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November 1, 2017

Can Trump Really End NAFTA?

 |  By: Anna-Lisa Laca

The entire time Canada, Mexico and the U.S. have been negotiating the North American Free Trade Agreement (NAFTA), President Trump has threatened to tear up the deal. However, if he were to withdraw from the trade agreement, there’s a good chance the courts and Congress would step in to preserve our trading relationships.

“I happen to think that NAFTA will have to be terminated if we’re going to make it good. Otherwise, I believe you can’t negotiate a good deal,” Trump said last month in one of his most recent comments about scrapping the agreement.

Canadians think there’s a chance he might pull out. Carlo Dade, director of the Canada West Foundation’s Trade and Investment Centre thinks there’s about a 50% chance of that happening.

American farm groups have responded to the threats made by the president, urging him to do no harm.

“Stay the course, do the hard work, do the heavy lifting, find consensus, improve NAFTA don’t walk away from it,” says Tom Vilsack, former secretary of agriculture and current CEO of the U.S. Dairy Export Council.

Dairy leaders hope negotiators protect the U.S. dairy industry’s trading relationship with Mexico at all cost. According to Shawna Morris, vice president of trade policy for the National Milk Producers Federation, the U.S. sells $1.2 billion of dairy to Mexico each year. That’s the equivalent of one year’s milk production on a 1,500-cow size dairy. As the No. 1 trading partner to U.S. dairy, 75% of Mexico’s dairy imports come from America.

“It’s 3 times more than the amount of dairy we sell to China each year,” she adds.

Vilsack says walking away from NAFTA would be a difficult competitive disadvantage for the U.S. to overcome.

“We’re already dealing with the aftermath of pulling out of TPP. We’ve lost an opportunity in Japan that we’re going to have to work hard to reclaim,” he says.

According to Jim Wiesemeyer, Farm Journal’s Washington policy analyst, Trump pulling out of NAFTA would likely not be the end of the trade agreement.

“Even if trump were to withdraw I think there are other things that would happen to temper the impact, either the courts or Congress,” he says.  “You may well have Democratic Congress members that have never voted for bilateral trade agreements say let’s just keep what we have.”

Wiesemeyer says it’s important to keep in mind we are barely halfway through the renegotiation talks and a lot could happen between now and then. While some fear these talks could go on for years to come, Morris says the administration will not be willing to let that happen, although they likely won’t be wrapped up before the end of the year as originally hoped.

“We don’t anticipate that it’s going to bleed on for years and years. Given the Mexican election pressures and given the pressure in the U.S.,” she says. “There isn’t a lot of patience from the Administration to see these talks go on.”