August 16, 2017 | By Phil Levy

Phil Levy Explains the NAFTA Renegotiations

Council Senior Fellow on the Global Economy Phil Levy explains what NAFTA is, what the goals of the renegotiation might be, and how the renegotiation process is likely to play out.

"NAFTA is the North American Free Trade Agreement. It was a deal that was signed between the US, Canada, and Mexico in the early 90s. The original NAFTA was negotiated by George Herbert Walker Bush and his administration. They didn't get it signed. It was inherited by Bill Clinton, who made some modifications to this--labor and environmental side letters--and then he shepherded it through Congress. So what are the goals of the NAFTA renegotiation? That remains to be seen. So you have some people who say the goals are that we eliminate trade deficits. Others who say we modernize the agreement. And those two groups are not necessarily pointing in the same direction. I think there's really two versions of what we might have: One is the extended play version and one is the really short play version. The extended play version is something like what we saw with TPP, where it was always an exciting project for tomorrow and the negotiations stretched across pretty much the entire Obama presidency. The short play version would probably mean that they did something fairly similar to the TPP and tried to get it settled really by the end of this year if they could because you've got Mexican elections coming up next year and they don't want to get to this entangled with Mexican elections. The problem with that short play version is even if you have an agreement you still have to work it through the US Congress, and that puts you on a timetable where you're having congressional discussions of NAFTA 2.0 right in the middle of midterm elections. I think the best-case scenario is that they come up with a modernization package that doesn't look wildly different from what was contained in the TPP and they get enough congressional approval that it can be whisked through relatively quickly. I think that's a long shot."

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