NAFTA Renegotiation

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Re: NAFTA Renegotiation

Post by Shakespeare » 19 Oct 2017 23:04

On NAFTA, America, Canada and Mexico are miles apart
it seems unlikely that any deal that will please the Mexicans, the Canadians, Congress and Mr Trump exists.
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Re: NAFTA Renegotiation

Post by Taggart » 20 Oct 2017 05:23

Well, Canadians have only for themselves to blame. There's something called "diversification", but as long as I can remember Canada's exporters always wanted to take the easy way out, and trade mostly with America. That was about it. Full stop.

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Re: NAFTA Renegotiation

Post by AltaRed » 20 Oct 2017 11:13

:thumbsup: Indeed. Too freaking lazy to develop east and west market opportuinities.
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Re: NAFTA Renegotiation

Post by ghariton » 20 Oct 2017 13:45

AltaRed wrote:
20 Oct 2017 11:13
:thumbsup: Indeed. Too freaking lazy to develop east and west market opportuinities.
In fairness, the U.S. and Mexico were the only attractive markets to which our exporters had reasonably free access. When the U.K. joined the EU in 1972, that put an end to a very attractive potential market.

But there is plenty of blame that attaches to Canadian producers. For example, why haven't we done better in Mexico? And study after study has shown that Canadian-owned companies in Canada have lower productivity and worse performance than foreign subsidiaries in Canada in the same sectors. For some reason, many Canadians are reluctant to implement "best practices".

There is also lots of blame that attaches to government. Bailing out dying industries, from textiles to steel-making to ship-building (which can all be done better and mor4e cheaply elsewhere). Industrial policy that tries to create "national champions" and wastes billions of dollars on subsidizing them. Prohibiting foreign direct ownership of "strategic" sectors, resulting in foregoing what could have been healthy competition and injections of foreign know-how (think telecommunications and air transport). Fragmenting the already small Canadian market into ten provincial markets. Protecting certain sectors from any competition whatsoever.

Free trade agreements generally force governments to reduce such idiocy. Unfortunately, the new NAFTA envisaged by the U.S. negotiators is going in the wrong direction. So we have the choice of signing onto a free trade agreement that increases protectionism, or doing without a trade deal, and see protectionism spring up on its own. Not a palatable choice either way.

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Re: NAFTA Renegotiation

Post by Shakespeare » 26 Oct 2017 23:48

Top Trump official says U.S. isn’t offering ‘anything’ to Canada in exchange for NAFTA demands | Toronto Star
“We’re trying to do a difficult thing. We’re asking two countries to give up some privileges that they have enjoyed for 22 years. And we’re not in a position to offer anything in return,”...

“The president said there was no way to get the changes we need unless we get out, then have six months to negotiate,” said an anonymous pro-NAFTA senator. When senators expressed concerns, Inside U.S. Trade reported, Trump said, “Trust me, we’re working on this.”

Initiating a termination would carry risks of its own: Mexico has promised to walk away from the negotiating table if Trump announces he is starting the six-month notice period.

Canada has not taken a public position on what it would do in that case. Freeland, speaking more generally, said earlier this month that Canada would like to stay at the table....

It is not clear whether Trump could actually terminate the deal on his own or whether he would require congressional approval.
I'd say notice of termination is almost certain.
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Re: NAFTA Renegotiation

Post by AltaRed » 27 Oct 2017 00:01

I concede that is most likely. It's the only thing Trump knows, i.e. let it burn if he cannot get his way.
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Re: NAFTA Renegotiation

Post by big easy » 27 Oct 2017 17:18

If Trump won't be reasonable, I think the Liberals will just try and wait it out. Mid term elections are next year and there is the issue of whether Trump can even cancel the deal himself or if he needs Congress. Then hope to god he doesn't get re-elected.
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Re: NAFTA Renegotiation

Post by Shakespeare » 16 Nov 2017 16:40

Behind the G&M pay wall:

Get ready for ‘zombie’ NAFTA and a long fight in Congress - The Globe and Mail
there is speculation that this will be the round when increasingly untenable demands from the United States will lead Canada to walk away from the talks....

Former prime minister Stephen Harper suggests that Canada devise compromise proposals that meet the U.S. administration half way on these deal-killing initiatives. But if the intention of these provisions is to sink the deal, a proposal that leaves the NAFTA "mostly dead" (to quote The Princess Bride's Miracle Max) will not satisfy either anti-trade or pro-trade factions in the U.S....

In terms of likely outcomes, the least likely outcome is the swift and successful completion of a modernized NAFTA. However, complete dissolution of the deal is also unlikely....

The more likely scenarios are that Mr. Trump launches a notice of withdrawal that is blocked for a couple of years by the legislative or judicial branch....

The most likely short-term option is a zombie NAFTA that is neither alive nor dead while North American business waits for a presidential change of heart or a change of president. The zombie option is preferable to a completely dead NAFTA, but the economic effects of such instability are undeniably negative for all three countries....

the resolution of the issue lies in the hands of U.S. legislators.
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Re: NAFTA Renegotiation

Post by AltaRed » 16 Nov 2017 16:48

This is a pretty good piece on a dead NAFTA should that actually happen, i.e. Trump gives notice and Congress does nothing to stop it.

http://www.canadianbusiness.com/economy ... n=cb_daily

An excerpt:
Bank economists have analyzed various post-NAFTA scenarios. Much depends on the thickness of the walls erected in its place. When Scotiabank economists crunched the numbers earlier this year, they looked at what would happen if the 3.5 per cent tariff were applied to all goods traded between Canada, Mexico and the U.S. The answer: Canada’s real GDP growth (a measure of the economy that accounts for inflation) would slow by about half a percentage point.

However, Trump has also threatened to pull the U.S. out of the World Trade Organization. If the president does cancel NAFTA, it becomes far more likely he’d follow through on this threat, too. And that could mean even higher tariffs. For instance, Scotiabank looked at a scenario in which the U.S. applied a tariff of 20 per cent on imports from Canada. In that instance, annual growth in 2018 would slow from the current projection of two per cent to 0.6 per cent, and in 2019, growth would slow to just 0.1 per cent. Scotiabank also acknowledged that its simulations don’t reflect the maximum possible impact of NAFTA’s demise, such as the onset of a global trade war “that would be a major brake on global growth.”

“GDP could slip into what could be close to a recession, but keep in mind you’d also see a response from monetary policy,” says Brett House, a deputy chief economist with Scotiabank. “Interest rates would probably drop close to the zero lower bound again to keep the economy from tipping into a recession.”

This time around, however, there’s far less room for the Bank of Canada to manoeuvre. In the 2008 recession, the bank ultimately chopped its target overnight rate from 4.5 per cent to 0.25 per cent. Today that rate stands at just one per cent.
It is a pretty good time to keep some powder dry. The stock markets could get very ugly for a few years.
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Re: NAFTA Renegotiation

Post by Shakespeare » 16 Nov 2017 17:33

Like I posted earlier Smoot–Hawley Tariff Act - Wikipedia again. :roll:

The people retiring today could be in trouble.

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Re: NAFTA Renegotiation

Post by patriot1 » 16 Nov 2017 20:56

However, Trump has also threatened to pull the U.S. out of the World Trade Organization.
The enabling legislation for WTO says explicitly that approval of Congress is required to withdraw. See page 25.

https://www.gpo.gov/fdsys/pkg/STATUTE-1 ... Pg4809.pdf

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Re: NAFTA Renegotiation

Post by AltaRed » 16 Nov 2017 23:36

Good to know....albeit that is a step even the nutbar wouldn't do....would he?

The loss of NAFTA itself though would have an impact on business investment and the stocks of many companies that are especially vulnerable to the export side of their business. I saw a sound bite a few days ago saying, for example, Linamar would be hit a lot harder than Magna... so some investors may be positioning.
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Re: NAFTA Renegotiation

Post by Shakespeare » 17 Nov 2017 18:06

Behind the G&M paywall:

https://www.theglobeandmail.com/opinion ... e37015503/
Mexico's Che-flavoured alternative is the larger-than-life figure of Andres Manuel Lopez Obrador, the far-left populist who currently leads the polls for the July, 2018, national election. His many followers (mainly among urban and younger Mexicans) see him as a Mexican Che Guevara – an image he has embraced, going so far as to name one of his sons, Ernesto, after the revolutionary.

He is probably not a Hugo Chavez – that is, someone who would use the bait-and-switch of economic justice to transform his country into a brutal hermit-state command economy. He is a pure populist whose promises are vague and mercurial – but who would almost certainly trigger an economic crisis and withdraw his country from the North American economic and political system.

As such, the current round of NAFTA negotiations going awry or Mr. Trump scuppering the heart of the agreement pose a far, far greater threat to Mexico than to Canada or the United States. It would be damaging, but not fatal, to the Canadian economy. For Mexico, it is an existential threat.
“A wise man should be prepared to abandon his baggage at any time.” -- R.A. Heinlein, The Door Into Summer.

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Re: NAFTA Renegotiation

Post by Shakespeare » 20 Nov 2017 09:00

Behind the G&M paywall:

U.S. auto, agriculture sectors headed for NAFTA showdown with White House: study - The Globe and Mail
Although the effect on the U.S. economy would not be particularly heavy, the damage would be acute in agriculture and autos, the study says, causing the auto industry, the farm lobby and Congress to unite to try to save the deal.

"This battle will be fought within the United States, between U.S. stakeholders, Congress and the White House, not between Canada and Mexico and the Trump administration," says the study, titled Nafta Requiem: What if the U.S. walks away?...

Terminating the agreement would cost Mexico $25-billion in economic welfare, or the combination of a reduction in wages and increases in prices as tariffs rise.

The comparable figures for Canada and the United States are $14.5-billion and $20-billion, respectively, the models in the study show.
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Re: NAFTA Renegotiation

Post by Shakespeare » 30 Jan 2018 17:20

https://www.marketwatch.com/story/nafta ... 2018-01-30
Despite slow progress, Merrill Lynch reduced the odds of the U.S. exiting Nafta this year to just 25%. A few months ago, many trade watchers thought the chance of a U.S. withdrawal was at least 50-50 if not higher.

Fresh talks are slated for late February in Mexico and Trump has recently acknowledged that he’s facing a lot of pressure from fellow Republicans and business groups to stay in the trade pact.
“A wise man should be prepared to abandon his baggage at any time.” -- R.A. Heinlein, The Door Into Summer.

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Re: NAFTA Renegotiation

Post by ghariton » 30 Jan 2018 18:47

Shakespeare wrote:
30 Jan 2018 17:20
https://www.marketwatch.com/story/nafta ... 2018-01-30
Despite slow progress, Merrill Lynch reduced the odds of the U.S. exiting Nafta this year to just 25%. A few months ago, many trade watchers thought the chance of a U.S. withdrawal was at least 50-50 if not higher.

Fresh talks are slated for late February in Mexico and Trump has recently acknowledged that he’s facing a lot of pressure from fellow Republicans and business groups to stay in the trade pact.
Good news. But it is far too early to celebrate. My understanding is that the progress has been on secondary issues. As far as the rimary issues are concerned, there has been no progress at all: dispute resolution, sunset clause, auto sector rules of origin, and government procurement.

One possibility is that negotiations will be extended again and yet again, until Mr. Trump no longer has the power to block a deal.

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Re: NAFTA Renegotiation

Post by Shakespeare » 31 Jan 2018 18:12

http://thechronicleherald.ca/opinion/15 ... for-canada
Freeland has said she takes Trump at his word. She should. On NAFTA at least he has been unusually consistent.

He has called it the worst trade deal ever. He has said Canada and Mexico get too much from it and the U.S. too little. He has said that if NAFTA is to continue, the U.S. must get more while Canada and Mexico get less.

He may be entertaining mercantilist fallacies when he says this. He may be running afoul of accepted economic theory. But that is what he says and that is what he wants.

Freeland has also said that no deal is better than a bad deal. If the talks so far are any indication, the Liberals will eventually face that choice.
“A wise man should be prepared to abandon his baggage at any time.” -- R.A. Heinlein, The Door Into Summer.

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Re: NAFTA Renegotiation

Post by AltaRed » 31 Jan 2018 19:10

I think there will be some brinkmanship at some point on half a dozen key clauses. But will it come before Mexican elections or after?
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Re: NAFTA Renegotiation

Post by Shakespeare » 31 Jan 2018 23:35

This takes a much less rosy view of the negotiations:

https://www.theglobeandmail.com/news/wo ... e37813894/
In a broadside at her American negotiating partners two days after concluding the latest round of talks, Ms. Freeland accused Washington of taking an unrealistic "zero-sum" view of trade, said the U.S. is "never going to win" the race to bring back low-skilled jobs – a core tenet of President Donald Trump's economic strategy – and slammed politicians who use economic anxiety "as a political resource" to attack immigrants and trade deals....

This is an administration that is explicitly protectionist and, in many areas, the objective quite explicitly is to shrink the trading relationship."
“A wise man should be prepared to abandon his baggage at any time.” -- R.A. Heinlein, The Door Into Summer.

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Re: NAFTA Renegotiation

Post by Shakespeare » 05 Feb 2018 16:35

On the other hand....

https://www.nationalnewswatch.com/2018/ ... njE-a6nGUk
NAFTA deal possible by end of March, says Canadian envoy MacNaughton



Canada's ambassador to the United States said Monday he believes NAFTA negotiators can reach an agreement in principle by the end of March.

The upbeat assessment from envoy David MacNaughton comes in the face of the continuing threat from U.S. President Donald Trump to blow up the deal, which hangs over the final eight weeks in the current negotiating schedule.

MacNaughton refused to speculate on whether Trump is likely to pull out of NAFTA, but he said enough progress has been made on the "wiring and plumbing" of the agreement that all three countries can iron out their differences on the more substantial issues in the next two months.

"I would love to see a deal done," the envoy said after an event in Ottawa with his U.S. counterpart, Kelly Craft. "We've made tremendous progress on some of the less spectacular things."
“A wise man should be prepared to abandon his baggage at any time.” -- R.A. Heinlein, The Door Into Summer.

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