Resolution likely as sixth round of NAFTA negotiations commence

Today, the sixth round of renegotiations of NAFTA kicks off in Montreal. They will focus on energy, investment, financial services and agriculture.

Coinciding with the start of the World Economic Forum in Davos, Switzerland, some economists have raised concerns about a US withdrawal from the treaty. President Trump has cited an impasse on the issue of payment for a border wall between the US and Mexico as a potential reason for withdrawal.

However, it is likely that the agreement will be renegotiated successfully, with only marginal changes. In a recent Reuters poll of 45 economists, 41 believed the renegotiations would result in an updated trilateral agreement not radically different from the current one. Other economists have warned that withdrawal from the treaty would eliminate tariff advantages that could be potentially devastating for American agriculture and consumer prices.

With a Mexican presidential election scheduled for July of 2018 and US midterm elections in November, pressure to conclusively wrap up renegotiations has increased. However, expect the economic disadvantages of withdrawal to outweigh rhetorical threats of unfairness in shaping the Trump administration’s decision on whether or not to withdraw.

Delve deeper: NAFTA renegotiations: US protectionism writ large

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