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Is Trump Putting NAFTA on Life Support?


U.S. President Donald J. Trump. Photo: Flickr

By RICARDO CASTILLO    

U.S. President Donald Trump’s claimed that his reason for slapping Canada, Mexico and the European Union with tariffs on steel and aluminum was a matter of “national security.”

Definitely, the response from all of the nations in question — friendly allies all of them — is that Trump’s reason is pure, unadulterated humbug. None of the affected and definitely offended leaders liked the nasty attitude Trump took and each answered according to their specific relation with the United States.

Canadian Prime Minister Pierre Trudeau could not understand how his nation could possibly pose a threat to U.S. national security. In fact, in complaining about Trump’s reasoning, Trudeau took a trip down memory lane to remind Trump to all the Canadians that died in World Wars I and II fighting shoulder-to-shoulder with U.S. soldiers.

Trump’s reaction to this comment was no less than preposterous: “Trudeau is overreacting” he said.

Trudeau was not alone in feeling offended. In fact, last week President Enrique Peña Nieto spoke on the phone with the Canadian prime minister and both came to an agreement to stand together on this very touchy issue.

Trump’s reaction upon hearing about the union was one of dismay. Right in the midst of the North American Free Trade Agreement (NAFTA) renegotiations, he voiced a loud thought: Maybe it’s best for the United States to scrap NAFTA and do separate treaties with Canada and Mexico. Another threat from the big bully as seen from Canada’s and Mexico’s perspective? You bet!

Now, Mexico has followed in Canada’s footsteps all the way to filing a complaint with the World Trade Organization (WTO) as announced Monday, May 4, by Economy Secretary Ildefonso Guajardo.

He made it crystal clear that Mexico considers the 10 and 25 tariffs on aluminum and steel “due to national security” on the part of the United States violates the WTC safeguards agreement, as well as the General Agreement on Tariffs and Trade (GATT), inked by the three nations in 1994.

Guajardo also announced that Mexico will be announcing one-by-one the products on which it will impose countervailing tariffs, all of them “in proportion to the damage that Mexico may unfortunately receive.”

For starters, Mexico imposed a 20 percent countervailing tariff on U.S. pork. Many in Mexico immediately criticized the tariff as minimal and useless, claiming the government should hit the countervailing tariffs where it really hurts, such as on fuel imports.

Nevertheless, a tariff on pork seems to make sense for reasons more than one. Keep in mind that

Mexico is the United States’ largest pork meat importer and this industry thrives on Mexican sales.

And why not? It has some political implications, even if they weren’t intentional. Most U.S. pork ranches are in Iowa, considered “Trumpland” in terms of voters and definitely an influence at election time on the Electoral College. This may not be enough to topple Trump – and that’s not the intent, either – but surely it will irritate his pork ranching supporters, who, with all justification, will be demanding an answer from Washington since Mexico expects that the tariffs will send these ranchers reeling close to bankruptcy.

On the whole, Canada will be responding to Trump’s protectionist duty with quotas on different products that will come to about $12 billion, while Mexico expects to slap on duties for about $4 billion. Both Trudeau and Peña Nieto considered these amounts as comparable to the damage Trump’s tariffs will create. Those tariffs will stay put until Trump decides to drop his unwarranted tariffs.

Even then, both Trudeau and Peña Nieto agreed that neither nation poses a “national security threat” to the United States, and were suspicion that Trump is looking for reasons to undo NAFTA, which nobody has forgotten was one of his campaign promises.

Other articles being considered by Mexico for countervailing tariffs are electric lamps, apples, grapes, dairy products and other foodstuffs.

The underlying question remains: How will this trade war affect the real issue, that is, the ongoing NAFTA renegotiations?

Definitely the tariffs on steel and aluminum are eyed as a business ploy by Trump to put pressure on Canada and Mexico to yield to many of the demands which neither U.S. neighbor has agreed on, such as those on rules of origin and definitely the “sunset clause,” which Trump, through his negotiators, has made it clear he’ll not give in on.

The outcome of this confrontation is not going to be a good one. Now Canada and Mexico are embroiled in legal conflicts with the United States at the World Trade Organization, a fact that, in the long run, will irritate Trump further because it will force him to confront a higher authority on trade issues.

And at the WTO, an old Mexican adage seems highly appropriate for the occasion because in a show of force, it will all come down to seeing whose pork rinds crackle the noisiest.

Will this mean the beginning of the end of NAFTA as we knew it?

 

 

 

 

 

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Categories: Finance, Mexican politics, Mexico, Mexico-U.S. relations, Opinion, PoliticsTags: , , , , , , , , , , , , , , , , , ,

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