Renewed NAFTA talks could put Canadian trade relations at risk
Jan 30 2017 by Ken Ortega
That prospect is particularly worrisome for Iowa farmers and ag product manufacturers.
According to the ITAM Economist Manuel Molano, the Trumpian notion that trade and business are zero-sum games, and that Mexico is the enemy of the United States, is a 21st-century version of "Manifest Destiny" and the Nazi Lebensraum. "There will be a tit-for-tat reaction, and that would not be good".
So, while Trump's executive order "trigger finger" may have cost SMEs in terms of potential access, it appears that the greater threat in the short term may be regional stability and becoming collateral damage in any trade war. Immediately prior to Trump's inauguration, Shinzo Abe's government ratified the TPPagreement, seeing it as panacea for a crawling domestic economy and a change to lure the USA deeper into the Asia-Pacific.
Trump's proposal for the import tax is vague. Trade isn't going to evaporate because there's no TPP; renegotiated NAFTA or not, the U.S., Canada and Mexico are still going to do business with each other.
Trump has already ruffled feathers with Mexico, after doubling down on his plan to build a wall along the us southern border he says Mexico will pay for. There was none of the usual diplomatic rhetoric about "win-win" arrangements between nations but the blunt message that they had to benefit the USA more.
If ratified, the Comprehensive Economic and Trade Agreement would be an agreement between Canada and the European Union.
So if Donald succeeds in getting a 20% tariff on Mexican goods, the price of Mexican products will rise for U.S. consumers. Both countries are seeking to forge closer economic ties to offset the negative effects of trade barriers that could arise under Trump. The U.S. Department of Agriculture expects 2016-17 soy exports to hit a record 2.05 billion bushels, accounting for almost half of the recently harvested U.S. crop. "It's not just agriculture and Iowa that would face retaliation".
Still, a TPP pact without the United States should not be deemed meaningless. The US exported to China $116 billion worth of goods, mainly aircraft, electrical machinery, various grains and cars. This is government-managed trade, not free trade. He also said, "It will send a troubling signal of the American disengagement in the Asia-Pacific region at a time we can least afford it".
There is a growing risk that APAC economies will be negatively affected by a United States shift toward trade protectionism. John Deere spokesman Ken Golden says that company is closely watching the new trade policy developments.
Fitch believes this could potentially be more relevant to the APAC economic outlook than U.S. withdrawal from TPP. We can fairly ask: what alternative arrangements does the Trump administration have in mind to expand markets and reshape beneficial supply chains for USA products and services? However, that is impossible given the pledge by most Congressional Republicans that they will never raise taxes of any kind!
It also makes the point that trade in general is central to economic opportunity in rural America because "with the productivity of USA agriculture growing faster than domestic demand, the US food and agriculture industry - and the rural communities that depend on it - relies heavily on export markets to sustain prices and revenues".
The TPP, had it been implemented, would have set important foundations for economic integration in APAC, and delivered a significant long-term boost to some economies. It is equally upsetting that we have continued to force hard-working Americans to compete with foreign workers making less than a dollar an hour.
Mexico's top drug lord Joaquin "El Chapo" Guzman is escorted as he arrives at Long Island MacArthur airport in NY, U.S., January 19, 2017, after his extradition from Mexico. "We are concerned about any change in our trade relationships", says Kirk Leeds, CEO of the Iowa Soybean Association. "So we need a dramatic improvement in the way we train people who are displaced".
Trump is vowing to rewrite the North American Free Trade Agreement-or pull out of it altogether. The innovation aspect is sometimes forgotten; probably the main reason US automakers now produce top-quality cars is because they had to up their game to compete with the Japanese. But hubris has been the downfall of many leaders, and there is no guarantee that Trump can negotiate better bilateral deals with the TPP countries.