Canada PM: Trump was prepared to exit NAFTA before chat

Modesto Morganelli
Aprile 28, 2017

In his Twitter post, Trump called America's relationships with the two hemispheric neighbors "very good" and said the prospects of a renegotiated deal are "very possible". "The reality is, if I'm the government, I put the United States and Mexico on notice that it's now our intention to renegotiate NAFTA". But he also said that his consent to remaining is "subject to the fact that if we do not reach a fair deal for all, we will then terminate NAFTA".

Trudeau told a news conference in Saskatchewan he had urged Trump not to withdraw from the trade pact and warned that doing so "would cause a lot of short- and medium-term pain".

"We very much appreciate the bipartisan support from members of Congress on this important issue".

News of the possible USA pullout from NAFTA rattled financial markets on Wednesday. Relative calm returned yesterday after Trump's comments, and the Mexican peso strengthened 0.86 per cent against the U.S. dollar while the Canadian dollar was flat versus the greenback.

When asked what changes the president hopes to achieve through renegotiation, White House Press Secretary Sean Spicer said, "I think when you look at the various sectors - it's obviously being a multilateral agreement - there are areas in Canada, sectors where there's agriculture, manufacturing, services - that we look on both of them, where I think there's both a modernization, recognizing the world has changed, and also some trade imbalances and issues that have come up".

Trump campaigned for president previous year on a pledge to pull out of Nafta if he could not renegotiate better terms. The United States went from running a small goods trade surplus with Mexico in the early 1990s to a $63-billion deficit in 2016.

"Any disruption to the integrated supply chain that has been achieved under NAFTA could challenge the outperformance of the North American auto industry, including the potential job losses for some of the almost 2 million positions at plants in the United States, Canada and Mexico", the report said.

"If I'm unable to make a fair deal. for the United States, meaning a fair deal for our workers and our companies, I will terminate Nafta".

But numerous analysts watching events this week, as well as people within the Canadian government, believe there's a simpler explanation for what's been going on: Trump wants to flex some muscle entering the negotiations and the threat to pull out is his strongest lever.

"Canceling NAFTA, even if theoretically it might lead to better outcomes, would cause a lot of short- and medium-term pain for an bad lot of families", said the Liberal Party leader. Almost 75 per cent of all auto parts exported from the US are sent to its NAFTA partners, according to the report.

Trump has recently been bearing down on Canada.

A White House readout of Trump's conversations said Trump spoke with both leaders and that the talks were "pleasant and productive".

Trump has accused Mexico of luring away American factories and jobs with cheap labor and other advantages enabled by NAFTA.

On Thursday, Trump struck a largely conciliatory tone, acknowledging that ending NAFTA would be a "shock to the system" and saying he has "very good" relationships with both Pena Nieto and Trudeau. He has said businesses that choose to move plants outside the country would pay a price.

One of Trump's first major acts after becoming president in January was to pull out of the 12-nation Trans-Pacific Partnership, negotiated by his Democratic predecessor Barack Obama. The White House released a statement late Wednesday saying only that Trump had assured the two leaders that the USA would not withdraw from NAFTA at this time.

The NAFTA withdrawal process is complex, more so than the president portrays.

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