US: All trade agreements under review – NAB

President Trump made his dissatisfaction with some of the most important US trade agreements perfectly clear during his campaign, notes the analysis team at NAB.

Key Quotes

“He called the North-American Free Trade Agreement (NAFTA), involving the US, Canada and Mexico, “the worst trade deal maybe ever signed anywhere”, the Korean-US free trade deal is “a job killer” and a “horrible deal” and one of his first big steps as President was to pull the US out of the still not finalised “Trans-Pacific Partnership” multi-country plan.”

“The US has already started re-negotiating NAFTA with Mexican and Canadian officials who media reports suggest want a quick outcome. The US has set out what it wants from a revised NAFTA, highlighting its wish to lower the US trade deficit, get more benefit for US firms from rule changes, improve access to partner markets and forbid currency manipulation. However, the President has dampened spirits and worried US business by saying that he is far from convinced that a good enough deal can be struck to save the trade agreement.”

“NAFTA is not the only US trade deal facing pressure. The President has ordered a review of all US trade agreements to assess the extent to which they benefit the US, whether other countries are violating their terms and to see what measures the US can take against such breaches. Under the terms of these agreements, the US can pull out after a period of notice. We can only assume that US officials are running the ruler over the Australian-USA free trade agreement to see how it measures up to their expectations and criteria.”

“One deal that is already under pressure is the Korea-US free trade agreement that took effect in 2012. The US Trade Representative has already informed the South Korean government that he wants changes to their trade agreement considered. The focus is squarely on cutting the US trade deficit with Korea which, the US says, has doubled since the agreement was signed.”

“Judging by the trade balance, the Australia –US trade deal should cause fewer problems to the US administration. The US runs a big trade surplus with Australia and the array of US corporates present here seem unlikely to gain much from a large-scale renegotiation of the free trade deal. US direct investment at end 2016 totalled almost $200 billion and it was generating profits of over $8 billion. The $US9.3 billion flow of exports from their home country to Australian affiliates by US multi-nationals easily exceeded the $US2.5 billion flow coming the other way from their Australian operations to the US parent. Hence, judging by the US’s own criteria, our free trade deal with the US should be safe.”