Despite the Trump administration’s frantic last-minute efforts to hammer the NAFTA agreement, the attempt failed within the US timeline, so the talks continue. Why is the revised deal so important to the White House?
Last Friday, the trade talks between the United States and Canada broke off without an agreement.
The negotiations on the revised North American Free Trade Agreement (NAFTA) are not over, however. The talks continue and US Trade Representative Robert Lighthizer will meet again Canada’s foreign minister Chrystia Freeland.
Trump’s art of the deal
In the past year, the US and Mexican negotiators have been able to agree on a tentative outline for a new pact. The two also claim progress in the so-called “rules of origins” for automobiles, which govern how much of a car must be made within the NAFTA countries to avoid tariffs.
According to current rules, any car sold in North America that includes 62% of parts made within the region are exempt. However, the Trump administration wants to raise the figure to 75% hoping that more parts would be made in the U.S.
The current talks remain focused on agricultural issues, particularly the dairy industry. President Trump has called Canada’s dairy regulations protectionist and harmful to U.S. dairy farmers. In reality, both countries have their subsidy systems. Canada’s dairy sector operates under a regulated supply management system, whereas the U.S. government supports dairy farmers directly. Reportedly, U.S. support equaled 73% of U.S. dairy market returns in 2015.
In the dairy industry, the subsidies will artificially maintain lower prices, which effectively deter more competitive dairy industries, particularly from emerging and developing markets. In the automobile industry, the new NAFTA will increase the costs of cars sold in North America, which, in turn, will reduce offshoring, disrupt the ecosystems of car producers and translate to higher prices to consumers.
