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What if the United States Walks Away From NAFTA?

Posted November 28, 2017

Under Economic Issues, International Trade Issues

(Dan Ciuriak – C.D. Howe Institute)

The renegotiation of the North American Free Trade Agreement (NAFTA) opens up the possibility of the trade agreement lapsing.

Canada’s trade with the United States is remarkably balanced, when taking into account trade in goods, trade in services, investment income earnings and royalty payments for intellectual property. Nonetheless, not only has NAFTA been re-opened but Canada has become a target of both protectionist rhetoric and actions – including the application of anti-dumping duties and countervailing measures against alleged subsidies.

The United States is also demanding the scrapping of an important discipline on such actions, the NAFTA Chapter 19 binational review panels that Canada obtained as a key concession in the original free trade talks with the Reagan Administration. This, along with other demands that have been characterized as poison pills, raises the possibility of a breakdown in talks.

In a forthcoming paper, we evaluate what would happen if trade between Canada, the United States and Mexico reverted to the rules under the World Trade Organization. We also consider the impact if NAFTA lapses but the Canada-US free trade agreement (CUSFTA) remains in place; and scenarios under which free trade would continue between Canada and Mexico. Click here to read more.