Just when we thought Brexit would be the dominant discussion topic around the dinner table at International Trade gatherings, a much larger beast is on the loose.

North America Free Trade Agreement (NAFTA) What is Nafta? started in 1994, it is designed to lower tariffs for most traded goods and services between USA, Canada and Mexico it established rules covering food safety, intellectual property rights and dispute settlements. Since the deal was signed, trade between the three countries has more than tripled. Political ties between the three countries have also strengthened.  In the upcoming negotiations there is a number of specific areas which will be discussed.

What is at stake as Nafta talks begin? President Trump has called this free trade agreement a “jobs killer” and a “disaster”, and pledged to repeal it. However, in April, he pulled back and agreed to discuss “modernising” the “Agreement”. Talks between the three countries about overhauling the pact start in Washington on 16/08/2017.

mexico-usa-brexit-trumpMr Trump blames it for the country’s large trade deficit with Mexico, and suggested US manufacturing jobs have been lost across the border. But doesn’t automation and open trade with China have a bigger impact? Canada and Mexico argue for updating the pact and business has lobbied in favour of an arrangement which now covers $1tn worth of trade across North America in a broad range of industries from dairy to automobiles. What does the US actually want?  The US Trade administration is focused on changes that will reduce the trade deficit, or imbalance between imports and exports.  That means the US importing less from its neighbours, especially Mexico, or boosting US exports.  The US spokesman said it would push for greater access to the Canadian market for US dairy, wine, grain and other products. It has also said it wants to tighten rules that identify where items come from. That has drawn opposition from groups such as the automobile industry, whose supply chains now involve moving raw materials and parts across multiple borders throughout the Nafta area.  The US may also seek to strengthen its hand to promote American goods for “Buy America” government programmes.

Canada-economy-usa-trump-brexitWhat does Canada say? Canada’s Foreign Affairs Minister has said Nafta has benefited the Canadian economy, making it 2.5% larger annually than it would otherwise be. Canada wants to make the agreement more progressive, by addressing labour, environment, gender and indigenous rights, among other items What does Mexico say? Mexico says Nafta has helped its manufacturing plants and agricultural sector become more globally competitive. Their negotiators say they would raise issues that include easing and clarifying migration rules for seasonal workers, better border infrastructure and greater integration of telecom markets.

So as the UK considers Brexit and the small matter of hard borders with Eire it does put things in perspective when you consider the size of the hard land borders separating the USA from both Canada and Mexico.

More updates on the NAFTA negotiations will follow.

Mike Court is a specialist in International Trade Compliance for Middleton Jones


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