Submitted by Taps Coogan on the 8th of November 2017 to The Sounding Line.

George Friedman, co-founder of Geopolitical Futures, recently expressed his views on the ongoing negotiations between the US, Canada, and Mexico over the future of NAFTA. Mr. Friedman notes:

“Most Americans believe this is all about them. Mexico is a major power. By one measure it is the 11th largest economy in the world. By another it is the 15th. It’s a big country and Canada is a substantial economy and these countries consume a lot of American products. So the idea that these countries are helpless against whatever the United States does, really isn’t true. They’ve got a lot of options. One example that I would use is the states that export the most to Mexico are California and Texas. For them, the Mexican market is absolutely essential. Now notice that California is the largest state in the Union and that Texas is the second largest state. California is a democratic state. Texas is a republican state. There is a tremendous amount of energy in these two delegations. They can bring in republicans. They can bring in democrats and they are not really interested in having problems with the Mexicans. They depend on Mexico. So for all the conversation that are being had by all these people, all the discourse that is going on, in the end, this is going to be settled in the American Congress in the sense that if the United States is going to do anything, that has to go through there, and with the Texas and California delegations not particularly enamored with any major shifts in the NAFTA agreement, it’s going to be hard to get through Congress. We are going through this exercise of negotiating, but in the end it devolves to a Congress that, like many things recently, doesn’t necessarily agree with the Trump administration.”

As we have noted on a couple occasions (here and here), while the US maintains a trade deficit with Canada and Mexico, the deficit is small relative to the enormous overall volume of trade. Additionally, Canada and Mexico receive nearly a quarter of all American exports, more than any other country. In actuality, renegotiating NAFTA offers the US only a modest opportunity to reduce its trade deficit yet involves huge risks for all countries involved. Contrast this with China. The US trade deficit with China is larger than its trade deficit with the rest of the world combined, including Canada and Mexico, yet China only receives 7% of American exports. If America wants to reduce its trade deficit without reducing access to its largest export markets, China is the place to focus attention, not NAFTA.

There is more to the interview so enjoy it below:

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