Market News & Headlines >> U.S. Revises NAFTA Goals, Talks Continue
The Trump administration on Friday revised its objectives for renegotiation of the North American Free Trade Agreement, largely to reflect the demands it has made in NAFTA talks on agriculture, intellectual property and investment.
The revised objectives are now in line with U.S. proposals to largely eliminate Canada's import tariffs on dairy, poultry and egg products and to allow more protections for seasonal U.S. produce that is sensitive to imports from Mexico.
Officials for Canada, Mexico and the United States renewed NAFTA renegotiation talks on Friday in Mexico City, amid a cloud of uncertainty. While progress has been reported on some lesser issues, the sides remain deadlocked over U.S. demands regarding vehicle content, severely restricting or eliminating the NAFTA dispute mechanism and automatically terminating NAFTA in five years unless all sides agree to extend it. Canada and Mexico have steadfastly rejected all of these demands.
Although indications are that the U.S. trade officials have shown more willingness to negotiate in the fifth round of NAFTA talks, Reuters News Service reports some pro-trade Republicans in Congress are worried that President Trump may try to pull out of NAFTA entirely.
A bipartisan group of 74 House of Representatives members signed a letter last week opposing the U.S. proposals on automotive rules of origin, which would require 50% U.S. content in NAFTA-built vehicles and 85% regional content.
The termination of NAFTA would significantly hurt the U.S. agriculture and auto manufacturing sectors, according to a forthcoming study done by the C.D. Howe Institute, an independent not-for-profit research institute in Ottawa, Canada, Canada's Globe and Mail newspaper reports. U.S. bilateral auto exports would slump by $13.2 billion if NAFTA were terminated, while the U.S. beef, pork, poultry and dairy industries would each take hits of about $1 billion in exports, the study concludes.
Overall, the U.S. would sustain more economic damage than Canada, while Mexico would suffer most, the study concludes. If the pact were allowed to lapse, gross domestic product in each of the three countries would take a hit, with exports of goods and services within the region slumping by about $110-billion (U.S.) or 9% by 2023, the study says.