Trump softens stand on NAFTA, agrees to renegotiate

Abolishing the trilateral deal may give US businesses a fatal blow

The Dollar Business Bureau

In a recent telephonic conversation with the Canadian Prime Minister and Mexican President, Trump agreed to renegotiate NAFTA instead of scrapping the trilateral trade deal.

On his twitter account, he stated, “I received calls from the President of Mexico and the Prime Minister of Canada asking to renegotiate NAFTA rather than terminate. I agreed – subject to the fact that if we do not reach a fair deal for all, we will then terminate NAFTA. Relationships are good-deal very possible!”

Many on either side of the border are breathing a sigh of relief as Trump softens his stance on termination of the deal which is more than two decades old. However, Trump continues to stress that the deal was beneficial for Canada and Mexico, while it was disastrous for the economy of USA.

A recent trade spat between USA and Canada over lumber imports from Canada resulted in Trump ordering a 20% duty on Canadian lumber imports, which is likely to increase the cost of housing in America.

While masses of blue-collar labour are pushing for global supply chains of American corporations to be localised, many exporters within the US are relieved that the treaty enabling their cross border trade is not going to be abolished overnight. The building pressure from business community will force Trump’s administration to refrain from taking such drastic measures.

While stepping out of Trans Pacific Partnership (TPP) was relatively simplistic, given that the treaty was still in the process of ratification, ditching NAFTA is going to present complex issues as the fate of many stakeholders is linked to the outcome.

In the light of how e-commerce has shaped the global marketplace, NAFTA needs to be upgraded to account for the kind of online trade that flourishes in the new millennium, but making amends purely for retaliatory motives to make cross-border trade expensive is akin to stepping on one’s own toes – given how dependent the American consumers are on imports.

The Dollar Business Bureau - May 06, 2017 12:00 IST
 
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