May NAFTA deal? Fat chance, say analysts

It’s become an intriguing guessing game for trade analysts and a few media pundits: will a new North American Free Trade Agreement get done this month?

Or, is a May deal as likely as United States President Donald Trump taking a week-long break from Twitter?

Patrick Leblond, University of Ottawa associate professor of public and international affairs, said it’s possible that Mexico, Canada and the U.S. could agree to a deal in principle this month.

But such a deal is puffery because trade agreements are about specifics, not sweeping generalities.

“As most trade negotiators know, a deal in principle really doesn’t mean anything until the end. A trade agreement is a package deal… and the devil is always in the details,” Leblond said.

“It’s possible there could be some deal in principle… but in terms of actually a new NAFTA? We’re not going to see anything before 2019.”

Despite Leblond’s pessimism, representatives of Canada, the U.S. and Mexico are scheduled to begin another round of talks May 7 in Washington, D.C.

During the last six weeks or so, the mood around the NAFTA re-negotiations has been more positive, with politicians and observers saying that progress is being made and a deal is imminent.

In early May, U.S. Trade Representative Robert Lighthizer said it’s urgent to wrap up a deal in May for political reasons.

“If not, then you start having a problem,” Lighthizer said at a U.S. Chamber of Commerce meeting in Washington.

“I believe if we don’t get it done in the next week or two, then we’re on thin ice about whether it gets done before our (November midterm) election.”

If the Democrats regain control of the House of Representatives following the midterm elections, the thinking is it could be harder to ratify a NAFTA 2.0 in the U.S. Congress. There’s also the small matter of Mexico’s national election July 1, which could throw a wrench into the NAFTA talks.

There may be some merit to Lighthizer’s logic, but Leblond isn’t convinced that negotiators are actually close to a new NAFTA.

“In spite of high level meetings for a few days (in late April), nothing came out of it.”

Most of the discussions have focused on autos and the complex talks around what percentage of autos must be made in North America and how much workers must be paid to qualify as NAFTA region content.

Even if the countries reach a deal in principle around autos, many other difficult issues remain on the table, such as America’s proposal for a sunset clause, in which the deal is re-examined every five years.

“Then there are all those other issues, whether it’s labour or the environment, that we don’t know about,” Leblond said.

Other experts have also said that achieving a deal in the next few weeks, a genuine NAFTA 2.0, is not realistic.

“By some reports, the volume of outstanding legal text facing the negotiators would require about nine months of talks under normal circumstances,” said Laura Dawson, director of the Wilson Centre’s Canada Institute in Washington, in a Globe & Mail editorial.

Even if it was possible to complete a rushed deal, Canada and Mexico have little incentive to move quickly on NAFTA.

As Dawson noted in her editorial, Canadian politicians have said they won’t sign a deal that is worse than the present NAFTA.

Therefore, it makes no sense to sign a deal in principle before all the contentious issues are resolved.

Looking into his crystal ball, Leblond said it’s likely that low-level negotiations will continue through the summer and into fall, setting the stage for talks to finalize a deal in 2019.

Contact robert.arnason@producer.com

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