US: Has the rhetoric changed on NAFTA? - Natixis

Analysts at Natixis explain that the US rhetoric has changed on NAFTA as President Trump’s rhetoric has evolved with a policy shift taking place in the White House.

Key Quotes

“The globalist wing has been gaining traction. The bombing in Syria and a softer stance on trade with China and Mexico confirm the nationalist faction has lost ground. This can only be positive for Mexico. The recent withdrawal threat was followed by a more conciliatory tone evoking a renegotiation. Senior advisors showed President Trump a US map highlighting which states rely on Nafta. Texas exports to Mexico account for 5.7% of the state’s GDP.”

“Several states that supported President Trump are running current account surpluses with Mexico. The lobby of Mexican authorities with the companies (auto, oil, agriculture…) and states involved in Nafta has been remarkable. While the menace was in line with President Trump’s art of the deal approach and more noise is likely, we are gradually heading towards a soft Nafta renegotiation. This implies moving from tariffs to an agreement involving an update of rules of origin, financial services, technology, digital, dispute mechanisms…”

“How the renegotiation works?

The renegotiation process carries three steps. First, President Trump notifies Congress with a formal notice of his intent to renegotiate Nafta, setting a start date for the negotiations. Then, Congress has at least 90 days to make suggestions within trade committees in the House and Senate. Finally, representatives of the three governments (US, Canada and Mexico) start to renegotiate the trade agreement in a process that could take months or even years. 

Representatives will continually be consulting their President, to adjust priorities and check in about concessions. Once an agreement is found, each Congress will vote the new trade agreement. In the case of Mexico if changes are cosmetic the President has the power to implement the new agreement. During the last vote, no amendments are allowed. We remind that at any moment a country can withdraw with a simple six months warning notice. The US will hold mid-term elections in 2018 (November) and Mexico a general election (July) including President and Congress.”