How the U.S. election could put a stick in the spokes of USMCA

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Ratification of the new North American trade pact might appear inevitable, but the auto industry should keep its guard up as the United States works through its 2020 election cycle. 

Virtually every Canadian auto-industry executive and analyst I’ve spoken with since the United States-Mexico-Canada Agreement was written has expressed a similar sentiment: It provides the industry more certainty. Whether they favour the trade agreement or think it is flawed or even a step back, just about everyone agrees that having an agreed-upon set of rules is vastly preferable to being completely unsure of what those rules will be, as we all were for much of 2017 and 2018

This makes sense, obviously. The North American auto industry has complicated, delicate supply chains borne out of the original North American Free Trade Agreement. Going years without knowing whether those supply chains could continue to exist would be good for no one. 

But while it’s fine to breathe a sigh of relief, it would be naive to think that industry doesn’t have to worry about trade uncertainty in the foreseeable future. And as with the original NAFTA renegotiations that began in 2017, U.S. politics can be blamed for that. 

The United States is going through its election cycle, one that figures to be just as heated and divisive as the 2016 election campaign, perhaps even more so. As in 2016, trade could be a major issue. 

The Democratic Party is in the midst of determining which of its presidential candidates will be nominated to battle President Donald Trump in November. And if it wasn’t clear before, it was certainly clear while watching Democrats debate that the party is far from united on trade. 

Unsurprisingly, the top candidates representing the party’s moderate wing — former Vice-President Joe Biden and former South Bend, Ind., Mayor Pete Buttigieg, who this week dropped out of the race and threw his support behind Biden— have signaled support for the deal. 

However Sen. Bernie Sanders of Vermont blasted the trade deal as one that would “result in the continuation of the loss of hundreds of thousands of good-paying jobs as a result of outsourcing.” 

Sanders also criticized it for not doing enough on environmental issues. 

That’s worth noting because Sanders is rising in nationwide and state-level polls and was the only candidate to give Biden a run for his money during Super Tuesday’s primaries. He is emerging as the biggest threat to Biden, the front-runner for the Democratic nomination. And if Sanders becomes the nominee and defeats Trump, Canada and Mexico could soon find themselves negotiating with the United States on trade yet again. 

And then of course there’s Trump, whose erratic, unpredictable behaviour as president means the door is always open to setbacks on trade. It’s easy to imagine a second-term Trump, emboldened by his reelection, making an impulsive decision that could set back trade relations or perhaps again using trade as a bargaining chip to extract concessions from Canada or Mexico on any given issue. 

So, breathe that sigh of relief, but stay on your toes. The North American trade uncertainty might not necessarily be resolved. 

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