NAFTA: Longer negotiations could weaken Canadian position - NBF

According to analysts at the National Bank of Canadat he longer the negotiations about NAFTA continue, the weaker Canada’s negotiating position could become.

Key Quotes:

“Notwithstanding the war of words that broke out between the Canadian and U.S. leaders in the aftermath of the G-7 leaders’ summit, we still believe that U.S. President Donald Trump will not seek to shred NAFTA.”

“The political blowback from states (including those that voted for him), businesses and Congress (members from both sides of the aisle) could overwhelm his administration. What’s more, a months-long legal battle would inevitably ensue over whether the President has the authority to formally terminate NAFTA without congressional approval.”

“From this perspective, the U.S. tariffs on aluminum and steel imports can be seen as an attempt to create uncertainty in order to extract further trade concessions.”

“Given the prospect of never-ending negotiations, we can expect more and more people to challenge Canadian Prime Minister Justin Trudeau’s declaration that a bad deal would be worse than no deal. In their view, a flawed deal should be preferred to the risk of seeing certain companies choosing not to invest in Canada owing to uncertainty over access to the U.S. market."

“Canada’s difficult position is best summed up in the following quote: “With NAFTA in place, Canada is an option when globally oriented firms considered their North American strategies; without it, Canada is a smallish market that probably can be served from the U.S. or elsewhere.” All of this means that the longer the negotiations continue, the weaker Canada’s negotiating position could become.”