August 31, 2018 / 10:21 PM / 3 months ago

Breakingviews - Delaying NAFTA deal is actually a win-win-win

A commercial truck exits the highway for the Bridge to Canada, in Detroit, Michigan U.S. August 30, 2018. REUTERS/Rebecca Cook

WASHINGTON (Reuters Breakingviews) - Delaying a revamped North American Free Trade Agreement is actually a win-win-win. Canada and the United States will keep talking despite missing a Friday deadline to conclude trade talks. Negotiators will need to move quickly to avoid the risk of fresh demands from the next Mexican government. But getting a deal that all sides can sell is more important.

The mood was tense on Friday as U.S. President Donald Trump acknowledged having told Bloomberg he wasn’t going to make any concessions to his northern neighbor. The United States had already shut the Canadians out of talks for weeks while it negotiated with the Mexican government. On Monday, Trump hailed a U.S.-Mexico deal on certain NAFTA provisions and threatened auto tariffs on Canada if it didn’t capitulate by the end of the week.

Ottawa and Washington also appeared to remain far apart on certain issues. Trump has slammed Canadian tariffs of up to 270 percent on dairy imports. Canada objects to the U.S. demand to eliminate dispute panels for anti-dumping complaints.

That’s why it’s encouraging that both sides will continue negotiations next week. The Friday deadline was set because of the 90-day notice period Congress needs before a deal can be concluded. Meeting it would enable Mexican President Enrique Peña Nieto to sign the pact before he leaves office at the end of November.

But the parties have some wiggle room because the deal text doesn’t have to be released until the end of September. Trump gave notice to Congress on Friday that a trade pact with Mexico would be concluded by the end of November, and Canada could join “if it is willing.” Yet Trump’s threat to do a deal with Mexico alone rings hollow because Congress has signaled it would reject a bilateral deal.

If they miss the text release deadline, NAFTA could then be subject to new demands by Andrés Manuel López Obrador, the Mexican president-elect who takes office on Dec. 1. AMLO, as he is known, has said he favors renewing the pact, but he’s an economic nationalist who could raise fresh issues. For all three countries, maintaining a trilateral deal is key to supply chains, production logistics and agricultural sales. It’s worth the wait.

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.


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