Renegotiation of, or Withdrawal from, NAFTA: Context and Possible Consequences -
(“NAFTA”) is a trade agreement signed by Canada, Mexico, and the United States that came into force on January 1, 1994. Its goal was to eliminate barriers to trade and investment, creating one of the largest free trade zones. Since NAFTA came into effect, trade among the NAFTA countries has more than tripled, reaching US $1.1 trillion in 2016. NAFTA also provided a mechanism for investor-state dispute resolution, which led to a proliferation of investments in all three countries. Indeed, the record shows that NAFTA has led to at least 80 investment arbitrations against NAFTA Parties and has resulted in a perfect win-loss record for the United States.
NAFTA has not been without critics, however. Most recently and perhaps most critical for NAFTA’s longevity, President Trump has pledged to renegotiate NAFTA, and if renegotiation is not possible, then to withdraw from NAFTA altogether. Modification of or withdrawal from NAFTA could have a number of serious consequences for investments and investors. For example, Mexico already has experienced a chilling of investment by U.S. investors in light of the prospect of NAFTA’s coming changes. Additionally, although Canada seems amenable to the prospect of renegotiating NAFTA, Mexico has hinted that it will not sit down with the United States to renegotiate the agreement.
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