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[NAFTA] Renegotiation
Richy
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So we don’t have a thread about the NAFTA renegotiation going on, and I figured we should have one.
A bit of background is in order. NAFTA is the treaty that has opened up trade between Canada, the USA, and Mexico. It was signed in 1994, after half a decade of negotiations. It has led to over two decades of profitable trade, job creation, and economic growth for all three countries, and today we are each other’s largest suppliers and customers, and most companies larger than a mom-and-pops shop in any of our countries has either a supply chain stretching across at least one border or hires service firms on the other side of the border. To be sure, trade has not always been smooth, but NAFTA includes conflict arbitration clauses that have resolved conflicts, and which have been activated less and less as time went on, a testament to how easy trade has become.
Only a complete idiot would call this treaty a disaster and try to withdraw their country from it.
Which leads us of course to the USA electing a complete idiot who called this treaty a disaster and is trying to withdraw his country from it.
Negotiations have started; the opening round wrapped up in Washington last week, with the next one taking place in Mexico in early September, then in Canada in late September, and on and on like that. This first round was mainly opening statements and declarations of intents, and is reported to have been quiet and friendly. A joint statement at the end of that meeting stated that all three countries are interested in modernizing the now 23-year-old treaty. By contrast, the tiny-handed orange Nazi tweeted that negotiations were difficult and unlikely to succeed, and that termination is very probable. Most people ignored that tweet, save for Hamilton mayor Fred Eisenberger who mocked him for it.
So what’s at play? As with any negotiation, each country has a different agenda. As far as I know, these are the top priorities:
CANADA:
• An exception to the “buy American” policy in US government contracts to include Canadian goods and services, opening up a lucrative new market.
• New ‘progressive’ chapters in the agreement to focus on labour safeguards, environmental protections, gender equality, a new investor-state dispute settlement process, but most notably a chapter dedicated to Indigenous people.
USA:
• Abolishing Article 19. That’s the third-party arbitration clause which was originally fought for by Canada, and subsequently used to resolve several disputes, in particular with regards to softwood lumber, to their benefit. US companies, in particular in softwood lumber, hate that one. But with the WTO now in place and regulating trade disputes (that did not exist back in 1994), it may not be the victory US companies expect.
• Stricter country-of-origin regulations on the auto industry. One of the major hallmarks of US manufacturing and also one of the major pieces of the US trade deficit is car manufacturing, and a country-of-origin rule would require a certain proportion of the car’s construction to be done in the USA. To be fair, that rule was also part of the original NAFTA, but did not cover the car’s electronic systems, which were a minor thing back in the early 90s. That’s one thing the USA wants to change. Worthy of note, all major US auto makers have come out against this idea.
MEXICO:
• Mexico has been most vocal about wanting these talks to be done and the new treaty signed by 2018. The current Mexican government is pro-business, but next year they are heading into an election with a new candidate (term limits prevent the current president from running again) facing off against a left-wing opposition. The last thing they want is uncertain and slow trade negotiations with a hated US president who called their people criminals and rapists dominating the headlines during their campaign. They want these talks over and a shiny new treaty to campaign on. But we cannot overstate that this is an unprecedented fast pace to negotiate an international trade treaty; these things usually take years.
• Mexico also wants new regulations of cross-border investment and protection of intellectual-property rights. None of those issues were part of the original NAFTA, mainly because they were not international issues back in the 90s.
Last week the three nations agreed to a confidentiality agreement surrounding the negotiations, a standard practice. That does mean news about the talks will slow to a trickle. So I figured a thread to share info, debate the issues, and discuss the rumours, will be interesting.
A bit of background is in order. NAFTA is the treaty that has opened up trade between Canada, the USA, and Mexico. It was signed in 1994, after half a decade of negotiations. It has led to over two decades of profitable trade, job creation, and economic growth for all three countries, and today we are each other’s largest suppliers and customers, and most companies larger than a mom-and-pops shop in any of our countries has either a supply chain stretching across at least one border or hires service firms on the other side of the border. To be sure, trade has not always been smooth, but NAFTA includes conflict arbitration clauses that have resolved conflicts, and which have been activated less and less as time went on, a testament to how easy trade has become.
Only a complete idiot would call this treaty a disaster and try to withdraw their country from it.
Which leads us of course to the USA electing a complete idiot who called this treaty a disaster and is trying to withdraw his country from it.
Negotiations have started; the opening round wrapped up in Washington last week, with the next one taking place in Mexico in early September, then in Canada in late September, and on and on like that. This first round was mainly opening statements and declarations of intents, and is reported to have been quiet and friendly. A joint statement at the end of that meeting stated that all three countries are interested in modernizing the now 23-year-old treaty. By contrast, the tiny-handed orange Nazi tweeted that negotiations were difficult and unlikely to succeed, and that termination is very probable. Most people ignored that tweet, save for Hamilton mayor Fred Eisenberger who mocked him for it.
So what’s at play? As with any negotiation, each country has a different agenda. As far as I know, these are the top priorities:
CANADA:
• An exception to the “buy American” policy in US government contracts to include Canadian goods and services, opening up a lucrative new market.
• New ‘progressive’ chapters in the agreement to focus on labour safeguards, environmental protections, gender equality, a new investor-state dispute settlement process, but most notably a chapter dedicated to Indigenous people.
USA:
• Abolishing Article 19. That’s the third-party arbitration clause which was originally fought for by Canada, and subsequently used to resolve several disputes, in particular with regards to softwood lumber, to their benefit. US companies, in particular in softwood lumber, hate that one. But with the WTO now in place and regulating trade disputes (that did not exist back in 1994), it may not be the victory US companies expect.
• Stricter country-of-origin regulations on the auto industry. One of the major hallmarks of US manufacturing and also one of the major pieces of the US trade deficit is car manufacturing, and a country-of-origin rule would require a certain proportion of the car’s construction to be done in the USA. To be fair, that rule was also part of the original NAFTA, but did not cover the car’s electronic systems, which were a minor thing back in the early 90s. That’s one thing the USA wants to change. Worthy of note, all major US auto makers have come out against this idea.
MEXICO:
• Mexico has been most vocal about wanting these talks to be done and the new treaty signed by 2018. The current Mexican government is pro-business, but next year they are heading into an election with a new candidate (term limits prevent the current president from running again) facing off against a left-wing opposition. The last thing they want is uncertain and slow trade negotiations with a hated US president who called their people criminals and rapists dominating the headlines during their campaign. They want these talks over and a shiny new treaty to campaign on. But we cannot overstate that this is an unprecedented fast pace to negotiate an international trade treaty; these things usually take years.
• Mexico also wants new regulations of cross-border investment and protection of intellectual-property rights. None of those issues were part of the original NAFTA, mainly because they were not international issues back in the 90s.
Last week the three nations agreed to a confidentiality agreement surrounding the negotiations, a standard practice. That does mean news about the talks will slow to a trickle. So I figured a thread to share info, debate the issues, and discuss the rumours, will be interesting.
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In some years there's a Republican or two looking for the super racist vote that throws that in too. The difference is one actually won this time. However, I don't know that he's competent enough to actually get anything done. NAFTA is the law, as treaties are considered equivalent to federal law. Trump can't unilaterally change it, he can only present it to the Senate. If Trump wasn't courting Nazis actively maybe he could pull a Brown or Sanders but his own party would likely not support any major tightening in trade.
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So of course I expect that's what Trump and co. will try to do.
I've asked this in other threads and done a bit of googling without a clear answer: can he even actually do this unilaterally? I thought treaties when ratified by Congress are settled law and any amendment or departure from it will also require a vote in Congress?
I personally, think the Mexicans have zero interest in signing a new treaty with Trump. By pushing for a 2018 deadline, they ensure that this will fall apart. Either they don't think Trump will make good on his threat or are confident that Congress will swiftly kick him the balls so hard that he is unable to follow through. I think the Canadians figure this is a great way to try to push for maybe getting a better deal, but not really caring if things fall apart. Sadly, the US is currently run by idiots. I'm sorry rest of the world, I didn't vote for any of these dumb fucks, but a bunch of my fellow citizens are morons.
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You're dealing with Trump and a chickenshit GOP. I'd wager your best likely outcome would be that the status quo stays until the adults are put back in charge and people can make a good faith effort at making a real treaty. Worst case is Trump throws a tantrums and tries to carry through with his threat (we're all kind of fucked regardless of whether or not the court recognize him have the authority to unilateral withdraw from US treaties, the wealthy investors will shit a break and go into hyper panic mode at that point).
The Paris accords have no real enforcement mechanism and weren't ratified by Congress
-Indiana Solo, runner of blades
Eh, most new free trade treaties (at least by Democrats) do have stronger labor parts &c. You can only negotiate so much, so while signalling is always overplayed in campaigns reversal seems a bit strong.
I thought it was basically the CanPol thread cuz NOBODY ELSE CARES. :sad:
Sure the GOP will come out against Trump, but from my limited research this would be the first time that someone would have given enough of a shit to challenge the POTUS on unilateral withdrawal from a treaty. I think there was at least one case where it happened IIRC but not one cared enough to seriously challenge it and it didn't have major economic ramifications. So if Trump sent in the paperwork to do withdraw, we'd very much be in uncharted territory. I think given how the process works, the courts would likely agree that Trump can fuck off because he has no such authority to unilaterally withdraw. I mean we require 2/3rds of the Senate to approve it, seems kind of dumb that they could approve a treaty in like December before a new President is sworn in, but that new POTUS is really petty and immediately withdraws because they want to shit on their predecessor's legacy. Plus, it calls into doubt the US's ability to be a good faith actor if people have to worry about us elected dips shits like Trump, that withdraw from treaties on a whim, again 2/3rds of the Senate being required indicates that the founders intended treaties not be things handled on mere whims. Finally, I imagine there would be real concerns about corruption, particular meddling hostile actors using bribes to shoot down US treaties they find inconvenient.
The problem is this is very much in uncharted territory. Trump has already seated one scum bag of his choosing on SCOTUS and 4 of the current members already ignored one amendment. So it's probably safe to say that the investor class will lose it's shit if they believe Trump submitted the paperwork; especially, with how gutless the Republican party has been in responding to Trump's bullshit. For all they know, it'll happen (to be fair they panic over gnat farts and a fair chunk are just as ignorant as Trump). Not to mention the case would take time, time that we simply wouldn't have. It's essential the debt ceiling issue. Probably wouldn't' survive in court, but it doesn't have to survive court in order to royally fuck the economy.
Like I said, I would not be surprised if we say a US Constitutional Amendment come about because of this. Probably the easiest way to shut Trump the fuck up, if they could cite an amendment that spells out that he can fuck off here. I would love to be pleasantly surprised to see a better treaty, but with Trump being at the table, everyone should expect to see the status quo, since Trump will insist on something that the other two can't agree to.
Yes and no. My understanding is that the POTUS does have the authority to sign and withdraw the US from treaties, so yes he could unilaterally withdraw the US from NAFTA. But the provisions of NAFTA became US law through the NAFTA Implementation Act, which is a law like any other and therefore the POTUS cannot simply cancel out. Without changing the law, withdrawing from NAFTA would be mostly a symbolic move, and the practical effects and regulations of NAFTA would remain in effect. And changing the law would require Congress writing a new trade law that passes through the House and Senate and then gets to the Oval Office for signing. And with your current Congress, well, good luck with that.
There's a NAFTA clause that says he can send a letter to start a 6 month count down to terminate it. There's an argument that Congress has the power over treaties and this would exceed his Constitutional authority which only allows him to negotiate treaties
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Technically, the countdown is only until they are permitted to withdraw. Nothing automatically happens at the end of the 6 month period
Trudeau responds to Trump’s threat of ripping up NAFTA by laminating all trade deals
https://www.reuters.com/article/us-trade-nafta-produce-idUSKCN1BB39L?il=0
While that's true, I think Trump actually believes that protectionism is a good national economic policy. It's easy to think that - if you're having trouble competing with cheaper goods and services from other nations, an obvious and simple solution is to block access to your domestic market to other nations. And like all obvious and simple solutions to complex problems, it is disastrously wrong. But "simple" and "disastrously wrong" are as accurate adjectives for describing Donald Trump as "sexual assaulter", "Russian puppet", or "tax evader".
Canada pretty much has the right approach if one is concerned about a potential cheaper goods and services from another country harming the economy. You make it it harder for rat fuckers to initiate a race to the bottom, while racing the floor so that if they do start one, they can drag things down too far.
Two nice articles about the situation with Mexico, including some choice quotes about the popularity of making a deal with Trump:
Who knew that spending two years insulting an entire country and then sitting down at a negotiation table with them to hammer out a trade deal could backfire?
And if Trump thinks Mexico will cave for the sake of getting some scraps out of a bad NAFTA deal, well:
And now Trump finds out that international trade deals with foreign governments don't work the same way as ripping off a wedding planner.
I think I can guess what those same Republicans will do if labor standards are brought up in a negotiation.
Is that really the case? I've often wished the U.S. linked trade restrictions to how the trade partner deals with human rights, environmental protections, et cetera.
Yes, it is.
We have done so before. CAFTA, our trade deal with Central America, has provisions like that. But the clauses are meaningless unless enforced, and we've had essentially no appetite for actually pursuing them. Child labor, e.g., is endemic in the region, but we've pursued exactly one CAFTA enforcement action for labor conditions--against Guatemala, a country where trade unionists get murdered, and we lost the case in arbitration anyway.
Hopefully if the partner country (i.e. Mexico) is more interested in enforcement it will actually happen. But in general worker protection clauses in trade agreements are worth looking at with a jaundiced eye.
But so far everyone seems optimistic:
And, surprisingly enough, even on environmental issues it seems we may find some common ground. The USA may not believe in climate change, but it definitely believes in countries doing an environmental race-to-the-bottom to attract investments, and it wants rules to prevent that at least.
Could we, maybe not marry international trade agreements to individual administration politics of not one but multiple countries?
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That has got to be the stupidest idea I've ever heard. They want to deliberately insert economic and political uncertainty every five years? I know Trump has no idea how to run a business, but is there not a single person in his administration that has ever held a job?
Shit when I went down on a NAFTA status to the US that lasted 3 years. Are they going to limit that to the next renegotiation period?
I mean
exploiting avenues of uncertainty so they can hold the country hostage has been standard O.P. for the GOP for the last 8 years so
unironically, the answer is yes.
Sure, it's not as convenient and efficient, but it's safer.
We are. We're working on a free-trade deal with China right now, and 11-nation TPP talks are still underway.
I mean, even more than that.
A lot of trade is fundamentally geographic/proximity derived, and there really is nothing you can do about it.
Well there's the European trade deal too. And we are talking with south america so with the TPP and China that's pretty much everywhere except africa
Nah. This is Trump and his people. The most likely explanation is always that they are just fucking morons.
Trump is a nativist moron who doesn't understand trade. He hires people who think the same.