Trump is bound and determined to have his way in NAFTA negotiations whether or not anyone agrees with him. Ironically, not even the auto manufacturers do. The first round of negotiations, now underway, has hit a snag already. The meaning of “substantial” is in play.
The Wall Street Journal reports U.S., Canada and Mexico Wrap Up Nafta First Round.
Opening-round talks to remake the North American Free Trade Agreement revealed early fissures dividing the U.S. from Mexico and Canada, including a Trump administration proposal to require a “substantial” portion of autos and auto parts produced under the pact be made in the U.S.
The renegotiation of the trade deal, which was one of President Donald Trump’s main campaign promises and a key pillar of his “America First” agenda aiming to revive U.S. manufacturing and reduce the country’s trade deficit, is likely to face many hurdles. Auto makers in all three nations generally oppose the stricter rules floated by the U.S. negotiator, and pro-business lawmakers in Congress don’t want to see the pact significantly altered.
Early tensions over areas such as the so-called rules of origin—a major issue for the automotive industry—signaled the tough bargaining that lies ahead as the three nations try to wrap up a deal by early next year.
The chief U.S. negotiator, Robert Lighthizer, came into the talks Wednesday saying the U.S. would insist on tightening the rules of origin, and adding a provision covering U.S. production, an idea quickly dismissed as unworkable by Mexican and Canadian officials.
At this early stage of the talks, it is difficult to measure the depth of the disagreement. Opening rounds generally set the tone and schedule for negotiations. The U.S. has yet to release specifics on some of its most controversial positions, including measures to reduce the U.S. trade deficit, prevent currency manipulation, favor U.S. companies in government contracts, known colloquially as Buy America, and rework rules governing arbitration panels.
The U.S. feels that its most significant leverage in the talks is Mr. Trump’s threat to withdraw from Nafta if the U.S. doesn’t get the changes it wants. North American trade is far more significant to the Canadian and Mexican economies than it is for the U.S.
Mexican negotiators say they are prepared to scrap Nafta rather than accede to demands they consider harmful to their economy.
What’s the Best That Can Happen?
That’s a softball question. The best thing that can possibly happen is the trade talks collapse and Trump backs down on his promise to revoke the deal.
Nearly as good would be minor tweaks that don’t really do anything. One might even argue this is a better alternative as it would allow Trump to save face while bragging about nothing.
What’s the Worst That Can Happen?
The worst is the trade talks collapse, Trump abandons NAFTA and starts a global trade war.
I suspect there will be trivial to non-trivial but not devastating changes.
Given Trump’s propensity to back down, reverse course, or change his mind on a second’s notice, literally anything is possible.
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- Killing the Trade Golden Goose: Farmers Rattled by Trump’s NAFTA Rescinding Plans
- Lose Lose Lose Affair: Farm Lobby Turns Up Heat on Trump Over NAFTA
An ideal trade agreement can fit on a napkin: Effective immediately, all tariffs and all subsidies, on all goods and services ends today.
Mike “Mish” Shedlock
Trump, like any other socialist, thinks he can centrally plan America to prosperity.
Tony of Ca said:
I hate to break it to you, but economy is already very central planned. Do you really think are interest rates should be at effectively 1%? It’s time to wake up.
“Ironically, not even the auto manufacturers do. ”
The auto makers who drove their companies into bankruptcy and needed a massive federal bailout (still not repaid) not even seven years ago?
The auto makers who have off-shored nearly all manufacturing taking their jobs with them?
The automakers who want to produce cars with no labor laws and no environmental laws countries but yet want to import these products into America with little/no tariffs to destroy those companies who remained in America?
Consumers who could care less where their products are made and if they have a job.
Corporations will produce our products ANYWHERE we want them to. All we have ever had to do was say NO. Instead we would rather get the good deal, buy their cheap goods and pretend we are magnanimously supporting free trade in doing so.
Damn the people who give us what we ask for!
Your really think massive and powerful corporations don’t have total influence on politicians and give the corporations exactly what they ask for?
There is a reason not ONE banker went to jail in the last eight years.
I remember the vote for the original TARP. Congress was reporting they had significant voter contact on the issue and nearly ALL of it was against the bailouts .
Congress voted to approve it anyways…
And here we are.
I have no doubt that our government is bought and paid for largely. My point is simply that if we consumers had refused to buy imported goods, our corporations would have had no choice but to continue to produce domestically.
They made it easy by allowing US industries to fall prey to unions and lousy management, yet they seem to have enough wit to move off shore. They mae it easy by imposing ever greater costs on US manufacturers driving prices up while allowing imports in largely duty free. Sure, they lied to us, loaned us the money when our jobs fell behind, they made it easy…like they always do. It’s nothing new. We simply must wise up to where our interests lie…long term. Of course if you believe America is evil, if you believe that raising children into this world is a sin (and terribly limiting to your personal freedoms), and if you think you are entitled to purchase whatever you WANT, when you WANT it, then of course, who cares about the future?
Economics is ultimately the study of human behavior, what motivates us and what scares the crap out of us. There is little doubt they know these things about us. They spend more than half of their budgets marketing to us and trying to anticipate our next move. Ultimately they have been forced to not just anticipate our actions but to manufacture them, to create and direct markets to their goals.
The economy is not some irrelevant statistic, it is a direct reflection of who we are, be it natural or a Frankenstein monster. Ultimately money is not even real, it is an artificial construct created to make commerce and markets more “efficient”, and efficiency is a planned act, a preconceived contraption, not capitalism, not a market, not natural or human. It is an alternate non-reality, and like any illusion, has a limited life span.
“My point is simply that if we consumers had refused to buy imported goods, our corporations would have had no choice but to continue to produce domestically.”
Yup! People coming together is the ONLY WAY to bring politicians, corporate and government to their knees. You need to look no further than unions. But then this happens for the wrong reasons.
“They spend more than half of their budgets marketing to us”
And many times make false claims and when this can be passed on as reduced prices. But then we will not buy it probably and buy at higher prices from the company which advertises.
Looks like human beings exist for politicians, corporate and government to manipulate!
It all stops when debt stops being peddled or the consumers are so gorged on it they can’t shove anymore down their throats.
The Bank-Industrial complex work hand in hand and America becomes more indebted qtr after qtr.
Slow the debt merry-go-round and then what happens?
…and yet from my experience, with the exception of credit cards, it is almost always the borrower that actively seeks the lender.
Trade war is unavoidable. Trump a socialist? The political ignorance of the average person is nothing less than flabbergasting!
Stuki Moi said:
Running around believing economic actors exists to “provide jobs” for people, rather than to produce things as efficiently as possible, sure sound a whole lot more like Marx than Mises.
The whole point of government and the social contract in our system is to ensure the greatest benefits for the largest amount of people. Once you wrap your head around that you’ll understand what’s going on here.
NO. The purpose of OUR government, as outlined in our CONSTITUTION, is to preserve FREEDOM AND LIBERTY, NOT the assured redistribution of wealth to the “calculated” theorem of “greatest benefits to all”. Our revolution, our government, was formed in response to an overlord deeming justice as IT saw it. What do YOU value, liberty or an affordable Iphone? Trading our liberties for STUFF. And we laugh at the indians selling Manhattan for a few glass beads!
You’re wrong. Although Freedom and Liberty are concepts discussed in the Constitution, they are ambiguously defined. Some, those on the left/Democrats, assume that freedom and liberty are obtained via enforcement and regulation from the State, and some, on the right/Republicans promote free market capitalism as the solution.
In reconsidering NAFTA, Trump is looking to to make the US a stronger economy, for the betterment of this country’s people. It is certainly NOT our job to ensure the provide welfare for the entire population of Mexico, Canada or the world. And that is the role of the political leadership.
“Freedom” and “Liberty” are catchwords. Used by both sides. But Trump has concrete plans to tilt the playing field in our favor, and undermining him by pretending a NAFTA renegotiation is “anti-business” or anti Free Trade is a bunch of crap, and the words “Freedom” and “Liberty” are meaningless in this context.
And who wrote this social “contract”? I’ve not seen it and surely have not been asked to sign it or in any way confirm my commitment to it.
It’s called the Constitution of the US of A.
Tony of Ca said:
I’m sorry Roger; but we have all been socialist for some time.
I would agree that the best that could happen would be minor updates with Trump claiming a “major, major, I mean this is a Yuge win for America, people, it’s just the best deal, It’s going to mean jobs, jobs, jobs, a whole lot of jobs I tell ya, I’m so proud I got this done, didn’t I tell you I’d get this done, so many jobs, it’s just the best, I’m so proud”.
That may be the best. But a small step in the right direction.
And it will set-up the REAL trade talks coming with the EU/China/Japan – that the years of obama screwing the American economy/workers are over.
Baby steps. Let’s see if NAFTA can be updated first. If it all falls apart, that could be the black Swan event that triggers a trade war and economic recession. Hopefully negotiations will be successful.
The art of the deal is to always ask for more than you know you will get, to compromise for only half….which in never-Trump land is FAILING according to our pundits.
And YES, renegotiated trade deals will have losers, but how come we seem to ignore all the losers that our current trade deals create? I have watched for years as politicians have bragged about their amazing new deals, showcasing the winners, while completely ignoring the fact that our overall trade deficit GREW, YEAR AFTER YEAR.
We want to pretend that getting our brains beat out, that rising deficits and debt, countless wars ultimately driven by economic considerations, while telling us this is NOT a trade war. Just because it is undeclared from our perspective, does not make it not true. Our oppressors in trade will always deny their abuses, pointing out that we only get what we deserve. And as with everything else we are losing currently, our only excuse for not resisting is that we fear losing even more. This is not all that hard really, but as long as the remaining winners PAY for their protection, and we are extended unlimited credit to purchase what we cannot afford to buy, everything is simply GREAT!
America has been the loser on so many trade deals and “environmental” agreements that world expects America to always to be the loser in these deals.
Kinda the same way NATO expects America to pick up 80% of their costs.
The gravy train is coming to an end. And the people who have benefited so long from screwing America don’t like it.
When America was still a nationalist nation, what was good for GM WAS good for America because GM was American, owned by Americans. With globalists in charge of our government, and progressives in charge of every bureaucratic division of government, costs have gone through the roof, making it easy for corporations to sell the notion of foreign goods importation. While many of us seek the protection of borders and trade laws, those running our corporations and government could care less. They are citizens of the world. They can go where they wish, live where they wish, do as they wish while everyone at home can go to Walmart for entertainment.
Ultimately we can depend on NONE of them to work in OUR self interest, which is why we should be doing it, always be doing it.
It is tearfully sad to see AntiFa out in the streets begging for their tyranny, pleading for bog gov to come to their aid, creating safe spaces for one and all (well not deplorables…no that won’t do). People are suicidal. They are not nearly so ignorant as they would pretend. They know what they are doing and they just don’t care. They are raised to want and to believe they deserve, and they just can’t turn that off.
“Credit” the magic word. It drives it all and without it factories, wherever they are, will be silent.
NAFTA screwed us on the front end and the back end.
We lost millions of jobs to Mexico.
The poorest of their poor illegally saturated our country looking for a handout.
If Mexico refuses to play ball and make it a fair agreement that benefits ordinary Americans I’d be totally in favor of walking away. I’m fed up with being taken advantage of by a 3rd world armpit to the south so the corporations and the brokers (politicians) make out like fat cats.
No respect? Bring on the trade war.
Mexico – tax take not recycled into society = encouragement to migrate.
Bank-Industrial complex needs credit expansion to continue.
US receives more migrants.
US becomes more indebted.
Banks and Corps shareholders smiling having played everyone involved for what they can get.
Is this sustainable?
“Pro-business” lawmakers of Congress? Really? This is a great example of garbage journalism that goes on in the US these days. The implication that somehow renegotiating NAFTA is “anti-business” is being made here when even Mexico and Canada accepting going in that NAFTA needed to be updated to reflect today’s new realities. I’m sick and tired of seeing uninformed pundits making up news with no basis in reality.
The US side is being led by people who have experience both taking advantage of the existing agreements as well as being harmed by them – people FROM business. Business people. Are we to now take congress-puppets words as more informed than those people? Congress-puppets whose job is to reflect their individual constituency as opposed to the benefit of the country at large? I think not.
The ‘best’ that can happen, I’m sorry to say, is that the US gets everything it wants. The notion we continue with a broken trade agreement that harms the US is asinine.
The ‘worst’ that can happen is Trump gets torpedoed by people who completely misunderstand what the goal is here.
You assume that a trade agreement that “gives America everything it wants” would be agreed to by Mexico and Canada. That’s obviously not going to happen. Trade agreements happen because they are beneficial to all parties. Otherwise they would not happen at all.
NAFTA has been tweaked many times already and most likely will be tweaked again this time. The only difference this time is that Trump is making a big deal out of it and will claim a big win to boast to his supporters. The fact that Trump says it was a bad deal is just political bs so he can say he fixed it.
Mexican and Canadian negotiators will tell their constituents that they are satisfied with the results, and there was appropriate levels of “give and take”, or “win and lose”. But most importantly, they won’t sign a deal that isn’t beneficial to their countries.
Similarly, the US won’t sign a deal that isn’t beneficial to the US. Just like in the past. Only this time, Trump will say it’s a big win for the US.
The worst that could happen would be Trump insisting that “America gets everything it wants”, causing the agreement to collapse, a trade war, and a significant recession throughout North America. I know that there are some on this site who believe America can win a trade war. These same folks probably think America would also win a nuclear war.
Reblogged this on World4Justice : NOW! Lobby Forum..
Trump is a negotiator; so of course he went in with a strong position. I’m sure he knows he will have to compromise at some point; he is also pragmatic. We’ve had that “giant sucking sound” all these years as predicted by another businessman who could have been a good president. I’m glad Trump is trying to do something for the American worker and trying to keep his campaign promises.
Of course the auto manufacturers are against renegotiating or exiting NAFTA. That would drive up their labor costs sharply and the origin rules would drive up their materials costs. That would be bad for the CEO and shareholders. It would also be bad for anyone who received any lobbying dollars from the auto manufacturers, ie Congress.
You can bet the same people who approved billions for auto manufacturers eight years ago (and because Americans insist on sending the same people back to DC year after year, they are many of the same people) will be against NAFTA renegotiations today. That’s the opinion they are paid to have.
The justification used by Congress and President Obama to bail-out the auto companies was to save millions of jobs. How will Congress convince the American people that President Trump is wrong when NAFTA has transferred millions of jobs out of the US? And the automotive industry just one part of the millions of jobs NAFTA affected.
Conscience of a Conservative said:
the whole thing is ridiculous. we’re about to have a revolution in autos embracing smart cars which will totally change manufacturing, parts and content and Trump will be focusing on how cars used get built and hobble an industry in the process. the out come will be an american car company less and not more able to compete globally.
Victor Adam Smith said:
You won’t see this in the MSM – but Merkel’s statement today, albeit against the backdrop of political survival, is another stark admission that Germany is retreating from the Paris Climate Treaty.
The fact that Merkel would be attempting to spin Diesel fuel as an Eco-friendly fuel source is beyond laughable. Germany is reliant on diesel fuel which is created from heavy-grade oil; not refined light sweet crude. The majority of the heavy oil used within Europe comes from Libya and North Africa energy development contracts……..
Who would purchase an affirmative action BMW?
Just read that since the US imposed duties on Canadian softwood lumber, US homebuilders have dramatically increased lumber imports from Germany, Austria, Romania, Russia, and Sweden. US lumber producers are getting 20% higher prices, while homebuilders are paying 20% more for the lumber going into homes that American consumers buy.
One US industry wins while another loses, and consumers end up paying more.
These “free trade” agreements since 1980s are nothing more than government-managed trade to find buyers of US debt bonds in return for offshoring family-supporting jobs.