Trump Wants to Replace NAFTA With Bilateral Deal With Canada, Trudeau Says They’re Negotiating

After the U.S. President, Donald Trump, threatened to withdraw from the North American Free Trade Agreement, known as NAFTA, the negotiations about the remaking of the agreement continued. Trump met Canadian Prime Minister Justin Trudeau and it could be seen that there are concerns. Trudeau maintained a straight face while Trump was talking about the possibility of not reaching an agreement on NAFTA. The U.S. president said that it is possible that his country and Canada sign a bilateral deal to replace the pact. Trudeau confirmed that they are negotiating that possibility.

There have been three rounds of NAFTA talks and common ground has been found on customs and trade facilitation, e-commerce rules and other not so controversial issues that would update the 23-year old agreement, but U.S. officials are expected to propose some things that are important for the advance of Trump’s “America first” agenda. Mexico, Canada and certain U.S. businesses are opposing some of those proposals.

According to persons briefed by U.S. trade officials, one proposal would allow NAFTA to expire after five years unless all three countries agree to renew it, L.A. Times reports. The sunset provision, as it is called, obviously gives the administration a way out if there is no improvement in the U.S. trade deficit with Mexico or Canada.

Thomas Donohue, leader of the Chamber of Commerce, is one of the critics of the sunset clause.

“We all know that certainty and stability are crucial to successful trade relationships — and necessary to foster a pro-investment environment that drives economic growth and job creation. This clause would achieve the opposite effect. We’ve reached a critical moment. The chamber has had no choice but to ring the alarm bells,” he said in a particularly forceful speech in Mexico City.

The U.S. auto industry fears that Trump administration’s overhaul of NAFTA could destroy the North American supply chain. Current NAFTA rules say that vehicles that manufactured with at least 62.5% of contents from any combination of the three countries can be shipped from one NAFTA nation to another without paying duties. But, some officials now want that percentage to be 85. Allegedly, the American negotiators want 50% of the contents of autos to be made in the U.S. before they can be shipped without duties. The critics say that this is against a trade agreement whose basis is the regional economy of North America.

It is expected that in the fourth round U.S. propose weakening of the right of private investors and companies to sue governments. Washington also wants elimination of NAFTA chapter which allows Mexico and Canada to contest American anti-dumping and government-subsidy tariff decisions by turning to a NAFTA panel of judges, LA Times reports.

Seven rounds of talks should be held before Christmas, American trade officials have said.

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