WORLD OF INDUSTRIES 02/2018

Nafta negotiations could result in a new trade deal for
the North American bloc or it could start a global trade
and tariff war, the direction at which America and its
trading partners are heading is completely
unpredictable.
When negotiations for Nafta or North American Free Trade
Agreement began in 1991, the goal for all 3 countries was integration
of developed, high-wage economies like the U.S and Canada
with developing economies like Mexico. The expected outcome
was that free trade would provide new jobs and opportunities along
with stronger and steadier economic growth to Mexico. Whereas
for United States and Canada, Mexico was seen as a promising new
market for exports and also a low cost investment destination. When
Nafta came into force in 1994, the tariffs, duties and quantitative
restrictions on trading of goods across borders were progressively
eliminated. The deal focused on liberalization of trade and boosting
the manufacturing competitiveness of American and Canadian
companies, it also sought to protect intellectual property, establish
dispute-resolution mechanisms and implement labor and environmental
safeguards. Nafta fundamentally reshaped North American
economic relations. Within the first 20 years of Nafta’s implementation,
regional trade increased sharply from $ 290 billion in 1993 to
more than a $ 1.2 trillion in 2016.
US-Mexico trade
Mexico is the USA’s third-largest trading partner in terms of goods,
with $ 525 billion in total two-way trade recorded during 2016. With
more than $ 230 billion in exports and $ 294 billion in imports from
Mexico, America was left with a trade deficit to the tune of $ 63 billion
in 2016. These numbers recorded a further rise in 2017, with
America exporting more than $ 240 billion and importing more
than $ 315 billion worth of goods from Mexico, creating a trade deficit
more than $ 70 billion. America’s top exports include mechanical
engineering products and machinery ($ 42 billion), electrical
machinery ($ 41 billion), automobiles and commercial vehicles
($ 21 billion), plastics ($ 16 billion) and agricultural products ($ 18
billion). In terms of American imports, top import categories were:
Automobiles and components ($ 75 billion), electrical machinery
($ 62 billion), mechanical engineering products and machinery ($
51 billion), optical and medical instruments ($ 13 billion) and agricultural
products ($ 23 billion ).
Nafta renegotiation
Picture: fotolia
Despite delivering impressive trade numbers, the Nafta deal has
been a perennial political target. In 2016 presidential campaign,
Donald Trump criticized the pact for facilitating the shifting of U.S.
manufacturing operations and jobs to Mexico. Trump’s election
campaign also witnessed a series of derogatory accusations targeted
at Mexican immigrants. He has frequently insisted on constructing
the border wall along the US-Mexican border to regulate trade and
immigration between the two nations, and that Mexico will pay for it.
In response to the outrageous border wall proposal, Mexican President
Peña Nieto has firmly stated that his country will not pay for the
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