NAFTA breakup could give €3 billion boost to Dutch business: Rabobank

Container Terminal
. Container Terminal / Wikipedia

The North American trade agreement NAFTA falling apart would have negative consequences for the three countries it covers - the United States, Canada, and Mexico - but not for the Netherlands, Rabobank said in a report drawn up in response to increasing uncertainty that NAFTA will survive. The agreement collapsing could give Dutch businesses a 3 billion euros boost, the bank calculates. 

The negotiations on keeping NAFTA intact have so far been "far from smooth", Rabobank says in its report. "Given the nature of the negotiations, it is difficult to distinguish rhetoric from reality, but the threat of a NAFTA break-up is very real." This would hit the economies of the U.S., Mexico and Canada hard. But it also offers new chances for Dutch companies.

If the U.S. is a less attractive trade partner for Mexico and Canada, the countries will look to other trade partners. And both countries already have trade agreements in place with the EU. "The role of export substitution and changing trade patterns of Canada and Mexico also means that a small open economy like the Netherlands' could benefit more. At present trade with both countries is still limited, but this could be stimulated by the disappearance of NAFTA."

Rabobank investigated several scenarios. The most promising scenario for the Dutch business world is if NAFTA collapses completely, raising trade barriers between the United States and its two NAFTA partners. This would result in a relative fall in export prices, and rising opportunities for the Netherlands as an open economy. 

According to the bank's calculations, NAFTA collapsing completely will result in Dutch exports being 1.5 billion euros higher next year. And the Netherlands GDP growth would then be 0.4 percent higher in 2019, which roughly equates to 3 billion euros extra wealth. 

"There are also negative risks", Rabobank economist Hugo Erken warns. "For example, the U.S. disbanding NAFTA could lead to turbulence in the financial markets. This can affect Dutch investments and investment interests."

Tags: