The US-Mexico Trade Deal Dies

Yves here. One detail: this article does not make clear that the incoming president of Mexico, Lopez Obrador, did not object to the current government finalizing a trade pact with the US. But perhaps he could tell it was unlikely to get done in time.

By Barkley Rosser, Professor of Economics at James Madison University in Harrisonburg, Virginia. Originally published at EconoSpeak

Nobody is calling it that, but the low key story on the back pages of today’s major papers report that this is what has happened, not to my surprise.  September 29 (or maybe the 30th at a stretch) is the deadline for President Trump to submit to the Congress the final version of the US-Mexico trade deal if there is any chance of it being passed by the US Senate in time for outgoing Mexican President Pena Nieto to sign it on his lats day in office on November 30 after the outgoing Mexican parliament could approve of it.  The US Senate rules are that there is a 90-day waiting period for the initial announcement of a trade deal and a 60 day waiting for delivering the final detailed agreement.  The Trump administration got their initial report in on time, but with only it involving US and Mexico.  Sept. 29 is the deadline for the final deal.

As noted in previous posts here (Aug. 29, and Sept. 6, , sorry having trouble providing the links), top Republican senators such as No. 2 John Cornyn of Texas and others have said they will not approve a deal that does not include Canada, a reformed NAFTA.  Let me note that it was not impossible for this US-Mexico trade deal to form the basis of such a deal.  But, unfortunately, in the immediate aftermath of the announcement of the US-Mexico deal Trump announced that Canada must settle the negotiation on “our terms.”  Oh.  The funny thing is that there was a possible deal.  The US was making demands of Canada about the dairy industry (never a part of NAFTA because it was so hard to make a deal) and Canada was making demands about the lumber industry, generally described as a dispute over “dispute resolution.”  There were other issues, but these were the politically hard and sensitive  ones involving such places as Wisconsin and Quebec.  In the end it appears that no deal between the US and Canada has been made and probably will not be made in time for the Sept. 29 deadline.

The newspaper reports provide zero details of the official negotiations, led by official US trade rep Robert Lighthizer on the US side, a hardline but experienced and knowledgeable official. All we have is that there is no deal between and the US and there will be no further official negotiations between now and the deadline of Sept. 29 or 30. We have just passed a last possible moment to save the US-Canada negotiation at the UN meeting (where the US president for the first time in history was laughed at while addressing the UN General Assembly filled with around 100 national leaders from around the world), actually two.  One was a possible meeting between Lighthizer and Canadian Foreign Minister, Chyrsta Freeland, which might have happened on the sidelines of the UNGA meetings.  I do not think that happened, and while she has in the US media been regularly identified as the Canadian opposite number of Lighthizer, she certainly was not the Canadian rep in the now failed negotiations, presumably somebody on the same level as Lighthizer (US SecState Pompeo is the opposite number of Freeland), whose name I have never seen reported.

But that meeting became completely irrelevant as there became a possible meeting at the same meeting (after Trump got laughed at) between Trump and Canadian PM Justin Trudeau.  Trump very loudly and publicly declared that he would not meet with or speak with Trudeau, claiming that he did not like the Canadian ngotiating “style.”  Really.  In any case, any possible meeting between Lighthizer and Freeland was simply out the window.  And, of course, this means there will be no agreement between the US and Canada prior to the Sept. 29 deadline.

According to the back page WaPo report today, despite this failure of getting an agreement with the US’s largest national export destination, the Trump admin will submit the current US-Mexican agreement without Canada (NAFTA minus Canada) to the US Senate (assuming that some not well-reported details of this agreement with Mexico have been resolved).  I suppose there is a small chance that the Senate will accept it and that will be it.  But based on previous statements by important Republican senators, this will not pass without Canada aboard, and while a few Dem senators (Sherrod Brown) have made supportive noises about Trump’s trade war, I doubt there will be enough to offset the loud GOP opposition, especially given that that United Autoworkers Union has come out against the agreement without Canada, joining in this with the US Chamber of Commerce and the US Business Roundtable.

It looks like the successor to NAFTA, if anything, will have to be renogiated from scratch with the incoming leftist Mexican president, Lopez Obrador, but Canada will have to be brought in, no matter what, or else involved will laugh very loudly at President Trump.

Print Friendly, PDF & Email


  1. a different chris

    Other aspects of the above besides (or maybe over my head), I really, really didn’t like Lopez Obrador’s attitude of “hey, I ran against this blah blah bad bad things government but whatever they negotiate with our monster neighbor to the north is fine with me!”

    I mean, WTF. Right out of the gate this “populist” wanted to avoid addressing something of real substance to, you know, actual people.

  2. nervos belli

    Just to clarify to a european: when this yuuuge new and bestest trade deal ever dies due to those legal formalities of ratification, the old 1990s NAFTA from evil Bill will be still in full force and ticking along?

    At least until an even bigger and better trade deal is made, this time with more nations, more money and less bad media obviously. Correct?

  3. Winston Smith

    Thanks Yves for bringing this to our attention. Can’t understand why this important story is so under reported. maybe that has to do with being a Canadian living in the US, watching the Senate circus around “Keg” Kavanaugh…

    1. JEHR

      Winston, I’m a Canadian living in Canada and I am carefully following all the news reports here and this is new information about the negotiations that I haven’t heard before. I think that laugh at the UN may have broken the deal! I do not know how a country can negotiate a trade deal with Trump when he says he won’t compromise on anything and then throws in even more nefarious requests as part of the deal. He was actually celebrating the “ruination” or our economy. Wow! Just Wow!!!^&&*JY^&*()__)*&%$:”><??(*(_+)*%#$@$$%^&&*, etc.

        1. JEHR

          Thank you for the link. That makes more sense to me than anything else I have read. I think Canada would be wise to just not negotiate. We are going to pay either way, whether negotiating or not.

  4. Oregoncharles

    ” or else involved will laugh very loudly at President Trump.”

    Since Trump has repeatedly threatened to just pull out of NAFTA, that wouldn’t really be called for. And if it’s true that he’s “starting from scratch” with Lopez Obrador, which I doubt, we may actually see big improvements – which Canada may or may not sign onto.

  5. valuationguy

    Yves is correct in that this story misses the entire issue that the deal in final negotiations is one that Obrador has personally agreed to with and provides better benefits to Mexico….as opposed to Obrador’s very public opposition to the existing NAFTA agreement where most of the benefit is to foreign countries who just use Mexico as a final assembly area….rather than manufacturing parts there.

    It is highly likely that it is Obrador (i.e. Mexico) which will first formally announce pulling out of NAFTA in order for it to sign the new bilateral agreement with the U.S (since NAFTA precludes other bilateral trade agreements. As a result of Mexico formally pulling out (first), Trump can then ‘claim’ that he didn’t break the NAFTA agreement but was merely exceeding to Mexico’s wishes to negotiate a deal which is better for both parties. A win-win for both side which sidesteps much of the political morass. (Of course, Trump would need the Legislature to approve the new agreement…rather than depend on FastTrack…but should the Dems oppose it, Trump can blame any slowdown in the economy on them.

    In such a scenario….Canada is left out in the cold…and its auto parts manufacturing (where the majority of the trade tariffs will fall) quickly moves elsewhere.

    Everyone should watch the video of the very visible brush-off Trump gave “the kid” at the U.N….where Trudeau tried to get Trumps attention by tapping him on the shoulder and Trump ignoring him entirely. He stands and greets everyone else with a quick handshake….but Trudeau gets the proverbial (and literal) ‘cold shoulder’…..not something that any leader of a major “ally” is used to or won’t get the explicit threat conveyed. (Even if Trudeau did realize it at the time….his handlers are sure to have filled him in later.)

    1. Steve

      valuationguy, thanks for your post. Can you share any details or points about the proposed US-Mexico deal which in the mind of incoming President Obrador would make it a “better agreement” for Mexico relative to the current NAFTA agreement? The only thing I’ve heard which could fit the above is that both countries will now have additional “safeguard” tools to legally restrict the exports of the other if they are damaging to domestic interests. For example, unless Mexico can legally limit the subsidized agricultural exports from the US dumping which has “devastated” it’s rural economies, it will be almost impossible for Obrador to fulfill his promised rural/agricultural development agenda.

    2. Timothy Descheneau

      Canada’s trade with the world in vehicles and parts is roughly in balance. Since NAFTA, we’ve lost about half our motor vehicle jobs to right-to-work states in the U.S. and to Mexico. We consume about two million vehicles per year which makes it worthwhile for Honda and Toyota to assemble here as well as the Big Three. The end of NAFTA means we put tariffs on U.S. cars and parts and no longer have free trade with Mexico, either. The jobs we’ve lost will come back over a period of years of reorganization and the losses in efficiency will be borne by all three countries. Asian and European manufacturers will end up with most of our market.

      Remember, Canada is by far the largest customer for U.S. goods and services and there is very little that you produce that we can’t buy elsewhere.

    3. Tony Wright

      And if you keep bullying your friends you will find you have none left when you need them. It is called the law of Karma, Donald – learn it.

  6. clarky90

    “the US president for the first time in history was laughed at while addressing the UN General Assembly”

    IMO, serious political analysts are watching far, far too much “Dr Phil” and not enough (or at all) “WWE” (Jungian archetypal clowning). Deplorables understand mythology.

    The UN laughed at POTUS because Trump intended them to laugh…..

    The power elite, and their paid minions, ridicule, laugh at, insult, joke about, diminish, pop-psycho-analyze… DJTrump. And, as a result of their unremitting attention, and constant “gaze”, POTUS becomes increasingly powerful.

    In western mythology, “The trickster or clown”

    In American Indian culture;

    “In the days before the invaders came. . .we had clowns. …. our clowns were with us all the time, as important to the village as the chief, or the shaman, or the dancers, or the poets.”

    “Most every tribe had their Sacred Clowns. The Oglala and Lakota called them Heyoka (“crazy”), the Arapaho called them Ha Hawkan (“holy idiot”), and both peoples considered them religious specialists.”

    1. Edward E

      Trump’s stand-up set at the UN went really well, have to admit, though I thought that he should have finished with “The Aristocrats”.

      Sure hope his path never takes him to building a comedy show theatre in Branson, MO

    2. Procopius

      I think you’re right about the pundits not understanding kayfabe, and its importance among “the base.” There’s a reason Trump has been installed in the WWE Hall of Fame.

  7. JCC

    When it comes to Trump and his negotiation style, I think it’s pretty obvious to most that if he cannot be the Winner with someone else being the obvious Loser, negotiations fail (which he will then claim is a “win”).

    Unfortunately for him, though he would refuse to ever admit it, he is way out of his depth when it comes to International Negotiations. Although there may be Winners and Losers, the “obvious” part is normally hidden away, not flung into the other sides’ faces.

    Win-Win is the rule of thumb. Trump can’t abide by that simple rule and so his rework of the NAFTA Agreement was probably doomed from the start.

Comments are closed.