http://www.economist.com/news/americas/21701179-naftas-glory-days-may-be-over-three-amigos-and-two-spectresNAFTA’s glory days may be over
Jun 25th 2016 | MEXICO CITY, OTTAWA AND SACRAMENTO | From the print edition
WHEN Ronald Reagan, running for president in 1979, proposed doing away with trade barriers between the United States, Canada and Mexico, he did so with his usual hyperbole. It would show that Americans were still capable of “dreaming up fantastic deeds and bringing them off to the surprise of an unbelieving world”, he declared. The North American Free-Trade Agreement (NAFTA) signed by his successor, George H.W. Bush, and by his Canadian and Mexican counterparts in 1992 could not live up to such hype. But the benefits were still substantial, especially in the early years. Trade among NAFTA countries nearly quadrupled in nominal terms after the treaty took effect in 1994 (see chart). Northern Mexico industrialised. Productivity jumped in Canada, which had signed a free-trade deal with the United States six years earlier.
But when the “three amigos”, as the leaders of the NAFTA countries call themselves, gather for one of their annual summits in Ottawa on June 29th, the mood will be uneasy rather than celebratory. The biggest reason for that is Donald Trump. Today’s amigos—Barack Obama, Justin Trudeau, Canada’s recently elected Liberal prime minister, and Enrique Peña Nieto, Mexico’s president, are like-minded leaders who can unblushingly call one another friends. No one imagines that Mr Trump, if he is elected the United States’ next president in November, will fit into that club. He has called NAFTA a “disaster”. Just as he wants a wall to bar Mexicans from the United States, he wants high tariffs to keep out the goods they manufacture.
Although Mr Trump will be the most troubling spectre at the triangular talks, he is not the only one. The proposed Trans-Pacific Partnership (TPP), which would include the three NAFTA partners plus nine other (mostly Asian and Latin American) countries, would largely supersede the North American deal. Mr Obama views it as an improvement because it includes environmental and labour protections that NAFTA lacks. It would also help remove non-tariff barriers that still thwart North American trade. But it would transform NAFTA’s ménage à trois into a clamorous throng of a dozen; the three amigos would become the 12 acquaintances.
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