunch of countries” in a multi-lateral agreement “you get the worst of the deals.”

According to press sources, both Canada and Mexico have dismissed the idea of bi-lateral deals, as have several key U.S. lawmakers. “We want a trilateral agreement — we've always said this," the Huffington Post quoted Canada’s International Trade Minister Francois-Philippe Champagne as saying. “We know it works.” Senate Finance Committee Chairman Orrin Hatch (Republican-Utah) and House Ways and Means Committee Chairman Kevin Brady (Republican-Texas) both reiterated their support for retaining the tri-lateral nature of NAFTA as well.

Content provided by Picture: HKTDC Research
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