Donald Trump NAFTA Renegotiation Unnerves Canada

The Trump administration sent chills across North America’s spine this week after United States Trade Representative Robert Lighthizer notified Congress of the president’s agenda regarding NAFTA’s renegotiation in a letter. While President Trump has long decried the deal as unfair to American workers, the letter to U.S. lawmakers is the first concrete step taken towards renegotiating the deal.

The text of the letter is filled with aspirations to modernize the agreement to “support higher-paying jobs in the United States and to grow the U.S. economy by improving U.S. opportunities under NAFTA.” A number of key provisions, however, signal that the parts of forthcoming renegotiations could work to the detriment of Canadian interest.

The letter laments the fact that NAFTA hasn’t been renegotiated in over 25 years, a frequent talking point for the president, who repeatedly vowed to review the deal after making trade a centerpiece of his campaign, according to the Washington Post.

“We have put together an all-star team of top level people that are working on trade.” President Trump said in one White House meeting.

Given President Trump’s heated rhetoric on cutting American debt and reducing U.S. trade deficits, it’s also likely his administration will seek to level the U.S./Canadian trade balance. While this could be achieved by boosting American exports to Canada, it’s more likely to be accomplished by reducing Canadian imports into the U.S.

Donald Trump puts NAFTA on notice
Donald Trump puts NAFTA on notice [Image by Evan Vucci/AP Photos]

President Trump has repeatedly slammed Canada for its trade practices, according to the Financial Post, in key domestic industries, which he believes have unfairly driven the trade imbalance between the two nations. Any NAFTA renegotiation is thus likely to include stringent measures to reel in the U.S. trade deficit, most likely at the expense of Canadian exports.

Any renegotiations of NAFTA are likely to include significant changes on the American end of the deal. The president has repeatedly pushed the notion of “buy American and hire American,” and is likely to work toward repealing all restrictions on preferential purchasing.

This means that future U.S. government procurements, such as those from federal departments or state governments, may be forced to buy and hire domestically, rather than seeking cheaper options from NAFTA neighbors.

While Mexico and Canada are both largely excluded from U.S. protectionist policies which might include restrictions on imports, this exemption is likely one of the first things that will be targeted under the new administration’s efforts.

Unless Canadian or Mexican imports to the U.S. “contribute importantly” to injury caused to domestic U.S. producers, they are largely exempt from retaliatory actions by the American government, much to the ire of President Trump’s trade team.

Perhaps one of the largest implications of the president’s renegotiation ambitions is the deconstructing of barriers to U.S. investment in Canada and Mexico.

The U.S. hopes to at the very least drastically reduce barriers to U.S. investments “in all sectors” of its NAFTA partner’s economies, which could pave the way to increased American investment in Canadian industries like health care and telecommunications.

The U.S. has also moved to prohibit discrimination for foreign service suppliers, which would likely spur further American investment into the Canadian real estate sector, among others.

Canada braces for tough NAFTA deal
Canada braces for tough NAFTA deal [Image by Pablo Martinez Monsivais

Any renegotiation of the agreement is also likely to include a bid to increase the amount Canadians can buy from the U.S. without paying duties. The Trump administration has signaled its desire to raise the current amount from $20 CAD to $800, a move which could seriously harm Canadian retailers by granting consumers better access to American markets.

The next step now falls to the U.S. Congress and its committees, which still retain significant authority over trade, to review the objectives. As Canada prepares itself to renegotiate the deal, it must enter talks with its guard up to ensure a healthy economic future.

[Featured Image by Carlos Osorio/AP Images]