There’s a Darker Cloud Looming Over NAFTA and Here’s What You Need to Know

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Whether it will die or not die seems to be the question when it comes to the North American Free Trade Agreement, and recent signs appear to be pointing more to the former than the latter.

In the last week, the trio of NAFTA nations have been throwing stones at one another and the prospects of the deal’s failure has continued to rise.

On Wednesday, Canada filed a complaint with the World Trade Organization against the U.S., alleging unfair practices related to antidumping duties. Canada called on the WTO to review the United States’ practices, which it claims aren’t in accordance with WTO rules.

[Read more about Canada’s complaint: Canada Airs Concerns About U.S. Trade Measures in a Complaint with the WTO]

The U.S. shot back, with U.S. Trade Representative Robert Lighthizer saying that Canada’s “ill-advised attack” on the U.S. would only serve to lower U.S. confidence that Canada is committed to “mutually beneficial trade.”

In conjunction with that, news began to surface that Canada was convinced the U.S. is going to untangle itself from NAFTA in fairly short order. Following the reports, Canada refuted the hearsay, claiming it was inaccurate and reassuring the world that it’s looking forward to progress at the next round of talks in Montreal set for Jan. 23.

Regardless of how things shake out, Canada’s not prepared to be caught unawares.

“I think it’s our responsibility as a government to take [Trump’s] statements very seriously and to be prepared for every eventuality, which we are,” Canada’s foreign affairs minister Chrystia Freeland told the country’s Global News.

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Turning to Mexico, President Trump said last week that he plans to use the NAFTA negotiations to pay for the wall he wants to build along the U.S.-Mexico border. And he seems set on getting the wall built by whichever means necessary, whether via NAFTA or the DACA immigration bill deal.

In an interview with The Wall Street Journal last week, Trump said, “We have to have a wall. We don’t have a wall, we’re not doing the deal,” a published transcript of the interview noted Trump as saying in reference to DACA.

Tying the wall to NAFTA after DACA, Trump said: “You know, we make a good deal on NAFTA, say I’m going to take a small percentage of that money and it’s going to go toward the wall. Guess what? Mexico’s paying. Now Mexico may not want to make the NAFTA deal and which is OK, then I’ll terminate NAFTA…which I think would be frankly a positive for our country. I don’t think it’s a positive for Mexico, I don’t think it’s a positive for the world. But it’s a positive for our country because I’d make a much better deal. There is no deal that I can make on NAFTA that’s as good as if I terminate NAFTA and make a new deal. OK? But I feel that we have a chance of making a reasonable deal, the way it is now.”

Whether via NAFTA or DACA or any other acronym, Mexico—remaining steadfast in a position that it’s held since day one—said there’s no way it will be paying for a wall.

After a day of meetings in Washington Thursday, Mexico’s economy minister Ildefonso Guajardo wrote on Twitter: “The President of Mexico @ EPN has been very clear: Mexico will never pay for that wall.”

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It’s anyone’s guess how the next (and so far, what’s intended to be second to last) round of NAFTA talks will go now that tensions among the parties are very likely higher than they’ve ever been.

Talks have largely stalled thus far as both Canada and Mexico aren’t on board with U.S. demands to adjust rules of origin to set minimum levels of U.S. inputs, a clause that would see NAFTA time out and self-terminate after five years if it’s not renegotiated, and the elimination of a dispute settlement clause, which would repatriate dispute resolutions into the domestic legal system instead of turning it over to international arbitration panels.

Prospects for NAFTA aren’t exactly in the positive, and if the deal is going to go bust, it may not take all that long.

“There is a high probability, we put it at around 30pc, that NAFTA collapses in a few weeks’ time,” Marina ­Petroleka, an analyst at BMI Research, a unit of Fitch credit ratings agency, told the Telegraph. “The reason it is so high is that it is one of the few decisions that the White House, and specifically President Trump, can take unilaterally. It therefore becomes highly unpredictable.”

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