NAFTA to NALFTA? (North American Limited Free Trade Area)

Most people aren’t sure what a bilateral trade deal between the U.S. and its southern “ally”, where Trump proposed to build a BAW (Big Ass Wall), will actually look like. Or even if it’s legal. Maybe it would be just like NAFTA but without Canada, who satirically suggested building a wall, an ice wall, to keep out a Trumped American exodus of democrats.

What does seem to be evident is the requirement for increasing the overall value of cars manufactured in North America to become more North American by having 75% of the value of an automobile be from North America instead of 62.5%. And on top of that, automakers have to use more local steel, aluminum, glass, and parts. And the cherry on top of the whipped cream topping is to have “North American” wages of $16 an hour in 40% – 45% of the total labor costs for making vehicles.

 

Basically meaning, for a car to be truely North American, it’s going to have to source more expensive local materials with higher labor wages. Not a real problem for Canada. However, the question for Mexico is, why manufacture parts in Mexico, if labor costs would be roughly the same in the US and Canada?

Since NAFTA was stipulated in the Reagan era and ratified during the Clinton presidency, issues of digital trade, and intellectual property rights were vague. The new deal may be an improvement concerning the technological evolutions since 1994.

 

Trump supporters in the farmlands should be content that the duty-free farm products remains in the new deal, and Mexico has agreed to promptly buy as many U.S. farm products they can. However, labeling and health standards will be revamped.

NAFTA’s rules for settling investor disputes in the energy and telecommunications sectors remain intact in the US – Mexico Trade Deal.

The new deal, as Trump prefers to call it, or a revised NAFTA as most other experts calls it, has a major what if, being, what if Canada says no, and actually builds an ice wall?

A Canadian cold shoulder would be bad for all of North America, and Mexico (who is actually in a part called central America, no?). A significant issue for Canada during the trilateral talks between the NAFTA signatories was the case of the “Sunset Clause”, where a renegotiation every 5 years would be mandatory. The new deal has agreed to a longer cycle for negotiations, 3 Sunsets and a year.

 

The Canadian Press reports:

“An overhauled NAFTA would remain in force for 16 years. After six years, the countries would review the agreement and decide whether it needed to be updated or changed. They then would either agree to a new 16-year deal or the pact would expire.”

 

The bright side is NAFTA will probably just get a makeover, or else we might be seeing something like CUMTA(Canada U.S. Mexico Trade Agreement).

Another factor to consider is, America does need to consolidate NAFTA, and have things be peachy before furthering their trade war with China next month.