With NAFTA negotiations going badly, Goldman Sachs has published a report, ‘Thoughts on the Potential US Withdrawal from NAFTA’, that concludes that the US is likely to withdraw from the trade agreement next year ‘At this point, efforts at revising the agreement look likely to be unsuccessful, though a deal is still possible, in our view. If the talks do not result in a revised agreement by early 2018, we believe that the Trump Administration could announce its intent to withdraw from NAFTA.’ The NAFTA agreement calls for a six-month notice period before a nation can withdraw and ‘we believe it would follow a similar pattern to the strategy the White House has used in recent decisions on immigration (the DACA program), Iran, and health subsidies. Each involved a disruption to the status quo pursuant to a campaign pledge, with delayed implementation and an expectation that a new arrangement might be negotiated in the interim.’
Trump has threatened to pull out of the pact several times if ‘America First’ demands are not met. Following an unsuccessful fourth round of discussions, the parties have accepted that end 2017 timeframe for reaching agreement will no longer be achieved and talks will extend into Q1 2018.
According to Goldman, major sticking points in the talks are:
5-year sunset: The US has proposed that NAFTA would be terminated after 5 years unless all three parties agree to keep it in force. As a practical matter, this would result in a prescheduled renegotiation every ?ve years and increase uncertainty while the agreement is in effect, decreasing the bene?ts of the agreement on investment and cross-border trade ?ows.
This post was published at Zero Hedge on Oct 20, 2017.