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FILE - In this March 13, 2018 file photo, President Donald Trump talks with reporters as he reviews border wall prototypes in San Diego. (AP Photo/Evan Vucci, File)

Trump threatens NAFTA over the border wall: Good negotiating tactic or bad trade policy?


WASHINGTON (Sinclair Broadcast Group) — This month, the United States, Canada and Mexico are scheduled to convene the eighth round of talks to renegotiate the terms of the North American Free Trade Agreement (NAFTA). As the parties prepared for the high-level meetings in Washington, President Donald Trump took to Twitter threatening to blow up the trade agreement over his long-promised border wall with Mexico.

"Mexico is doing very little, if not NOTHING, at stopping people from flowing into Mexico through their Southern Border, and then into the U.S.," the president tweeted on Saturday. "They laugh at our dumb immigration laws. They must stop the big drug and people flows, or I will stop their cash cow, NAFTA. NEED WALL!"

This isn't the first time Trump has threatened to walk away from the North American Free Trade Agreement. Only days after the first meeting of U.S., Canadian and Mexican negotiators in August 2017, Trump told a rally of supporters that he didn't think the U.S. could make a deal. "I think we'll end up probably terminating NAFTA at some point," the president warned.

This also isn't the first time President Trump has used punitive trade actions against America's partners to get concessions on a better deal. Just before the Mexico round of NAFTA trade talks concluded in early March, Trump announced steep tariffs on steel and aluminum imports to the United States. The announcement came as a shock to Canada and Mexico, countries that together export more than $10 billion worth of both metals to the United States annually.

As negotiators broke off the seventh round of talks, Trump tweeted that America's neighbors could avoid the tariffs, if they were willing to cut a deal on NAFTA. "Tariffs on Steel and Aluminum will only come off if new & fair NAFTA agreement is signed."

Now, amid tough talk on tariffs from Washington and a competitive presidential election in Mexico, Trump again turned up his rhetoric in what experts say could be either a smart negotiating tactic or a disastrous trade position.

"It's really hard to know how seriously to take it," Claude Barfield, American Enterprise said of Trump's threats on trade.

After months of threatening to scrap the bilateral U.S.-South Korean KORUS free-trade agreement, President Trump ultimately backed down. Last week he called the trade pact a win for U.S. manufacturers and for his administration and signaled he would sign it if South Korea played a productive role in upcoming diplomatic talks with North Korea.

"If the KORUS agreement this past week is any indication, this administration just folded," Barfield said.

According to Dan Griswold, professor of globalization at George Mason University's Mercatus Center, backing down would be the ideal scenario.

"There has been a pattern on other issues, of the president pulling up short from following through on his worst threats," he explained, citing the KORUS deal and tariff exemptions for Canadian and Mexican steel and aluminum imports.

"At the end of the day, the worst fears weren't realized," Griswold continued. "My hope is the same will be true of NAFTA."

However, for some immigration experts, it's critical that Trump is serious about walking away from NAFTA in order to get Mexico's attention on border security.

"The president needs to consider using whatever leverage we have to try to gain cooperation with Mexico on migration issues. And their interest in keeping NAFTA in place is certainly a possible pressure point," said Jessica Vaughan, director of policy studies at the Center for Immigration Studies.

Vaughan argued that Mexico has been "looking the other way" when it comes to border enforcement and preventing migrants from traveling through Mexico into the United States. While previous administration's have not wanted to tie the migration and border security issues to the U.S.-Mexico trade relationship, she stressed that everything about the bilateral relationship should be on the table.

"Using these other forms of leverage is going to be influential with Mexico," she said. "Whatever it takes to get another country's attention is what the president is going to do and I think that's the smart thing to do."

Regardless of whether or not the United States and Mexico negotiate the border wall or border security in the context of the free trade talks, the president is already setting the stage to be able to claim a major policy victory, explained Robert Gulotty, political science professor at the University of Chicago.

"I don't think it's plausible that there's going to be any sort of spending on the part of Mexico to build a wall or a direct transfer of money to the United States," he noted. "Rather, what I think will happen, is Trump is going to label one concession [from Mexico] and say that will give us some billions of dollars in trade value. And he will say, that will compensate us for the wall."

All three parties have already agreed in principle to alter portions of the North American Free Trade Agreement during the Obama-era negotiations of the Trans-Pacific Partnership (TPP). Donald Trump withdrew the United States from the deal early in his presidency, but the agreement included stronger labor and environmental provisions and intellectual property protections that are a part of the ongoing NAFTA talks.

As the specifics of the renegotiated NAFTA become clearer in the coming months, one thing is certain: each country will make concessions and each will be able to walk away claiming some victories.

"Any economic gain Trump can attribute to the negotiations, he can sell as something that was given up for the purposes of giving us a free hand to invest in things like the wall," Gulotty continued. " I wouldn't put it past him to try that."

The final cost of Trump's proposed border wall is expected to be somewhere in the range of $18 billion or as much as $66 billion. The Department of Homeland Security has not made an official cost estimate public as the Trump administration is still reviewing design prototypes.

While Trump repeatedly promised his supporters on the campaign trail that Mexico would pay for the wall, the president and members of his administration have revised their funding plan.

In January, Trump floated the idea that Mexico will pay for the wall "indirectly through NAFTA." In an interview with the Wall Street Journal, Trump suggested he would take "a small percentage" of U.S. profits from the trade deal and put it towards building the wall.

Around the same time, White House chief of staff and former Secretary of Homeland Security, John Kelly made waves when he said that Mexico would not "directly" pay for the border wall. Instead, he said the more likely scenario would involve visa fees or renegotiating NAFTA. "In one way or another, it's possible that we could get the revenue from Mexico, but not directly from their government," Kelly told Fox News.

According to Griswold, the president's plan to get Mexico to indirectly pay for the wall using tariffs or punitive trade tools will ultimately backfire and the bill will ultimately be delivered to U.S. consumers.

"We don't get other countries to pay for things through tariffs. Tariffs are a direct tax on American consumers, so it's a costly way for the U.S. government to raise money from its own citizens," he stressed. "If the wall ever does get built, I think it would be a huge waste of money and it's going to be Americans who are going to pay for it."

Mexican leaders have repeatedly made it clear that they will not pay for the border wall and with the Mexican presidential elections taking place in July, none of the prospective candidates have shown any signs of bending to Trump's demand.

So far, Mexican President Enrique Peña Nieto has not publicly responded to Trump's threat regarding NAFTA and the border wall. However, presidential frontrunner Andres Manuel Lopez Obrador issued a fiery denunciation of the U.S. administration's policy.

"Mexico and its people will not be the piñata of any foreign government," Lopez Obrador said in a speech only hours after Trump sent out his critical tweet. "It's not with walls or use of force that you resolve social problems."

Griswold warned that Trump misread the situation in Mexico by issuing his border wall ultimatum. "I think the president is misunderstanding how Mexico is going to react to this. They're in the midst of a presidential election and if anything, President Trump is feeding anti-American sentiment in Mexico, which could lead to a government there which is much less friendly to the United States. And that is in nobody's interest."

Even though NAFTA is fundamentally an economic agreement, it has also set the stage for improved diplomatic collaboration between the United States and Mexico and improved regional security by increasing wages and economic opportunities south of the U.S. border.

"Unfortunately, the Trump administration is undoing all that goodwill that's been built up under NAFTA," Griswold said, noting that the result could be a rise in populist, anti-American sentiment coming out of this summer's elections.

The timetable for the NAFTA renegotiations remains uncertain. U.S., Mexican and Canadian representatives have offered different estimates for when the talks could be concluded and reports that only six of the 30 chapters of the deal had been agreed upon.

Last week, U.S. Trade representative Robert Lighthizer indicated the parties were coming close to a deal. However, last month he acknowledged that the political machinations in North America are likely to complicate progress.

"I fear that the longer we proceed, the more political headwinds we will feel," Lighthizer said. After Mexico's presidential elections in July, Canada will be holding provincial elections and the U.S. midterm elections will take place in November.

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