President Trump has been famously critical of the the North American Free Trade Agreement, but as the seventh round of negotiations to recast it continues, one wonders why the U.S. hasn't just bowed out. Edward Allen of Politico thinks he knows the answer: Trump is stalling for time.
"Whether by design or by luck, Trump is already winning the NAFTA renegotiation. It turns out the uncertainty over NAFTA’s fate is Trump’s friend. It is part of what appears to be a systematic — U.S. trading partners might say predatory — strategy to shift investment dollars to the United States," Allen writes. "I have had conversations with business leaders in recent weeks in which they all quietly acknowledge the same thing: Until they know what the new rules will be under NAFTA, they are likely to hedge their bets by locating new investments in the United States rather than in Canada or Mexico, just in case the rules change and they are frozen out of the largest North American market."
Trump is sweetening the deal for multinational businesses who may want to open up shop in the U.S. with with a weaker dollar policy, lower corporate tax rate and business-friendly laws on the environment, workplace safety, overtime pay, and fuel economy standards. But this may not be effective for long, as trading partners catch on.
Making a decision either way on NAFTA could hurt Trump, which gives him an incentive to stall even longer. If Trump pulls out, he risks backlash from his agricultural base, which benefits enormously from the deal, as well as Republican lawmakers. At a recent meeting, nearly 30 House Republicans asked Trump to update NAFTA but urged him to be careful about adding import tariffs.
If Trump signs a deal, "then he will have to pivot from being NAFTA’s biggest critic to being a cheerleader for the new agreement in Congress, which Democrats are all but certain to denounce as inadequate," Allen writes. "A long negotiation in which he can continue to claim he is fighting for a better deal looks by far the best bet."
"Whether by design or by luck, Trump is already winning the NAFTA renegotiation. It turns out the uncertainty over NAFTA’s fate is Trump’s friend. It is part of what appears to be a systematic — U.S. trading partners might say predatory — strategy to shift investment dollars to the United States," Allen writes. "I have had conversations with business leaders in recent weeks in which they all quietly acknowledge the same thing: Until they know what the new rules will be under NAFTA, they are likely to hedge their bets by locating new investments in the United States rather than in Canada or Mexico, just in case the rules change and they are frozen out of the largest North American market."
Trump is sweetening the deal for multinational businesses who may want to open up shop in the U.S. with with a weaker dollar policy, lower corporate tax rate and business-friendly laws on the environment, workplace safety, overtime pay, and fuel economy standards. But this may not be effective for long, as trading partners catch on.
Making a decision either way on NAFTA could hurt Trump, which gives him an incentive to stall even longer. If Trump pulls out, he risks backlash from his agricultural base, which benefits enormously from the deal, as well as Republican lawmakers. At a recent meeting, nearly 30 House Republicans asked Trump to update NAFTA but urged him to be careful about adding import tariffs.
If Trump signs a deal, "then he will have to pivot from being NAFTA’s biggest critic to being a cheerleader for the new agreement in Congress, which Democrats are all but certain to denounce as inadequate," Allen writes. "A long negotiation in which he can continue to claim he is fighting for a better deal looks by far the best bet."
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