Canada and Mexico Seek to Expand Trade Outside North America as NAFTA Renegotiations Prove Difficult

Four rounds of trilateral talks have now concluded since August, and Canada and Mexico are looking to expand their trade relationships outside of North America as renegotiating the North American Free Trade Agreement (NAFTA) with the U.S. has proven difficult. While business communities across all three countries are generally hoping for a modest modernization of the agreement, the Trump Administration has been negotiating for farther reaching changes.

Mexican and Canadian Officials involved attribute the contentious nature of the discussions to U.S. demands for items such as: a five-year sunset provision, changes to NAFTA’s dispute arbitration system, changes to intellectual property provisions, new protections for American produce growers, 50% U.S.-specific content requirements, and a strengthening of rules of origin for the auto industry. Many U.S. business disagree with these “‘poison pills”, which they argue would ultimately hurt American companies, jobs, and investments.

Due to the uncertainty surrounding the continued existence of NAFTA, as President Trump repeatedly threatens to terminate the deal, Canada has begun strengthening its free trade deal with Europe, the Comprehensive Economic and Trade Agreement, which was signed in October 2016. “Canada has better access to Europe than almost any non-European country in the world, including the U.S.”, and is looking to cement itself in this region. And although current trade between Canada and Latin America is quite small, Canada, along with its Mexican counterparts, have met with Peruvian and Chilean officials to discuss a future trade deal.

Mexico, similarly concerned with the current NAFTA discussions, is enhancing trade relationships with its partners in Latin America, and working to further strengthen the Pacific Alliance between Mexico, Colombia, Chile and Peru. Mexican officials have also travelled to Brazil and Argentina to discuss buying more corn and soy products, which Mexico gets almost entirely from the U.S. at present.

Mexico is also seeking to diversify their trade with other regions in the world, including non-historical trading partners such as: the European Union, China, the Middle East and Turkey. In an early September trip to China, Mexican President, Enrique Peña Nieto, signed a Memorandum of Understanding (MOU) with e-commerce giant, the Ali Baba Group. Under this agreement, Alibaba will work closely with the Ministry of Economy of Mexico to help Mexican Small and Medium-sized Enterprises expand into international markets, in particular China.

NAFTA renegotiation talks are expected to continue into 2018. Whether the Trump Administration’s posture and willingness to withdraw from the 24-year-old agreement is sincere or just a negotiating tactic remains to be seen. In the meantime, Canada and Mexico are actively seeking to diversify their trading partners 

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