NAFTA stumbling blocks. Is the end near?

November 21, 2017 – The Trump administration is intent on implementing significant modifications to the NAFTA treaty that just may bring the whole treaty crashing down. The three most controversial demands by the US are: 1) Dismantle the dispute resolution provisions that allow any of the three countries to lodge a complaint against the others. 2) The “sunset” clause which automatically terminates the agreement after five years. 3) And, the country of origin insistence that automobiles imported to the US contain at least 50% American made components.

NAFTA Flags

In addition there are several additional issues that our USTR negotiators are addressing. One is the Common Names issue whereby Canada’s free trade agreement with the EU requires that any food or drink products from specific regions of Europe may not be “copied” by products from other countries when sold in Canada. This would require American dairy farmers to label their Parmesan cheese Imitation Parmesan, or some equivalent if exported to Canada.

Other obstacles include cheap softwood lumber that Canada exports to the US. This dispute is one of the largest and most enduring trade disputes between both nations. The heart of the dispute is the claim that the Canadian lumber industry is unfairly subsidized by federal and provincial governments, as most timber in Canada is owned by the provincial governments.

So where does this leave us? The official report from last week’s negotiating rounds in Mexico City was that a great deal of progress was made on a number of chapters. But the three core issues have not been resolved. According to a Wall Street Journal report today, the three countries have agreed to keep talking until the end of March. Then what? Does NAFTA go away? Let’s hope that substantial progress can be made when they meet again in Montreal in late January. Time is running out.

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