Will Trump change NAFTA, TPP, CETA?

North American Free Trade Agreement (NAFTA)

In 2015, important steps towards the conclusion of the TPP were made. But Trump’s election as the President of the US put a question mark about the TPP and the role the US played to make it materialise.

Donald Trump’s election followed the conclusion of a number of points for the Comprehensive Economic and Trade Agreement (CETA) to be signed between Canada and the EU. Yet during his electoral campaign, Trump made it clear to revise the clauses of NAFTA with a particular focus on Mexico, which is considered as an ‘economic enemy’.

But to revise the clauses of NAFTA will also have impacts on Canada-US economic relations as both countries have strong political, economic and diplomatic ties. Among issues which were discussed during Prime Minister Trudeau’s visit to the US in February are questions related to the NAFTA for more balanced economic relations, particularly trade relations between the US, Canada and Mexico. Even though Trump targets Mexico in the intended NAFTA reforms, he will indirectly touch upon agreements which link the US and Canada. Negotiations will go underway for the three NAFTA member countries to prepare themselves for fair negotiations which will take into account each member country’s economic and trade interests. For Canadian officials, the renegotiations of NAFTA’s clauses do not target Canada directly but rather Mexico, which is constantly blamed by Trump for unfair trade with cheap imports to the US and the delocalisation of US companies to the Mexican market.

While Mexico constitutes a source of cheap labour, a major import market for the US economy and production hub for American multinationals, Canada is also an important market for US exports and delocalisation of its companies. Therefore future negotiations under NAFTA will reshape trade and economic relations between the US, Canada and Mexico. While the main focus for such a manoeuvre by Donald trump is to save American interests, I hope Canada and Mexico will also come to the negotiation table with policies which will defend their interests and counter the US influence over the future of NAFTA. Yet on 20 April 2017, following Trump’s statement about Canada’s protection of its agriculture, dairy, fine wood and energy sectors, Trudeau responded that every country for a better reason protects its agriculture industry. He further stated that every country subsidies its dairy and agriculture sectors. These reactions from the US president and the Canadian prime minister already give us an idea about how difficult the NAFTA negotiations will be. Import tariffs will apply to Canadian exports of agriculture products, fine wood and oil to the US as Trump accuses Canada of dumping these products and thus affecting the US farmers and workers in the wood industry and the oil sector.

By the end of March, Trump’s administration had made a step forward for the NAFTA negotiations. The White House has already listed its priorities for the negotiations. The US interim trade representative Stephen Vaughn stated that most of the NAFTA chapters are outdated. Several sectors (agriculture, government contracts, tax, telecommunications) will be points of discussion between Canada, the US and Mexico. Trade disputes management and rules of origin will be highly considered too as the main driver of the negotiations is related to unfair trade with the Canadian and Mexican exports to the US.

Trans-Pacific Partnership (TPP)

The TPP has been thought to be one of the major transregional trade partnerships. The US strongly supported the TPP under Obama’s presidency. The main ideas behind such support were to counter China’s growing economic and trade influence in Asia as well as to foster commercial ties between the US and a number of Asian countries (even though countries like Canada, New Zealand join the TPP for instance). However, President Trump already claimed the US withdrawal from the TPP and does not see the US to support such a trade partnership. Even though Donald trump was harsh with China during his presidential campaign over unfair trade, delocalisation of American companies to China in search of cheap labour and production costs, news about the US withdrawal from the TPP, I am sure, will be very welcome for Chinese officials. But economic tensions will remain as the US and China have always fought over trade disputes. Yet in the trade report the US publishes every year, the new US secretary of commerce complains about poor negotiations for China’s access to the WTO. This is one issue among many others in US-China trade relations.

While major steps were made to finalise the TPP in 2015, Trump’s willingness to save American economic and trade interests are taken as a shock by other TPP members. It seems that the US is more interested in fostering bilateral trade deals with its partners in order to have easy control over them during bilateral trade negotiations.

The US has always criticised China for unfair trade but in a globalised market economy, companies search for low production and labour costs to move their businesses to places that can offer such opportunities, hence the massive presence of US companies in the Chinese market. If Trump wants to create jobs for Americans and promote the notion of consuming America-made products by Americans as he claimed during his electoral campaign, it will be hard for him to achieve such goals. The US economy is strongly tied to the Chinese economy as is the Chinese economy to the US economy. Protectionism and nationalism, as he put it in his own words ‘America first, Americans first’, was one of the main focuses of his electoral campaign. But in this more and more globalised world with economies tied together than ever before, it would be interesting to see how the US will navigate alone its trade and economic future.

Comprehensive Economic and Trade Agreement (CETA)

While Donald Trump is more and more fostering US protectionism since his election as president, EU-Canada economic relations are now more tied together than ever before. Yet the signing of the CETA in late October 2016 has been an important move for Europe and Canada to deepen their trade relations even though certain points and aspects under CETA still need further negotiations. In this era when the WTO is lingering and when global trade policies have become contentious, the signing date of the deal between the EU and Canada for the CETA to concretise was a good choice to counter Trump’s ambitions. While the TTIP is unlikely to materialise with negotiations not going further than expected between the US and the EU, consensus around the CETA is more likely to be reached between Canada and its EU trade partners.

But concerns do arise when one considers the number of American subsidiaries established in Canada. Many observers pointed out that US companies in Canada could use the CETA to sue European governments. In this case, the CETA will not constitute a deal to counter US protectionism under Trump but will extend trade disputes between the US and Canada to the EU. Therefore, it is likely that future NAFTA trade negotiations particularly between Canada and the US will jeopardize EU’s trade and economic interests with Canada.

* DAOUDA CISSÉ is an independent researcher based in Montreal. He was Postdoctoral Research Fellow at the China Institute, University of Alberta, Edmonton, Canada.

* THE VIEWS OF THE ABOVE ARTICLE ARE THOSE OF THE AUTHOR AND DO NOT NECESSARILY REFLECT THE VIEWS OF THE PAMBAZUKA NEWS EDITORIAL TEAM

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