The North American Free Trade Agreement, or NAFTA, was an agreement between the United States and Canada that commenced in 1989. In 1991, Mexico entered a bilateral agreement with the U.S, which Canada joined in 1994. According to the Office of the United States Trade Representative, “tariffs were eliminated progressively and all duties and quantitative restrictions, with the exception of those on a limited number of agricultural products traded with Canada, were eliminated by 2000.” The second round of the NAFTA talks are expected to be completed by the end of this year. However, each party to the agreement has diverging interests which have been delaying the progression of the talks.
As the second round of the NAFTA talks approaches, there are a number of topics set to be discussed on the agenda. One of the most significant set backs of the agreement, however, is President Donald Trump’s threats to leave the pact earlier this year. Trump has on numerous occasions labelled NAFTA as the “the worst trade deal in the history of trade deals” and the actualisation of such a threat could have significant ramifications for the future of the NAFTA agreement. While one of the biggest points of contention surrounding the progression of this agreement is Canada’s reluctance to apply any major changes to the deal; Canada benefits significantly from the deal as it stands. The negotiators involved in the second round of these talks have stated, “We do not expect any major breakthroughs or major developments in this round. We really don’t.”
The major concern with the break down of NAFTA is that it will have significant implications for Mexico, more so than the other two states involved. Being party to the agreement allowed Mexico to increase its trilateral trade by $1 trillion annually. However, while Mexico will be most affected by the end of the NAFTA agreement, it will also have certain effects on the U.S and Canda too. As Reuters reports, “If NAFTA collapses, costs could rise for hundreds of billions of dollars of trade as tariffs are brought back. Free-trade lobby groups say consumers would be saddled with higher prices and less availability of products ranging from avocados and berries to heavy trucks.”
Should the United States pull out of the NAFTA deal, the effects felt among all three parties will be of a considerable magnitude and will perhaps have an effect on the wider global community. Trump’s threats could very well mean that the second round of NAFTA talks may end in the agreement as we know it, and this begs the question; what can be done to prevent this? Evidently, one of the issues at the forefront of this debate is the unwillingness of Canada to finish these negotiations in a timely manner. If the NAFTA agreement is to remain on foot, it is imperative that Canada takes a more active role in engaging with the negotiations to ensure the U.S’ participation, and consequently Mexico’s involvement in the agreement as well. As Mexico has threatened to walk away from talks if the U.S withdraws themselves from the agreement, NAFTA is currently in a volatile position.