NAFTA to Collapse As Trump's Bullying Tactics Yield No Results

Mexico announced it would exit the North American Free Trade Agreement, known as NAFTA, just hours after Canadian officials claimed the U.S. will most likely pull out of the agreement. The comments made Wednesday have sparked fear in international markets and a devaluation of both the Canadian dollar and the Mexican peso.

Two government officials told Reuters earlier in the day that Canada is increasingly convinced that United States President Donald Trump will soon announce that Washington is pulling out of the trade agreement.

Few hours later three Mexican sources, who know about the negotiations, claimed Mexico would exit NAFTA if Trump decided to trigger the 6-month process to withdraw from the pact. Initiating the withdrawal process would not be binding for the U.S. and such a move would need Congress approval.

One of the sources, Raul Urteaga, the head of international trade for the ministry of agriculture, said "if Trump announces a U.S. withdrawal from NAFTA, well at that moment the negotiations stop.” The announcement will complicate attempts by the U.S. to use threats of withdrawal as leverage in the upcoming, and penultimate round of the NAFTA negotiations to be held in Montreal, Canada between Jan. 23-28.

Trump's threats and demands have garnered criticism by many analysts who have accused him of attempting to bully Mexico and Canada.

The three countries agreed in July to hold seven rounds to renegotiate NAFTA, however not much progress has been made on key issues.

Among them: the U.S. attempt to establish a minimum limit of U.S. content for automobiles, a clause that would automatically terminate the agreement if it is not renegotiated every five years, and the elimination of the chapter 19 provision in NAFTA's disputes mechanism, which allows for an alternative binational panel to review domestic courts' determinations on antidumping and countervailing duty cases.

Other related issues remain as Canada also filed Wednesday a 32-page complaint with the World Trade Organization challenging U.S. investigations on subsidies to Canadian-exported goods, such as dairy products and lumber wood. In early 2017 the Trump administration imposed tariffs on these Canadian goods.

The NAFTA has faced increasing criticism by Trump, who has called it the "worst trade deal in the history of the world" and repeatedly vowed to pull out of it during his campaign.

However the U.S. president's view on the pact is not shared by his country's Chamber of Commerce CEO,Tom Donohue who had warned that pulling out of NAFTA would be a "mistake" and would mean an "absolute destruction [...] to economic growth."