President Donald Trump entered into office threatening to abandon the North American Free Trade Agreement if the United States was not given a better deal immediately. But, after negotiations began, it looked as if his ultimatum would be unnecessary.
Now, U.S. officials involved in NAFTA negotiations are being accused of making proposals on issues Mexico and Canada have said they would never agree to. Are these bold negotiation tactics being used to place the U.S. in a better position for future issues, or are trade arbitrators intentionally trying to sabotage talks so Trump can make good on his promise to leave the agreement?
According to Bloomberg, two unnamed officials indicate it is their belief that it’s the later reasoning, stating that some of the United States’ more recent proposals would make it impossible to reach a settlement.
As the negotiations are intended as private dealings between countries, exactly what was on the table is a mystery. However, some details have been made public. Among them are the insistence that the U.S. limit its market for contracts at a dollar-for-dollar rate with the combined Canada-Mexico market. While this could be feasible in some industries, the United States’ much larger population and economy makes it difficult to achieve overall.
Both countries have expressed concerns that this would leave them with diminished access to U.S. procurement, making them second-tier trade partners.
At the core of this entire issue is the automotive industry. Trump has made cutting the trade deficit as the primary goal for the NAFTA renegotiations. Cars are easily the largest disparity between the United States and Mexico. The U.S. has demanded a deal that provides better terms for American workers and its industries, especially automotive.
The United States has also said it wants open so-called seasonal products, like produce, to dispute-resolution mechanisms. This is anticipated to lead to numerous disputes with U.S. growers and possibly end in tariffs, which could severely handicap Mexican exports. There have also been proposals to eliminate the preferential tariffs on textiles from Canada and Mexico over two years.
As for the possibility that the U.S. could be bluffing, there is reason to take these threats seriously. On Tuesday, the Department of Commerce decided Bombardier aircraft should be subject to a 219-percent import tax after Boeing complained Bombardier was issued unfair subsidies from Canada and Britain. Justin Trudeau, Donald Trump, and U.K. prime minister Theresa May discussed the matter this week, but there appears to have been no resolution to the measure.
Taxing imported cars has been a longstanding threat of the Trump administration, but domestic automotive manufacturers have a lot of interest tied up in other countries and, as a result, haven’t been nearly as enthusiastic. The U.S. also hasn’t made any definitive demands in regard to the automotive sector during this last round of talks — at least, none that we know of.
U.S. Trade Representative Robert Lighthizer told reporters Wednesday that “significant progress continues to be made” in the NAFTA talks. Still, he expressed his concern that “there is an enormous amount of work to be done, including on some very difficult and contentious issues.”
The next round of talks will take place in Washington, starting October 11th. Officials expect the United States to finally present its proposals on automotive rules of origin and take a controversial position against the other two countries. Odds are good that the U.S. will demand that a significant share of a car must be made in the three countries to enjoy tariff-free benefits, along with a highly U.S.-specific content requirement.
Foreign officials have already said those rules would be nearly impossible for the other countries to accept.
[Image: NAFTA Secretariat]
“On Tuesday, the Department of Commerce decided Bombardier aircraft should be subject to a 219-percent import tax after Boeing complained Bombardier was issued unfair subsidies from Canada and Britain.”
This is kind of weird for a couple reasons. First, Bombardier barely competes with Boeing in much of anything. Sure, Boeing sells a folly called the BBJ to people, but it’s a minor player in executive travel because of running costs and the need for bigger airports. In the commercial world, there’s almost zero competition between them.
Second, I believe most of Bombardier’s products are made in Wichita. So how would this tariff even work?
Starting a few years ago, Bombardiers C series is a direct competitor to Boeing’s bread and butter 737s. The C series is built in Mirabel, Quebec where all the CRJs are built.
Even before the C series, the CRJs have long been a thorn in the side of Boeing, you can’t fly regional airlines without running into one.
I didn’t realize the C-series was taken seriously (yet), at least compared to Airbus. I know it’s still new to the market, so hard to say what the long-term impact will be.
I know the CRJ well, it’s about half the flights I take regionally. I guess I never thought Boeing cared about them much. Sort of like building minivans and worrying about whether MINIs are stealing your market :P
the CRJ900s and CRJ1000s are much bigger than the 700 and easily eats into the shorter routes that 737s would have taken. While they can’t quite fly coast to coast, a whole lot of routes that companies like Skywest and defunct companies like Pinnacle or Mesaba operate/operated would have been 737 orders.
Boeing would have a key interest in nipping the C series in the bud, the CRJ customers with Boeing planes are going to be tempted to consolidate vendors if they undercut the 737 Max by some margin
What?! The CRJ in no way competes with the 737. That’s like saying an Airbus A380 competes with the 737 because they both have wings and it can fly the same distance.
While the C series is closer in size and mission to the 737 its smallest variant the CS100 is much smaller and serves a market Boeing doesn’t. It is also a design from this century unlike the antediluvian 737. Note that Boeing did not even compete on the Delta order that was the so-called excuse for their complaint.
The jet in question, the CS100, has no real analogue in the B737 or A32X series. It’s a 100 seater (while the 737-7MAX and A319 are 130-135 seaters). The 737-7 was not even in the running in the RFP, and Boeing only offered used 717s and some E190s to Delta’s RFP. The 737-600 and A318 have been dead and gone for some time.
The CS300 is larger and can seat 130, but that’s not the jet Delta ordered.
Boeing going as hard as they did (and Commerce giving such an outrageous tariff) is hard to swallow, considering the massive amount of tax breaks and similar moves Boeing makes when selling jets (e.g. offering United older 737-700s, not even 7MAXes, at a rate so loss-leading to cut the C-series out of an order with UA). It’s a naked attempt to smother BBD while they were struggling and to prevent them from having the resources to make a CS500 stretch, which would be a real A320/737-8MAX competitor.
This will cost Boeing orders from Canada (like new F-18s, tankers, helicopters, etc) if it’s not resolved. It’ll probably make their relationship with Delta even thornier than it is now.
On the subject of the tariff itself, it will be contested in trade court, which will probably be much more favorable to Bombardier. The barrier for Commerce to impose such a tariff is very low, but whether the tariff actually gets collected is another story. Especially for such an outrageous tariff that doesn’t seem to have any basis in actual percentage of production per frame. But make no mistake, this is basically Boeing declaring war on Bombardier and using the US Government to try to kill a product that could, eventually, impact their bread and butter 737-8, if BBD ever manages to make a CS500.
From a technical standpoint, the C-series is an absolute winner. It’s outperforming its fuel burn and other cost metrics by over 2% which, in an era of being overburn by 2-3% is common, is outstanding. It’s also a very passenger friendly jet. That’s what happens when you put 30 and 50 year old base designs against a clean-sheet. But BBD is having production problems relating to Pratt engines (what else is new). That’s not unique to BBD, as Airbus is also struggling with its variant of the Pratt GTF.
England has also threatened to cancel Boeing military contracts since the tariffs would hurt Bombardier plants in the EU.
Don’t confuse bomb tossing with policy.
45 was voted in by folks (a minority, recall) who wanted the biggest bully and “stuff” disturber in office. They got him, but didn’t realize he is a total con-man who then staffed the administration with worst case scenario choices. A valid protest vote got them a worst case scenario…for them, but a con man
Don’t think he’s read any policy he didn’t see today on Faux News. The underlings who know to play him will come in with all sorts of things good for their industry and bad for “the people”.
NAFTA is dead. Long live NAFTA!
Ross Perot is finally our president.
As a Canadian, I was always against expanding the Free Trade agreement between the USA and Canada to include Mexico. American and Canadian workers cannot compete with Mexican workers when it comes to labour costs.
As they say on Sesame Street ‘which of these is unlike the others’?
For better or worse, my sense of voter sentiment in the run-up to the election was the voters’ real beef with NAFTA has really been about Mexico. Some call it overt racism; some cite the inability to compete with Mexican labor prices. Either way, it seems that Trump’s voters and every industry except the auto industry would be pleased by a NAFTA renegotiation that has one step: Kick Mexico Out.
Sure, car prices may go up for some models, by by no means all. The more desireable and more profitable trucks and SUVs are mostly (not exclusively, but mostly) made in the USA and Canada anyway.
Caboose – Canada wants wage and worker rights in NAFTA. That would be an indirect way to deal with Mexico, if they want to sign on, they can level the playing field.
Ironically, many of the companies using/abusing Mexican labour happen to be USA companies. It is easier to blame the Mexicans than the exploiters.
they need to raise labor rates in mexico and actually regulate stuff there. its a third world country because of corruption and lack of regulations.
not only that, they have very lax regulations regarding just about everything, including building code. just like the republicans LOVE! less government! i remember going to ensenada, and watching buildings being built there. all stacked cinderblock and mortar, very little rebar to be seen. good enough, right?
PM Trudeau has warned that if this tarif stands, Canada will cancel its ongoing purchases of Boeing-built F18s.
Actually, your air force should buy the used Australian F-18s to replace your CF-18s as they are only about ten to fifteen years old and are of the Super Hornet spec. By the time these will need replaced something better will be online, and it will probably work unlike the F-35.
My prediction is your current government will do the more fiscally irresponsible thing and then laud Canadian jobs saved (or possibly both). Either way your boy king can’t lose, one way “I saved jobs” and the other, “I [pretended to be a man and] stood up to Trump”. Clever girl.
ca.reuters.com/article/domesticNews/idCAKCN1BH2H2-OCADN
28-Cars-Later,
I’m American. As such, I certainly wouldn’t dare bad-mouth the leaders of other countries.
“People who live in glass houses shouldn’t throw stones.”
I respectfully disagree, see people and things for what they are otherwise you are self censored.
28-Cars-Later,
We have a clown for President. An embarrassment worthy of a 1950s banana republic. A man who knows nothing about any of the complex topics he’s supposed to manage. Who “learns” what to think from cable news.
And you criticize Trudeau?!
@BobNelson
don’t mind 28-C-L. he’s one of those pompous types who thinks he and he alone can “see people and things for what they are.”
JimZ,
“… thinks he and he alone can ‘see people and things for what they are.\'”
He saw me for a Canadian, which I am not…
28 Cars,
The Canadian Air Force is lagging quite a bit.
Our Aussie F/A 18s are already being considered by the CAF. The youngest of our Hornets are 30 years old.
Yes it’s time for you folks to get active .Your President is about to do permanent harm to your country..I.solating your country from the global economy, as imperfect as it may be, is going to hurt a lot.Thank goodness we’ve just begun to use CETA – Canada Eu.free trade agreement.Our neighbours want to become our advisories – sad !.
The last four did, its only fair…
We must find a way to jettison this illegitimate presidency, and quickly, before any real damage is done.
We in the US survived eight years of an illegitimate presidency, why not four more?
You’re right, Bush should never have been given the 2000 election because he didn’t actually win.
Agreed, and Chalky was just another CIA op like Junior.
as much as i despise the dotard, nafta was no bueno for american workers. american companies and roger smith? si. he helped kill flint michigan.
It has been muy bien for American farmers though. Killing NAFTA would be killing their cash crops.
Well, the way things are going can only harm the US and its people.
The US needs relationships with other nations to maintain its standard of living. That’s how the US achieved what it has.
As we can see Trump and his team are a joke. I blame the media and ignorant selfish individuals for his rise to power.
Good to see you back to simple America bashing rather than more anti semitism.
As a Canadian, I hope NAFTA talks fail. Before it was signed in early 1990’s, I believed it would be a ” net negative” for Canada, and unfortunately my prediction was right..
Trump is all bluster so he starts with a ridiculous opening bid, but realistically hopes to end up somewhere in the middle – typically door-in-the-face negotiating and it does work much of the time. Get too tough on Mexico and they better get that wall done quickly because bad economic conditions south of the border mean more “undocumented” immigrants arriving north of the border.
Bombardier is a good example of how twisted economic relations have become. One might think that the whole idea of American airlines and passengers benefiting from the fact that the British and Canadian tax payer have subsidized the development of Bombardier passenger jets would appeal to Trump.
Ummm… voyager??
Are you really looking for logic in a Trump Administration policy? Seriously?
And are you really expecting consumer interests to carry any weight at all, opposite Boeing?