No fall-back deal in effect if NAFTA axed

With North American Free Trade Agreement negotiations faltering, it’s possible that the U.S. could walk away from the talks and kill the deal.

Should that happen, a few observers have said the original U.S.-Canada Free Trade Agreement would take effect. That would lead to negotiations between Canada and the United States to up-date that deal.

John Masswohl, director of government and international relations with the Canadian Cattlemen’s Association, isn’t buying that argument.

“I think that’s overly simplistic,” he said.

“If NAFTA is ripped up, the Canada-U.S. FTA from 1989 would also be ripped up. I think you have to assume if we’re going to do a demolition so we can do a re-construction, then we’re demolishing right down to the studs.”

The three countries formally began talking about NAFTA in August because U.S. President Donald Trump promised to rip up or renegotiate the deal during his 2016 campaign.

Representatives of Canada, Mexico and the U.S. took part in the fourth round of negotiations last month to update the 24-year-old NAFTA deal.

A number of analysts are concerned the U.S. is on track to terminate NAFTA because Trump continues to make unhelpful comments.

“If we cannot make a deal, it will be terminated and that will be fine,” he said in October.

As well, U.S. negotiators have put forward proposals that are untenable for Canada and Mexico, such as changing rules of origin around automobile manufacturing so half of all content comes from the U.S.

“I don’t know how many of these proposals there are, but there’s a stack of them,” Masswohl said.

“They all come from the perspective … to rebalance trade, so they (the U.S.) no longer have (a trade) deficit.”

Since many of the proposals are unacceptable to Canada and Mexico, some analysts have suggested that Canada should pursue a bilateral trade deal with the U.S.

Masswohl said it’s much too early to give up on the NAFTA negotiations, but the idea of renegotiating the Canada-U.S. FTA doesn’t make sense because NAFTA was an improvement to the older deal and changes have been made to NAFTA since 1994.

“To revert back to the original agreement from 1989, that needs a heck of a lot of modernizing,” Masswohl said.

Whether Canada is re-negotiating NAFTA or the old FTA, accepting a bad deal isn’t an option, said Don Buckingham, Canadian Agri-Food Policy Institute chief executive officer.

“If Canada doesn’t at least maintain its position, why would it sign a NAFTA 2.0 or an FTA 2.0?”

He said Canada would be better off reverting to World Trade Organization rules for trade, where there would be small tariffs on commodities and goods exported to the U.S.

Masswohl agreed.

“If somebody presents you with a win-lose scenario, you can’t accept being on a lose end,” he said.

“You’ve got to go ‘lose-lose.’ ”

Some trade experts may believe that NAFTA talks are headed for a “lose-lose” outcome but Masswohl isn’t in that camp.

It’s still early and there’s time to reach a NAFTA deal that is positive for all three countries and beef producers in Canada, he said.

“We (the CCA) are still pursuing suggestions on how to improve the border transaction, how to make trade better. I’m not giving up on that,” said Masswohl, who has decades of experience in trade and was the agriculture and trade counsellor at the Canadian Embassy in Washington before joining the CCA.

“Washington works on the basis of crisis, and this thing hasn’t reached crisis point, yet.”

When it does get to a genuine crisis, Masswohl believes the U.S. business community will storm Washington to defend NAFTA.

“They’ve done a little bit (of lobbying), but they are more or less keeping their powder dry.”

About the author


Stories from our other publications