The next round of NAFTA talks are scheduled to take place on November 17-21 in Mexico City. Judging from the limited progress made thus far and the apparent rigid position of the United States on several key issues, it appears doubtful that any significant breakthroughs can be expected. With only one additional round scheduled for early next year, it now appears that the possibility of the U.S. pulling out of NAFTA could pose a significant threat to Canadian businesses. Although some would argue, this is all just more Trump posturing and bullying tactics to pressure Canada and Mexico to grant concessions to keep the deal alive.
No doubt, early 2018 will be an interesting and challenging test for the relationships within the North American triumvirate. Right now, there are many questions which are causing Canadian business leaders to adopt a “wait and see” approach on major investment decisions. Hopefully, the new year will bring some additional clarity to these questions:
- Does NAFTA survive, and if so, in what altered form?
- Will the primary focus of the U.S. be to reduce the significantly larger trade imbalance with Mexico, or will Canada face similar consequences?
- If the U.S. does pull out, will there be a move to revert to the former bilateral trade agreement between the U.S. and Canada, or will they seek to strike an entirely new deal?
- Does President Trump really have the authority to pull the U.S. out NAFTA without Congressional approval.
- Under NAFTA and over the past decade, the supply chain of the automotive sector has become highly integrated between the three countries, and some have suggested that this has preserved the global competitiveness of the North American automotive industry. What will the new landscape mean for the automotive sector, and Ontario in particular?
- Will the U.S. become more protectionist by imposing higher duties and tariffs on imported goods? How will this impact the competitiveness of Canadian companies doing business in the U.S?
- Will Canada retaliate by imposing higher duties and tariffs on American goods coming in to Canada?
- What impact will all this have on prices to Canadian businesses and consumers?