August 16, 2017, was a truly historic day for Canadian, Mexican and American negotiators as they kicked off the first round of trade talks to renegotiate the North American Free Trade Agreement (NAFTA). All parties have a long and proven track record of fruitfully negotiating free trade agreements (FTAs). Yet none of them has ever successfully redebated an existing agreement, so they are now in uncharted territory.<\/p>\n
The distinction between FTA negotiation and renegotiation hasn\u2019t been lost on Canadian Foreign Affairs Minister Chrystia Freeland, who has compared modernizing an existing agreement to renovating your house while you\u2019re still living in it. \u201cThe end result \u2014 a nicer kitchen, perhaps, or an energy retrofit \u2014 is terrific. But getting there can be a little messy and uncomfortable,\u201d she said<\/a> recently.<\/p>\n Freeland\u2019s metaphor makes a valid point about some of the discomforts of reopening discussion on something that is already in place. However, it omits two important distinctions that weigh particularly heavily in the current negotiation context.<\/p>\n First, countries renegotiate FTAs for different reasons than the ones that lead them to initiate talks on new FTAs. To continue with Freeland\u2019s metaphor, building your dream house with your new partner is quite different than renovating your kitchen because your spouse can\u2019t stop complaining about how much he or she hates it. Second, in contrast to regular trade talks, should renegotiation discussions go awry, it is by no means clear that you can simply return to the status quo. Indeed, you may well be forced out of your house entirely.<\/p>\n The Trump administration did not push for a NAFTA renegotiation because it wanted to create a modernized NAFTA 2.0 that benefits all sides. The President has made his deep dissatisfaction with NAFTA abundantly clear \u2013 most recently during his Phoenix rally speech when he spoke about \u201cterminating<\/a>\u201d the agreement. Prior to that, he has called it the \u201cworst trade deal in the history of the world,\u201d blaming it for America\u2019s huge trade deficit, the exodus of US manufacturing firms and substantial job losses. For him, an improved trade deal isn\u2019t the litmus test for accepting a modernized NAFTA. Indeed, a new trade deal would be considered \u201cfair\u201d only if the United States receives disproportionately large concessions compared with Mexico and Canada.<\/p>\n The Trump administration\u2019s discontent with NAFTA as it stands implies that Canada should be wary of considering the existing agreement to be the fallback option if renegotiations turn sour (see a recent Fraser Institute paper<\/a> by Steven Globerman and Christopher Sands). \u00a0Trump has on multiple occasions suggested that NAFTA has made the United States worse off and that he\u2019s ready to scrap the agreement if no acceptable compromise is found. Canada\u2019s alternative to a successful renegotiation may thus be a return to the old Canada-US FTA of 1989 or, even worse, to the World Trade Organization conditions.<\/p>\n Many of these threats might be political bluster, and it may well be that in the end cooler heads in Washington are able to contain the Trump administration\u2019s inflammatory rhetoric. Robert Wolfe has argued in Policy Options<\/em><\/a> that Canada and Mexico have considerable leverage if the US is looking for a quick deal. Joel Trachtman has contended<\/a> that the Trump administration can\u2019t withdraw from NAFTA without a nod from Congress.<\/p>\n The threats highlight the added dimension, however, of renegotiating a trade agreement with a disillusioned partner: you might end up having to decide on a deal that disproportionately favours your counterpart or even leaves you worse off.<\/p>\n So, should Canada be prepared to go as far as accepting a worse deal? Bargaining theory says yes. Our negotiators should leave the trade talks only if a new agreement makes us worse off than under the most credible fallback option. If Trump\u2019s threat to ditch NAFTA is plausible (which is still debatable), we should at least in theory be open to accepting a NAFTA 0.8.<\/p>\n Political forces, however, would make this scenario a difficult pill to swallow for Prime Minister Justin Trudeau. The Canadian public would see disproportionate concessions to our southern neighbour as a sign of weakness, a perception that our government would want to avoid at all costs.<\/p>\n All this suggests that a renegotiated NAFTA will be more difficult to conclude than a regular FTA. The antagonistic political climate, where the US wants to win big and Canada and Mexico do not want to lose, severely constrains the set of amendments that all parties can agree upon. And even if an agreement eventually materializes, it is not clear whether Canadians will perceive it as a modernized NAFTA 2.0 or an arm-twisted NAFTA 0.8.<\/p>\n This article is part of the\u00a0<\/strong>Trade Policy for Uncertain Times<\/u><\/strong><\/a>\u00a0special feature.<\/strong><\/p>\n Photo:\u00a0US Trade Representative Robert Lighthizer, right, speaks with Foreign Affairs Minister Chrystia Freeland, as they leave a news conference at the start of NAFTA renegotiations in Washington. (AP Photo\/Jacquelyn Martin)<\/p>\n Do you have something to say about the article you just read? Be part of the\u00a0<\/em>Policy Options\u00a0discussion, and send in your own submission.\u00a0Here is a\u00a0<\/em>link<\/em><\/a>\u00a0on how to do it. <\/em>|\u00a0Souhaitez-vous r\u00e9agir \u00e0 cet article ? <\/em>Joignez-vous aux d\u00e9bats d\u2019<\/em>Options politiques\u00a0et soumettez-nous votre texte en suivant ces\u00a0<\/em>directives<\/em><\/a>.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":" August 16, 2017, was a truly historic day for Canadian, Mexican and American negotiators as they kicked off the first round of trade talks to renegotiate the North American Free Trade Agreement (NAFTA). All parties have a long and proven track record of fruitfully negotiating free trade agreements (FTAs). Yet none of them has ever […]<\/p>\n","protected":false},"featured_media":254425,"template":"","meta":{"_acf_changed":false,"content-type":"","ep_exclude_from_search":false,"apple_news_api_created_at":"2025-10-08T01:44:51Z","apple_news_api_id":"ebb1362a-3c68-48f4-bc2b-2c4c2360e794","apple_news_api_modified_at":"2025-10-08T01:44:51Z","apple_news_api_revision":"AAAAAAAAAAD\/\/\/\/\/\/\/\/\/\/w==","apple_news_api_share_url":"https:\/\/apple.news\/A67E2KjxoSPS8KyxMI2DnlA","apple_news_cover_media_provider":"image","apple_news_coverimage":0,"apple_news_coverimage_caption":"","apple_news_cover_video_id":0,"apple_news_cover_video_url":"","apple_news_cover_embedwebvideo_url":"","apple_news_is_hidden":"","apple_news_is_paid":"","apple_news_is_preview":"","apple_news_is_sponsored":"","apple_news_maturity_rating":"","apple_news_metadata":"\"\"","apple_news_pullquote":"","apple_news_pullquote_position":"","apple_news_slug":"","apple_news_sections":[],"apple_news_suppress_video_url":false,"apple_news_use_image_component":false},"categories":[9362,9360,9372],"tags":[8407],"article-status":[],"irpp-category":[4217,4245],"section":[],"irpp-tag":[7183],"class_list":["post-265439","issues","type-issues","status-publish","has-post-thumbnail","hentry","category-economie","category-international","category-recent-stories-fr","tag-trade-fr","irpp-category-affaires-internationales","irpp-category-economie","irpp-tag-commerce"],"acf":[],"apple_news_notices":[],"yoast_head":"\n
\n