Automotive News Canada - November 2017 - 22
* N O V E M B E R 2 017
Analysts mull scenarios if/when Trump blows up NAFTA
agreements and massive
confusion are plausible
outcomes during the
six-month notice period
required to withdraw
By JOHN IRWIN
A WORLD WITHOUT THE NORTH
American Free Trade Agreement
would be sure to disrupt the Canadian
auto supply chain.
But just exactly what would happen
if the United States decides to exit the
agreement remains an open question
with no clear answers. That's because
that country's departure from NAFTA,
a possibility that became more realistic following the most recent round of
renegotiations in October, is virtually
without precedent, analysts say.
"The things we have taken for
granted we should not take for granted anymore," said Jeff Rubin, senior
fellow at the Centre for International
Governance Innovation in Waterloo,
Ont. "We have taken for granted that
globalization and her handmaiden,
free-trade agreements, are both desirable and inevitable. That's being challenged."
U.S. trade negotiators have reportedly proposed requiring vehicles built
within the NAFTA region to have at
least 85 per cent North American con-
If U.S. President Donald Trump
decides to quit NAFTA, he and
Prime Minister Justin Trudeau
could work out a bilateral deal.
tent, including 50 per cent U.S.-made
content, to cross the borders tariff free.
It's a proposal that negotiators from
Canada and Mexico have found unacceptable, just as most automakers and
"It would seriously disrupt the
auto-supply chain, and it would [put]
North American producers in all three
countries at a disadvantage against the
world," said Douglas George, consul
general of Canada in Detroit.
U.S. President Donald Trump has
repeatedly threatened to withdraw the
industry can sue and potentially wait
United States from NAFTA, and sharp
disagreements over the American trade
Still, if NAFTA is blown up, analysts
team's proposals have made that possisaid it is likely for the three nations to
bility more realistic.
pursue bilateral trade agreements with
It is unclear what would happen if
each other. For Canada and the United
Trump withdraws the U.S. from the
States, their pre-NAFTA free-trade
agreement, but analysts said it would
agreement would likely come back into
certainly be messy.
play, though the two sides might try to
For one, Trump cannot instantly
modernize the agreement.
withdraw the U.S. with the stroke of a
pen or the sending of a tweet. He can
only withdraw on six months' notice.
But bilateral deals are seen by many
During this window, experts said
in the automotive industry as less
to expect automakers
than ideal because the
and others to sue the
requirements of each
deal are unlikely to
in an attempt to keep
NAFTA rules in place
and to put pressure
have some advantages,
on Congress to chalbut the major downside
lenge Trump's authoris the potential for rules
ity to pull out of the
to not match up perfectagreement on his
ly," Sands said.
own, seeing as it was
No matter what haponly ratified in the
pens in renegotiations,
United States because
Canada, Mexico and the
Congress approved it.
industries that depend
"You can have
on NAFTA are receiving
Director of the Johns Hopkins
this weird situation
a serious message from
Center for Canadian Studies
where Trump makes
Washington: They can
his analysis on
no longer assume free
NAFTA, but behind the scenes there's trade as a given.
paralysis," said Christopher Sands,
"You always knew where the U.S.
director of the Johns Hopkins Center
stood," Sands said. "The idea that the
for Canadian Studies in Washington,
new administration would come in and
upset that apple cart makes the U.S.
"He can say we're leaving NAFTA
much less reliable as a partner, even if
in six months, but it'll get stuck in the we decide to just leave NAFTA as it is."
rule-making process. Plus, the auto
You can have this weird
situation where Trump
makes his analysis on
NAFTA, but behind the
scenes there's paralysis.
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