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New Nafta deal 'in trouble', bruised by electoral politics, tariff rows

If Trump did dump Nafta, the three nations would revert to trade rules in place before it came into effect in 1994

Reuters  |  Mexico City/Ottawa 

NAFTA
The delay means businesses are still uncertain about the framework that will govern future investments in the region

More than six months after the United States, and agreed a new deal to govern more than $1 trillion in regional trade, the chances of the countries ratifying the pact this year are receding.

The three countries struck the United States-Mexico-agreement (USMCA) on Sept. 30, ending a year of difficult negotiations after US demanded the preceding trade pact be renegotiated or scrapped.

But the deal has not ended trade tensions in If ratification is delayed much longer, it could become hostage to electoral politics.

The has its next in 2020, and holds a in October.

The delay means businesses are still uncertain about the framework that will govern future investments in the region.

"The USMCA is in trouble," said Andres Rozental, a former Mexican for

Though he believed the deal would ultimately be approved, Rozental said opposition from US Democrats and unions to labor provisions in the deal, as well as bickering over tariffs, made its passage in the next few months highly unlikely.

Canada's Parliament must also ratify the treaty and officials say the timetable is very tight. Current legislators only have a few weeks work left before the start of the summer recess in June, and members of the new Parliament would have little chance to address ratification until 2020.

Trump, a Republican, has shown frustration with the Democratic-led US House of Representatives for failing to sign off on the USMCA. He has threatened to pull out of the old pact, the North American Free Trade Agreement (NAFTA), if does not hurry up.

If Trump did dump Nafta, the three nations would revert to trade rules in place before it came into effect in 1994.

Tariffs 

Canada and are seeking exemption from US tariffs on global imposed last year.

The metals tariffs were not included in the USMCA and and Canada are impatient to resolve the issue. Mexico has repeatedly threatened to target new US products by the end of April in retribution if tariffs are imposed.

Meanwhile, Trump on Thursday threatened to slap tariffs on Mexican auto exports unless Mexico does more to stop drug traffickers and illegal immigration.

Mexico's government is in the final stages of completing a new list of potential US imports to be targeted, said Luz Maria de la Mora, a Mexican minister.

"There's going to be a bit of everything," she told Reuters, declining to give details of how the list - originally encompassing products such as bourbon, cheese, motor boats, pork legs, and apples - could be modified.

De la Mora would not be drawn on whether Mexico could refuse to ratify USMCA if tariffs are not withdrawn, saying only: "All options are on the table."

In Ottawa, Canadian said this week her government was "constantly" looking at its own retaliation list, noting that Trump's tariffs left the country over C$16 billion worth of space to strike back.

Freeland did not say when that list could change, and a government source, speaking on condition of anonymity, said it might not be necessary. Still, Freeland said Canada was coordinating with Mexico about its options.

Justin Trudeau, who faces a tough re-election battle, on Thursday rejected accepting quotas on Canadian and aluminum in exchange for US tariffs being dropped.

Trudeau was criticized during the USMCA negotiations for giving ground to Trump on access to Canada's dairy sector.

Workers

US Democrats have threatened to block the USMCA unless Mexico passes legislation to improve workers' rights, a demand shared by the

A bill already in Mexico's to strengthen trade unions should be approved this month, the government says.

Trump blamed for millions of job losses in the as companies moved south to employ cheaper Mexican labor. Trump is running for re-election in 2020, and his 'America First' policy will likely feature prominently in the campaign.

Forcing Mexico and Canada to rework was one of Trump's signature pledges during his win in 2016, and Democrats are pulling out the stops to avoid losing again.

"The closer the election gets, the harder it will be for Democrats to grant Trump a victory" by ratifying the USMCA, said Sergio Alcocer, a former deputy Mexican

Some Democrats are pushing to change the deal - an idea that both Canadian and Mexican officials resist.

"People need to be very careful around opening up what could really be a Pandora's box," Freeland said on Thursday.

Canadian officials say they fear that if one part of the treaty were reopened, it could spark clamour for other sections to be renegotiated as well.

First Published: Sun, April 07 2019. 21:16 IST
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