A world without the North American Free Trade Agreement would be sure to disrupt the auto supply chain in Canada and the U.S., analysts said.
This story by John Irwin originally appeared in Automotive News.
But just exactly what would happen if the U.S. decides to exit the agreement remains an open question with no clear answers. That’s because that country’s departure from NAFTA, a possibility that became more realistic following the most recent round of renegotiations, is virtually without precedent, according to analysts.
NAFTA negotiators met in early December and parted ways for the holidays Dec. 15. They did so without signing off on any chapters after a week of talks. They will reconvene in Montreal beginning Jan. 23.
U.S. trade negotiators have reportedly proposed requiring vehicles built within the NAFTA region to have at least 85 percent North American content, including 50 percent U.S.-made content, to cross the borders tariff free. It’s a proposal that negotiators from Canada and Mexico have found unacceptable, just as most automakers and suppliers have.
It is unclear what would happen if Trump withdraws the U.S. from the agreement, but analysts said it would certainly be messy. For one, Trump cannot instantly withdraw the U.S. with the stroke of a pen or the sending of a tweet. He can only withdraw on six months’ notice.
During this window, experts said to expect automakers and others to sue the U.S. government in an attempt to keep NAFTA rules in place and to put pressure on Congress to challenge Trump’s authority to pull out of the agreement on his own, seeing as it was only ratified in the U.S. because Congress approved it.
No matter what happens in renegotiations, Canada and Mexico – and the industries that depend on NAFTA – are receiving a serious message from Washington: They can no longer assume free trade as a given.?