NAFTA Update: January 23, 2018

CPTPP and NAFTA in 2018

Canada and the ten other CPTPP countries concluded discussions on the agreement today, January 23. Since President Trump withdrew from the original TPP, its future was uncertain. Canada had expressed serious concerns about the agreement in November, citing the culture and automotive sectors. Now, CPTPP is moving forward, with all eleven countries, including Canada, willing to sign the agreement.

In a statement from the Minister of International Trade, Hon. François-Philippe Champagne, he confirmed improved outcomes related to culture, automobiles, and intellectual property provisions. The CPTPP is expected to be signed by early March. CPTPP without the U.S. will likely be extremely beneficial for Canada, opening up foreign markets for Canadian products without increasing competition with American firms. However, the impact of CPTPP on NAFTA negotiations is debated. Some think it will create tensions with the U.S. and Mexico, while other see it as an essential move to protect Canada in the event that NAFTA negotiations fail.

On the NAFTA front, the sixth round begins today and will continue until Monday, January 29 after a controversial and pessimistic January. Unnamed Canadian government officials claimed that Canada increasingly expects President Trump to withdraw from NAFTA, but the federal government quickly worked to shut down these rumors, emphasizing that NAFTA negotiations were proceeding as expected. Simultaneously, U.S. Speaker of the House, Paul Ryan, said the biggest problem with NAFTA is Canadian dairy producers dumping low-cost products in U.S. markets. It is too soon to tell how this round of negotiations will unfold.

NAFTA negotiations are scheduled to wrap up in March, but this seems overly optimistic in light of the present status of trade talks. Crucially, the Mexican presidential election and U.S. midterm elections are fast approaching, leading some to ask if negotiations should be suspended until after both are completed. The Mexican election is scheduled for July 1 with inauguration on December 1 and the U.S. midterm elections are scheduled for November 6. They will impact 435 seats in the House of Representatives and 33 seats in the Senate. Suspending negotiations makes practical sense but it would delay the next round until 2019, an unattractively long timeline.