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Time Is Running Out For Old And New NAFTA Deal

Above Photo: Flags of the U.S., Canada and Mexico fly next to each other in Detroit, Michigan, U.S. | Photo: Reuters

Even though a deal was reached in 2018, the USMCA has not been ratified by any of the three countries, which means the trade framework is still at risk.

Back in December 2018, U.S. President Donald Trump gave Congress a six-month ultimatum to approve the newly signed “United States-Mexico-Canada Agreement” (USMCA), yet as elections loom closer and tariffs disputes continue the chance of the countries ratifying the pact this year are receding.

Even though a deal was reached in 2018, the USMCA has not been ratified by any of the three countries, which means the trade framework is still at risk. “The USMCA is in trouble,” assured former Mexican deputy foreign minister for North America, Andres Rozental.

Speaking to reporters on Dec. 2, 2018, Trump said he “will be formally terminate NAFTA shortly,” adding that the U.S. Congress can choose between the United States-Mexico-Canada Agreement or “pre-NAFTA, which works very well.” If Trump did dump NAFTA, the nations would revert to trade rules in place from 1994.

As tensions continue in North America, the delay and Trump’s threat could lead the “new Nafta” to become hostage to electoral politics, as the renewal of the trade agreement was one of Trump’s main campaign promises. The U.S. has its next presidential race in 2020, and Canada holds a federal election in October 2019.

The uncertain path lies in the hands of the Democratic-majority House of Representatives, who do not favor the deal. “We have a president who’s much less pro-trade than the Republican consensus has been historically, and Democrats do not appear as enthusiastic about working with this president,” said Senator Pat Toomey (R-Pa.), a member of the Senate Finance Committee, which has jurisdiction over trade agreements.

Canada’s Parliament is also roadblock, as current legislators only have a few weeks work left before the start of the summer recess in June, and members of the new Parliament would have little chance to address ratification until 2020.

This has been exacerbated by unresolved labor terms and tariffs, which are the main issues at hand. U.S. Democrats have threatened to block the USMCA unless Mexico passes legislation to improve workers’ rights, a demand shared by the Canadian government. A bill already in Mexico’s Congress to strengthen trade unions should be approved this month, the government said.

Yet the dispute on international tariffs on commodities and goods might be the decisive factor. Canada and Mexico are seeking exemption from U.S. tariffs on global metal imports imposed last year, as these were not included in the agreement.

However, Trump on Thursday threatened to slap tariffs on Mexican auto exports unless Mexico does more to stop drug traffickers and illegal immigration. While Mexico’s government announced that soon it will present a new list of potential U.S. imports to be targeted.

Mexican deputy economy minister, Luz Maria de la Mora, added that “all options are on the table,” in regard to her government deciding to not ratify the deal if metal tariffs are not addressed. While Canadian officials say they fear that if one part of the treaty was reopened, it could spark clamor for other sections to be renegotiated as well.

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