Daily Management Review

Rio Tinto: NAFTA revision leads to uncertainty


11/02/2017


Slow negotiations on the renewal of the North American Free Trade Agreement (NAFTA) creates uncertainty among enterprises and can damage investment and growth, said Alf Barrios, Rio Tinto’s Aluminum Executive Director, on Wednesday.



Jim Winstead
Jim Winstead
Canada and Mexico say that several US proposals for the modernization of NAFTA are unacceptable, which causes growing concern that Washington may abandon the tripartite deal.

Rio Tinto exports 75% of aluminum produced at its Canadian plants in the US and provides 30% of the needs of this market, Barrios said at an evening conference organized by the Canadian-American Business Council.

"The negotiation process caused uncertainty among businesses on both sides of the border, and I think that this to some extent puts the risk of investment and growth," he said when asked about the negotiations on NAFTA.

US President Donald Trump often describes the 1994 pact as a "catastrophic agreement" and threatens to withdraw from the deal unless serious changes are made to it.

The data show that Rio Tinto’s Canadian plants accounted for 53% of the 3.65 million tons of aluminum that the company produced last year.

Barrios said the NAFTA agreement created a predictable business environment that facilitated investment decisions and strengthened ties between Canada and the United States.

"Therefore, we are following very carefully how everything is developing, and we call on the negotiating groups to continue to search for ways to strengthen these relations," he said.

Speaking earlier in the day, Governor of the Bank of Canada Stephen Poloz said that the lack of clarity regarding NAFTA negotiations means that companies postpone investment decisions.

The rather tough position of the American negotiators casts doubt on the future of the entire transaction, an agreement about which was reached 23 years ago.

Proposals for a radical change in NAFTA to reduce the US trade deficit led to a change in the modernization negotiations, as a result of which some participants and analysts questioned how the NAFTA partners can avoid the impasse.

US requirements include forced repeat negotiations every five years, leaving the lion's share of the automotive production of the continent to the United States and simplifying the introduction of import barriers for some Canadian and Mexican goods.

Trump continued his attacks on NAFTA in all the negotiations begun in August, repeating his own threats of ending the entire treaty if Mexico and Canada did not agree to change.

The violation of the US NAFTA dispute resolution regime, plans to limit external access to government contracts and attacks on Canadian dairy producers and forest industry producers further exacerbated the gloomy mood among trade officials. 

source: bloomberg.com






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