Trump lays 90-day timetable to open talks for NAFTA

The Dollar Business Bureau

The Trump administration, in its detailing of the 'America First' policy on the official website of White House, has included renegotiation of the North American Free Trade Agreement (NAFTA) as a top priority agenda.

On February 2nd 2017, Trump took this up with the lawmakers at White House, setting a 90-day timetable to begin talks with Canada and Mexico, other members of the tri-lateral trade agreement. Commerce secretary Wilbur Ross, he said, would be the top negotiator in talks with the partner countries of NAFTA. Meanwhile, Mexico and Canada are also gearing up for renegotiation with their American counterparts.

Citing trade deficits as high as $60 billion with Mexico, Trump has accused its northern and southern neighbours of ripping America off. Calling NAFTA a catastrophe, he is hellbent upon getting a sweet deal for USA under NAFTA, or withdrawing from it altogether.

Trump, the businessman that he is, is intent on turning around USA's balance of payments situation, which has been in the red since 1975. America is one among the countries harbouring record high deficits. It had a $762 billion deficit in goods alone in 2015, which was offset to the tune of $260 billion by a surplus in service exports.

Since ratification of NAFTA, in absolute dollar terms, volume of trade in goods between America and Mexico has increased more than five times, from $81.5 billion in 1993 to $532 billion in 2015. But USA, which had a surplus with Mexico throughout 1990-94, has since seen its deficits with Mexico pile on, reaching a peek of $74 billion in 2007. In 2015, USA had $60.6 billion deficit with Mexico and $15.5 billion deficit with Canada.

Experts believe that NAFTA could do with a little tweaking, especially with regard to regulations for digital trade, which was non-existent at the time of its genesis. Also, it would do USA good to get Mexico and Canada to raise their limit for duty-free purchases from America, which is currently fixed at $50 and $20 respectively. The same limit in US, for purchasing from retailers in the other two countries, is $800, which is much higher. NAFTA requires 62.5% sourcing from US, for duty-free import of goods from Mexico/Canada. US will attempt to push this limit higher during impending negotiations.

Many American traders, who benefit from NAFTA, are against its abolishment. The stakeholders would like Trump to be much more deliberative and consultative in the process of renegotiation, which will require him to relinquish his rock-hard aversion to compromise.