Jolley: Are NAFTA Negotiations Going Fabulously?

That's what chief U.S. negotiator John Melle said recently when asked how talks were progressing. “Fabulous,” he said.

But his comment was definitely one-sided and politically inspired. Melle was part of the fourth round of negotiations which featured lots of drama and rising tensions. His proposals were unacceptable for Canadian and Mexican participants. American industrial organizatio17tober 5e about the new shape of the TPP. How big will it be? What will be its effect onCanadianns and Congress, too, are concerned about a looming trade disaster and are pushing hard for preserving long-standing regional trade ties.

Melle and friends put forth a string of bold but probably unworkable proposals on auto rules of origin, a sunset clause, government procurement, and gutting dispute panels seen by the Canada and Mexico as non-negotiable. His proposals were long-signaled, as was Canadian and Mexican opposition to them.

NAFTA’s fate may now hang on how flexible Trump will be about his over-the-top demands when the fifth round of talks begins soon in Mexico City. Without a potentially embarrassing and politically dangerous reversal by Mexico and Canada, Trump might give the mandatory six months notice required to leave NAFTA. Whether he eventually pulls the trigger and kills the deal or backs up at the last possible second could be called 'the art of the deal,' Trump style.

Facing new tariffs and an 'America First!' attitude from Trump's negotiating team, Canadian Foreign Minister Chrystia Freeland said Trudeau would “explain really clearly to the President that Canada is not America’s problem," pointing to an aggressive Mexico as the culprit.

Note that the use of wording like 'explain really clearly' is a polite diplomatic phrase for the 'gloves are coming off.'

Replying to a question posed by a newspaper reporter, Stephen Moore, a senior economic adviser during Trump’s campaign and chief economist at the Heritage Foundation said, “He’s unpredictable, so I don’t know. I do feel, though, that his bark has been worse than his bite on trade. That doesn’t mean that he’s retreating. But I think we’re going to see a NAFTA 2.0 that will find areas that will give the U.S. even greater benefits, while protecting American workers.”

Unpredictability is usually not part of the discourse in international discussions. It leads to misunderstandings that can become enormous roadblocks to progress.  “Protecting American workers” if a pull out triggers a recession would be the ultimate error in judgment.

The U.S. Chamber of Commerce, an important force for Trump during his run for office, has forcefully stated they will not stand with him. Chief Executive Officer Tom Donohue has pledged to fight “like hell” to preserve NAFTA.  He warned that the Chamber, the largest and most influential business lobby in America, will send an “army” of representatives to Capitol Hill to demonstrate support for the deal.

Congress seems to stand firmly with the Chamber of Commerce and Trump will have to decide how much firepower from both sides of the aisle he's willing to take. Courtroom battles and political fights over a pullout will ensue and the President might have to face the humiliation of a congress dominated by his party moving to block his actions.

The current meeting in Washington has been called a two-tier process; the first friendly and workable, the second like another gunfight at the OK Corral. Legitimate progress will be made with the necessary updates to modernize the quarter-of-a-century old pact in areas like regulations and services. The three countries will make no progress on the contentious U.S. proposals.

In the meantime, American agriculture which sorely needs the marketing advantages of NAFTA, especially after Trump's jumping ship on the Trans Pacific Partnership, is holding its breath. The specter of losing two major trade agreements after a decade of falling farm income will be a major blow to the industry.