Talks to overhaul Nafta at risk of failure: Experts

US President Donald Trump said on Wednesday tough negotiations were ahead on the North American Free Trade Agreement but a deal was possible.
US President Donald Trump with Canadian Prime Minister Justin Trudeau at the White House in Washington on Wednesday. Speaking to the media during Mr Trudeau's visit, Mr Trump said of the Nafta talks: "It's possible we won't be able to make a deal, an
US President Donald Trump with Canadian Prime Minister Justin Trudeau at the White House in Washington on Wednesday. Speaking to the media during Mr Trudeau's visit, Mr Trump said of the Nafta talks: "It's possible we won't be able to make a deal, and it's possible that we will."PHOTO: REUTERS

US' unpalatable proposals to Mexico, Canada a concern for other trade partners in Asia

Negotiations to overhaul the North American Free Trade Agreement (Nafta) seem headed for the rocks, analysts say, with US proposals unpalatable to Mexico and Canada.

Delegates from the three nations are meeting in Arlington, Virginia, this week for the fourth round to try to revise the 23-year-old agreement, which allows tariff-free trade across the three borders.

US President Donald Trump has criticised the trade pact for luring American manufacturing jobs to low-wage Mexico and has vowed to quit the pact or revise it to reduce his country's US$64 billion (S$87 billion) trade deficit with its southern neighbour.

Chief among the tough US proposals is a "sunset" provision that would force renegotiation of the trade pact every five years - undermining long-term business plans.

The US' other trade partners are nervously watching the Nafta negotiations, which are due to wind up with the last round in Washington next Tuesday.

In an e-mail, Mr Curtis S. Chin, a former US ambassador to the Asian Development Bank and a senior fellow with the Milken Institute, a non-partisan economic think-tank, wrote: "With Nafta now more than 20 years old, it could well use some revisiting and updating."

But he added: "President Trump played the role of 'the terminator' on the proposed Trans-Pacific Partnership trade deal.

"If jobs and businesses are going to continue to be disrupted, the President's approach makes clear his view that it is better to be the disruptor. That is also a message to Asia and other trade partners."

BETTER TO BE THE DISRUPTOR

If jobs and businesses are going to continue to be disrupted, the President's approach makes clear his view that it is better to be the disruptor. That is also a message to Asia and other trade partners.

MR CURTIS S. CHIN, a former US ambassador to the Asian Development Bank, referring to US President Donald Trump. SCAN TO WATCH Trump open to US-Canada trade deal.

Direct implications for Asian economies remained uncertain and would not be immediate. But, "clearly, Asian companies doing intra-North America business across US, Canada and Mexico borders need to be thinking through implications for supply chains and movement of products, services and people", Mr Chin wrote to The Straits Times.

Mr James Keith, a former US ambassador and managing director for China and South-east Asia at Washington-based McLarty Associates, told The Straits Times that there is unlikely to be action on trade negotiations with Asian partners until Mr Trump completes a visit to South-east Asia and North-east Asia next month. "There will be a tactical pause, and then pressure (to negotiate bilateral trade deals) will pick up again," he said.

Meanwhile on Tuesday, 300 American business people signed an open letter to Mr Trump, urging him not to abandon Nafta.

In a speech on the same day in Mexico City, US Chamber of Commerce president and chief executive Tom Donohue warned: "There are several poison-pill proposals still on the table that could doom the entire deal."

Trade with Canada and Mexico supports 14 million jobs in the United States, and over 125,000 small and medium-sized American businesses export to Canada and Mexico, the US Chamber says.

Various studies have estimated that while the benefits of free trade under Nafta have been mixed, the economies of all three countries have grown under the agreement.

A new study has warned that the US auto-parts industry could lose up to 50,000 jobs if the trade pact is terminated, and companies must pay higher tariffs to ship products to Mexico and Canada. The US auto-parts industry employs about 870,000 workers.

In an earlier statement, Mr Donohue said abandoning Nafta would create an "existential threat" to North America's national and economic security. "Our free-trade partners, in particular Canada and Mexico, are vital geopolitical allies in the fight against terrorism, transnational crime and illegal immigration. In these trying and complicated times, we must double down on these relationships, not drive them apart," he warned.

But US Trade Representative spokesman Emily Davis hit back, saying: "The President has been clear that Nafta has been a disaster for many Americans, and achieving his objectives requires substantial change. These changes of course will be opposed by entrenched Washington lobbyists and trade associations."

A version of this article appeared in the print edition of The Straits Times on October 13, 2017, with the headline 'Talks to overhaul Nafta at risk of failure: Experts'. Print Edition | Subscribe