Grim reality of NAFTA talks sets in after tough US demands

Former US trade representative Robert Zoellick said he thought there was a 50-50 chance Donald Trump would quit NAFTA. (Reuters)
Updated 15 October 2017

Grim reality of NAFTA talks sets in after tough US demands

ARLINGTON, Virginia: Negotiators from Canada and Mexico grappled with US demands to drastically alter the North American Free Trade Agreement on Saturday, as talks over renewal of the pact vilified by President Donald Trump ran through a fourth straight day.
Some downcast participants said the demands, unveiled this week in line with Trump’s “America First” agenda, have increased the odds of NAFTA’s demise. At the very least, they could make it impossible to reach a deal renewing the treaty before a year-end deadline.
“The atmosphere is complicated,” one trade official told reporters, adding that his fears about some “pretty harsh, pretty horrible” demands from the US side of the negotiating table were coming true.
Speaking on condition of anonymity because the talks are confidential, the official added the US stance “has a clear protectionist bias, a bias that is trying to eradicate, minimize, eliminate the mechanisms that existed in NAFTA in the last 20 years.”
Trump, who blamed NAFTA for shifting US manufacturing jobs to Mexico during his election campaign last year, has repeatedly vowed to scrap the treaty unless it can be renegotiated on more favorable terms.
At the mid-point of seven scheduled negotiating rounds, many of the US proposals appear aimed at turning back the clock on changes in the global economy since NAFTA took effect 23 years ago. Collapse of the deal could reverberate well beyond North America, where trade between the United States, Canada and Mexico has more than quadrupled since 1994.
Former Mexican Trade Minister Jaime Serra, who was responsible for negotiating the original trade pact, said there was no economic logic to the US demands.
“Issues are being put on the table that are practically absurd,” he told Reuters. “I don’t know if these are poison pills, or whether it’s a negotiating position or whether they really believe they’re putting forward sensible things.”
Some officials from NAFTA governments said they knew all along the negotiations would be tough, but vowed to soldier on through the three remaining scheduled rounds of talks.
“We said from the beginning that this was never going to be easy,” Canadian Trade Minister Francois-Philippe Champagne told CBC radio. “We want to be at the table, be constructive, offering alternative proposals.”
One of the US proposals unveiled this week would require that 50 percent of the value of all NAFTA-produced cars, trucks and large engines come from the United States, people briefed on the negotiations said.
The same proposal calls for a sharp increase in NAFTA’s regional automotive content requirement, boosting it to 85 percent from the current 62.5 percent. The existing level is already the highest local content requirement of any trading bloc in the world.
Meanwhile, the Trump administration’s call for a so-called NAFTA sunset clause would effectively trigger a renegotiation of the pact every five years. Serra said the US content requirements would distort NAFTA trade with “pure protectionism” while the sunset clause would choke off investment decisions with uncertainty.
US negotiators also want to end a trade dispute settlement system that has deterred US anti-dumping cases while erecting new protective barriers for seasonal fruit and vegetable growers. And though Canada and Mexico had sought more access to US government procurement contracts, they were met this week with a proposal that would effectively grant them less.
Even before the current round of negotiations got underway in a suburban Washington hotel, US Trade Representative Robert Lighthizer said NAFTA was “lopsided” in favor of Mexico and Canada and needed major changes to rebalance it.
“The president has vowed to bring jobs and investment back to the United States,” Lighthizer said. “We will do no less.”
One of Lighthizer’s predecessors, Robert Zoellick, said he thought there was a 50-50 chance Trump would quit NAFTA.
“He’s trying to go back to make trade agreements fix the bilateral trade deficit. I don’t believe he can be successful in doing that,” Zoellick, now non-executive chairman of AllianceBernstein, told a banking conference in Washington on Saturday.


Gulf stocks battered by coronavirus and oil slump

Updated 01 April 2020

Gulf stocks battered by coronavirus and oil slump

  • Perfect storm of pandemic and energy price war sends shockwaves across the region’s economic powerhouses

DUBAI: Stock markets in energy-rich Gulf states slumped to multi-year lows in the first quarter of this year over coronavirus shutdowns and crashing oil prices.

The five major bourses in the region, which pumps a fifth of the world’s crude supplies, plummeted in the first three months of the year, with Dubai’s market losing more than a third of its value.

The majority of the losses were sustained in March which saw the collapse of the OPEC+ production cut agreement and the implementation of shutdowns to counter the spread of coronavirus, bringing most businesses to a standstill.

The declines were also triggered by a price war between Saudi Arabia and Russia that sent oil prices crashing to 18-year lows, spooking investors into a sell-off.

The sharp decline led Standard & Poor’s ratings agency to cut its projections on average oil prices this year by half to $30 a barrel.

This means the six Gulf states — Bahrain, Oman, Kuwait, Qatar, Saudi Arabia and the UAE — will lose at least $100 billion in oil revenues this year.

Ratings company Moody’s estimated that Kuwait’s oil income would decline by 10 percent of gross domestic product (GDP), while the drop in other states will be between four and eight percent of GDP.

Capital Economics projected Middle East and North Africa growth this year to contract by 1.7 percent, the worst since early 1980s.

HIGHLIGHTS

The end of OPEC+ production cuts coupled with coronavirus-related shutdowns have rocked energy-rich Gulf states.

Dubai Financial Market led the slide in the first quarter, shedding a massive 36 percent since the start of the year, followed by its UAE partner Abu Dhabi Stock Exchange which dipped 26.4 percent.

In March, the two bourses posted their worst monthly performance in a decade, according to CNBC Arabiya channel.

The UAE’s largest real estate firm Emaar Properties dived a massive 45 percent in the first quarter.

The Saudi Tadawul market, the largest in the Arab world, plunged 22.5 percent to close the quarter at levels last seen in November 2016.

Saudi Aramco, the world’s biggest listed firm, gave up 15.3 percent since January to end 30.15 riyals ($8) a share, below its listing price of 32 riyals.

The energy giant was listed on the domestic bourse in December following the world’s largest initial public offering, which generated $29.4 billion.

Kuwait’s Premier Index dipped 24.1 percent and Qatar’s index dropped 21.3 percent. The tiny bourses of Bahrain and Oman dropped 16.1 percent and 13.4 percent