The NAFTA Renegotiation: What If the US Walks Away?

C. D. Howe Institute Working Paper, November 2017, ISBN: 978-1-987983-48-7

24 Pages Posted: 8 Dec 2017

See all articles by Dan Ciuriak

Dan Ciuriak

Ciuriak Consulting Inc.; Centre for International Governance Innovation (CIGI); C.D. Howe Institute; Asia Pacific Foundation of Canada; BKP Development Research & Consulting GmbH

Lucy Ciuriak

Independent

Ali Dadkhah

Ciuriak Consulting Inc.; Infinity Law

Jingliang Xiao

Infinite-Sum Modeling Inc.; Ciuriak Consulting Inc.

Date Written: November 29, 2017

Abstract

The request by the United States to renegotiate the North American Free Trade Agreement (NAFTA) opens up the possibility of the trade agreement lapsing. We evaluate what would happen if trade between Canada, the United States and Mexico reverted to the rules under the World Trade Organization using a computable general equilibrium model. We report on three scenarios: NAFTA lapses with all three trading relationships reverting to WTO rules; NAFTA lapses but the earlier CUSFTA between Canada and the United States remains in place; NAFTA lapses, CUSFTA remains in place, and Canada and Mexico continue their NAFTA commitments under a separate free trade agreement. We take into account the implications of imposing new tariff walls and removing the services and investment commitments under the NAFTA. The key findings are that NAFTA lapsing hurts all three parties. The US suffers relatively small negative effects but these are concentrated in key sectors. This concentration of negative impacts represents a potential political poison pill for NAFTA termination. By the same token, the quantitative analysis suggests protracted talks because the basis of a deal is not on the table and termination is politically infeasible.

Keywords: NAFTA, Canada, Mexico, United States, CGE, regional trade agreements

JEL Classification: F13, F15

Suggested Citation

Ciuriak, Dan and Ciuriak, Lucy and Dadkhah, Ali and Xiao, Jingliang, The NAFTA Renegotiation: What If the US Walks Away? (November 29, 2017). C. D. Howe Institute Working Paper, November 2017, ISBN: 978-1-987983-48-7, Available at SSRN: https://ssrn.com/abstract=3080616

Dan Ciuriak (Contact Author)

Ciuriak Consulting Inc. ( email )

83 Stewart St.
Ottawa, Ontario K1N 6H9
Canada

Centre for International Governance Innovation (CIGI) ( email )

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C.D. Howe Institute ( email )

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Asia Pacific Foundation of Canada ( email )

Canada

HOME PAGE: http://ciuriakconsulting.com/

BKP Development Research & Consulting GmbH ( email )

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Germany

Lucy Ciuriak

Independent ( email )

Ali Dadkhah

Ciuriak Consulting Inc. ( email )

83 Stewart St.
Ottawa, Ontario K1N 6H9
Canada

Infinity Law ( email )

200-931 Fort St.
Victoria, V8V 3K3
Canada

Jingliang Xiao

Infinite-Sum Modeling Inc. ( email )

16167,Glenbrooks Pl
Vancouver, BC - British Columbia v4n1t3
Canada
6047245981 (Phone)
6047245981 (Fax)

HOME PAGE: http://www.infsum.com/en/

Ciuriak Consulting Inc. ( email )

83 Stewart St.
Ottawa, Ontario K1N 6H9
Canada

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