From TPP to NAFTA: International trade in Trump’s America
Monday, January 30, 2017
When I wrote about the signing of the Trans-Pacific Partnership (TPP) in November of 2015, I concluded by asking where we would be in a year. At the time, the Canadian political landscape had seen the election of Liberal leader Justin Trudeau to replace Conservative leader Stephen Harper as the prime minister of Canada. A year later, the political landscape has changed once again, this time with the election of Donald Trump as president of the United States of America.
Trump certainly has not been shy about his "America first" platform, looking to boost the U.S. economy for the benefit of its citizens. In his inauguration speech, his declarations of buying American and hiring American spoke to his plans of renegotiating trade agreements within his first 100 days in office. Given what followed, he didn't waste any time getting to work.
Currently, in the United States…
On his first day in office, Trump signed an executive order to terminate America's involvement in the TPP, a trade agreement to open up global trading opportunities with 12 Pacific Rim countries. The TPP represented the greatest trading block of countries since the North American Free Trade Agreement (NAFTA) was signed in 1994, an agreement between Canada, the United States and Mexico.
When the TPP was signed in late 2015, many wondered what this meant for NAFTA, a true relic with some outdated terms. Some terms were modernized upon the signing of the TPP, although those have since been lost.
The New York Times reported that in signing to remove the U.S. from the TPP, Trump nullified the refreshed NAFTA. However, without the TPP in place for the States, NAFTA will live on.
The White House's website states that Trump is open to negotiating a new NAFTA agreement, although, "If our partners refuse a renegotiation that gives American workers a fair deal, then the president will give notice of the United States' intent to withdraw from NAFTA." CBC News notes that Trump has not threatened to end NAFTA altogether — this is likely a tactic to get cooperation from all parties involved.
How is Canada impacted?
Global News reports that renegotiation talks will "pose little risk to the Canadian economy," since the threats Trump made during his campaign were not directed at Canada. This provided some much-needed optimism for those entering negotiations.
Prime Minister Justin Trudeau spoke to this while he was in Saskatchewan recently. He recognizes it's too soon to see how things will go, but he plans to highlight the benefits of trade between Canadian and the United States.
After all, they need each other to make the agreement work. Because 35 states currently export their products to Canada, Trudeau does not feel that adding further barriers would help labour.
On the flip side, Saskatchewan exports 60 per cent of their agriculture products to the States, which could see a significant hit should tariffs be added. The agriculture industry is only one of many industries to be explored in an updated agreement — others include softwood lumber and dairy.
What about Mexico?
In Mexico, the focus is on the automobile manufacturing industry. Mexico has lots to lose should Trump get his way in his attempts to put America first.
When NAFTA was signed, several U.S. auto manufacturers relocated to Mexico. The cheaper labour provided by workers in Mexico resulted in thousands of jobs lost by American workers, which has allowed the Mexican auto industry to flourish over the last 20-plus years. The Boston Globe points out that since 1993, there has been a 679 per cent increase in Mexican auto imports.
And Mexico is not the only country that has caused issues for American labour. The outsourcing of jobs hasn't only benefited Mexico — the Globe goes on to state that China's growth results in 200,000 American jobs lost per year.
Given Trump's desire to "put America first" and negotiate a new NAFTA that benefits the States, Reuters says Mexico is a bit reluctant to enter renegotiations. What does this mean for their auto industry? How can they come to a mutually-beneficial agreement?
Officials remain involved in the process, in hopes that they will be able to parlay an updated NAFTA into further discussions on border security and immigration. However, Trump and President Enrique Peña Nieto of Mexico canceled a planned meeting last week amid rising tensions about a border wall between the countries.
What if Mexico leaves the agreement? Prior to NAFTA, Canada and the United States had their own trade partnership called the Canada-United States Free Trade Agreement. Should Mexico decide that a rewritten NAFTA no longer benefits their country, Canada and the United States will automatically default to this previous agreement, founded in 1987.
As of right now, we still face a bunch of speculation as to what will happen next. Negotiations will not result in immediate outcomes, and Congress' approval will still be required once an agreement has been reached.
The purpose of the TPP was to focus on breaking down trade barriers on a global scale. Now that this is no longer a goal for Trump's America, NAFTA's time in the spotlight has been renewed. With similar intentions, will each country be able to satisfy their own needs in a new agreement? We'll have to stay tuned.
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