US to woo NAFTA partners to see off China threat

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US to woo NAFTA partners to see off China threat

Presidents and prime ministers are convening for the Summit of the Americas in Peru this weekend. Although US President Donald Trump has cancelled his trip to Lima because of the escalating situation in Syria, one of the highlights could still be the announcement of an agreement in principle over a renegotiated North American Free Trade Agreement.

Mexico’s Secretary of Economy Ildefonso Guajardo Villarreal said on Monday that the NAFTA renegotiation was 80 percent likely to be concluded in April. And, with Vice President Mike Pence replacing Trump at the summit, further updates could come soon.

Whether or not significant progress on NAFTA is announced, the White House is briefing that Pence will urge fellow Americas leaders to engage with Washington, not Beijing, on international trade. The argument will be that the US should be the hemisphere’s economic and political “partner of choice,” even though China is now the top trading relationship for a number of its nations, including Brazil and Uruguay.

With this intended summit pitch, the White House has in recent days been attempting to push forward the NAFTA renegotiation, which had previously stalled for months. Especially with the White House now embarking on what could yet become a trade war with China, the president has decided to dampen tensions with Canada and Mexico to reduce the number of fronts on which he is battling.

The other key reason why NAFTA progress appears to have sped up is the Mexican presidential elections on July 1. Campaigning began on March 30 and, during the period leading up to election day, Ottawa and Washington feared the government of Enrique Pena Nieto could slowly disengage from NAFTA talks.

This concerned Canada and Washington because international trade skeptic Andres Manuel Lopez Obrador leads in recent presidential polls. The leftist populist has positioned himself as a big critic of Trump and his “campaign of hatred” against Mexico, while he is also no fan of Pena Nieto. It was feared, at least until the recent uptick in NAFTA progress, that Pena Nieto may have decided there was little to no benefit to his administration of being engaged in the long-troubled trade talks at the end of his mandate while his party’s presidential candidate, Jose Antonio Meade, tries to regain electoral ground against Lopez Obrador.

In this context, and with November’s US congressional ballots on the horizon, the NAFTA talks, without the progress of recent days, could have collapsed or been suspended until at least 2019. In this scenario, with the US House of Representatives and Senate going into summer recess in July, and only briefly reconvening this autumn, the Republicans who control Congress may well have preferred that potentially contentious NAFTA issues did not cloud the congressional campaign, given that more protectionist-leaning Democrats are seeking to retake both chambers of the legislature.

NAFTA issues aside, the US administration has — to date — paid relatively little attention to the Americas region and Trump is widely unpopular there. This is why there will be a mixed reaction to the president cancelling his visit, with some fellow leaders breathing a sigh of relief, while others will be concerned about the perceived lack of prioritization the administration is giving to the hemisphere.

This will be Pence’s second trip to the region following his travels last August to Colombia, Argentina, Chile and Panama, which came in the aftermath of Trump’s remarks that he was considering “military options” to intervene in Venezuela — an unfortunate comment given long memories on the continent of US interventionism. As he will do this week, Pence emphasized during last year’s trip the strength of US commitments to economic, political and security partnerships throughout the region. However, he was forced to cut his previous trip short to join Trump at Camp David for a meeting on North Korea.

NAFTA issues aside, the US administration has — to date — paid relatively little attention to the Americas region and Trump is widely unpopular there.

Andrew Hammond

To date it is NAFTA that the Trump team has placed most attention on in terms of relations with the Americas, and the president last week said he hoped to see a renegotiation announcement soon. The deal, which originally came into force in January 1994, is the most comprehensive trade deal outside the EU, and the first major trilateral trade agreement negotiated between a developing country (Mexico) and developed counterparts (the US and Canada).

The chief reason why the renegotiations have dragged has been the intransigence of Trump, who has called NAFTA “the worst trade deal maybe ever signed anywhere, but certainly ever signed in this country.” The president has repeatedly raised the rhetoric on Canada and Mexico, with both previously concerned he may deliver Washington’s six-month notice of withdrawal from the treaty.

A key reason for the Trump team’s stance is that, despite the fact NAFTA has much US business support, it has long been criticized by elements of both the political left and right in the country. For instance, US labor unions have blamed it for contributing to a hollowing out of the country’s manufacturing industry, partly because of increased trade deficits with Mexico and Canada.

Yet Trump now appears ready to perform a volte-face over the treaty, and Pence will use the summit more broadly to try to re-anchor hemispheric neighbors into the US alliance system. Whether or not a NAFTA breakthrough is announced this weekend, Washington appears determined to double down on delivering a renegotiated treaty soon.

 

  • Andrew Hammond is an Associate at LSE IDEAS at the London School of Economics
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