NAFTA Update: Nobody Has Any Idea What's Going On

In case you haven’t kept up with the coverage on the renegotiation of the North American Free Trade Agreement, things haven’t gone well. Despite wrapping the latest round of talks in Washington on Friday, negotiators have made no clear progress on updating the trade deal. Considering a new deal is supposed to be finalized by the end of March, it’s beginning to look as if the NAFTA revamp might be doomed.

The biggest issue crippling the talks continues to be regional-content requirements for cars to qualify for NAFTA benefits. Both Mexico and Canada have described the U.S. content proposals as “unworkable.”

“People have to be planning for what they do in a worst-case scenario,” Robert Holleyman, a partner at Crowell & Moring and the former deputy U.S. Trade Representative under Barack Obama, told Bloomberg. “At the same time, I’ve never seen industry more involved across all sectors in making the case that the U.S. needs to come out with a NAFTA that allows all three countries to declare victory.”

The United States is dead-set on narrowing trade gaps, especially with Mexico, and sees the content origin requirements as an essential part of ensuring a more equitable exchange. President Trump has said he would withdraw the U.S. from the agreement entirely if the gap in trade was not fixed.

Republican lawmakers, including Senators John Cornyn and Ted Cruz, have asked Trump not to abandon NAFTA as Democratic representatives have requested protection for U.S. workers. However, whether either side has the ability to actually stop him from leaving the accord is unknown. “History suggests it would be very challenging for Congress to muster the will and the energy to forcefully counter that,” mused Holleyman.

However, with no real progress made, it’s becoming increasingly difficult to envision a different outcome. The United States doesn’t seem interested in softening its demands and has been critical of Mexico and Canada for not participating earnestly. During the previous round of ineffectual discourse in Mexico, U.S. Trade Representative Robert Lighthizer explained his goal was to “rebalance” trade on the continent and requested that Mexico and Canada begin engaging in a “serious way.”

The next round of talks will take place in Montreal from January 23rd to the 28th. They are likely to become the defining moments for NAFTA’s future.

[Image: NAFTA Secretariat]