As high-levels meeting continue, President Trump seems pleased with the progress of the new NAFTA deal. Talking to the French President Macron, who is on an official visit to Washington, Mr. Trump said: “Nafta as you know is moving along. I could make a deal very quickly, but I’m not sure that’s in the best interest of the United States. We’ll see what happens, but we’re doing very well.”
Mexican Economy Minister Ildefonso Guajardo and Canadian Foreign Affairs Minister Chrystia Freeland were both in meetings this week, trying to get the deal done before elections, which are scheduled in both countries. The US is also trying to resolve the issue before the trade mission to China. They have been pushing for an early May conclusion, and to have the deal approved by Congress in November. Moises Kalach of Mexican business chamber feels that if the agreement isn’t reached soon, it is best to postpone it until elections are over, although he estimated a 75% chance that the deal will be struck in the next 10 days. Currently, there are nine or ten topics that are ready for ministers’ approval, after being hashed out by the negotiating teams.
Automotive rules of origin, one of the toughest issues on the table, still remains open, as American side is trying to boost its manufacturing industry, but their proposal could wreak havoc on existing supply chain. Freeland feels that this is a lynchpin for the entire deal and has praised Americans for “creative thinking” which has sped up things considerately. Other major obstacles include a sunset clause and the dispute resolution process, both crucial to the success of the entire endeavor.
Another reason for trying to close the deal as soon as possible is the upcoming presidential elections in Mexico, where Andres Manuel Lopez Obrador, a leftist candidate, is leading the polls. Mr. Obrador has voiced concerns over the country’s oil industry and an airport under construction, both of which can have an impact on the NAFTA deal.
Eric Lascelles, the chief economist for RBC Global Asset Management in Toronto, says that NAFTA is very important for all three countries and should be negotiated as soon as possible. “If NAFTA dies, protectionism increases inflation and that is not good for the bull story,” he said for Forbes. “You’re stuck with several negative consequences because inflation acts like a tax and it obliges the Fed to tighten. It would be a worse case scenario and you would face the real risk of a sudden recoil. Will we see tax cuts giveth and protectionism taketh away? I’m still hopeful.”