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Re-Implementing Old Trade Agreement Difficult

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It’s a refrain frequently heard in Canada: That ending NAFTA wouldn’t change much in economic relations with the U.S., because the countries could simply pull their older agreement off the shelf, dust it off, and persist in trade without tariffs.

It’s also wrong, some analysts say.

This story by The Canadian Press appeared in Automotive News Canada.

A few people interviewed this week disputed the idea that the original Canada-U.S. Free Trade Agreement of 1987 would automatically snap back into place if NAFTA disappears, an increasingly relevant topic as hostilities mount in the trilateral trade talks.

Re-implementing the original agreement would raise new challenges, said Sarah Goldfeder, a former U.S. diplomat. First of all, she said the current American political climate would not make for an easy re-implementation. She said there would be demands for a renegotiation within the U.S., and the parties would soon be back at the table struggling with many of the same sticking points.

The current NAFTA talks have become bogged down amid huge gaps between the countries and insiders now view termination as a real possibility.

Even if Congress does successfully vote to re-introduce the old FTA, its vote would either require the approval of President Donald Trump, or an overwhelming, two-thirds majority vote in Congress to overcome a presidential veto.

The end of free trade in North America would leave new tariffs averaging 3.5 percent in the U.S., 4.2 in Canada, and 7.1 in Mexico. Some analysts said that would reduce Canada’s GDP by about 2.5 percent on a long-term basis.

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