Negotiators from Canada, Mexico and the United States opened the first round of talks Wednesday to revamp the 23-year-old NAFTA free trade agreement, which some see as a demon and others view as a savior. But anyone who thought Washington would put aside the tough anti-NAFTA rhetoric of President Donald Trump and get down to the serious, nuanced business of trade diplomacy were disappointed.
Instead, they saw US Trade Representative Robert Lighthizer double down and insist the North American Free Trade Agreement must undergo wholesale revision to address the US trade deficit and preserve manufacturing jobs. "The views of the president about NAFTA - which I completely share - are well known. I want to be clear that he is not interested in a mere tweaking of a few provisions, and a couple of updated chapters," Lighthizer said at the opening ceremony.
"We feel that NAFTA has fundamentally failed many, many Americans and needs major improvement." Those comments were in stark contrast to those by Canadian Foreign Minister Chrystia Freeland and Mexican Economy Secretary Ildefonso Guajardo Villarreal, who stressed the pact brought benefits for all three economies.
Freeland said trade is not "a zero-sum game," and deficits are not the way to gauge success of any free trade deal. "We have powerful shared interest in reaching mutually beneficial agreements," she said, stressing Canada's goal of "bolstering what works, improving what can be made better" in the accord, which encompasses a quarter of the world's economy.
Guajardo said that, while there is room to make the regional trade deal better, "NAFTA has been a strong success for all parties." But it cannot be improved, he added, by "tearing apart what has worked." Lighthizer said revamping NAFTA fulfills Trump's repeated campaign promises to help US workers.
Trump famously denounced NAFTA as "the worst trade deal maybe ever signed anywhere," and threatened to pull out of the agreement he said has destroyed US jobs. But he eventually succumbed to pressure to renegotiate instead. Given recent criticism over his handling of North Korea, Venezuela and the white supremacist violence in Charlottesville, Virginia, Trump will need from the talks something he can call a victory.
However, he recently warned again that he will "terminate NAFTA" if "we don't get the deal we want." Lighthizer did not repeat the threats to pull out of NAFTA. But he said Washington cannot ignore the lost manufacturing jobs that resulted from "incentives, intended or not, in this agreement." He said these lost jobs amounted to at least 700,000.
US negotiators will insist on measures to ensure "the huge trade deficits do not continue and we have balance and reciprocity," and are periodically reviewed, he said. He also called for tougher NAFTA content requirement for goods, especially autos, and an increased share of US-manufactured content.
Although US trade with Mexico shifted from a $1.7 billion surplus in 1993 to a $55.6 billion deficit in 2016, during that period total trade with Canada and Mexico more than tripled, reaching $1.2 trillion by last year, with millions of US jobs depending on export industries. Economists argue that a free trade agreement is not the place to address a bilateral trade imbalance. And focusing on the deficit could become a key sticking point in the talks, since reducing the US deficit likely means cutting imports from Mexico or increasing exports.
Despite the aggressive US stance, negotiators from all three countries agree on the need to update the pact, which was signed before the internet was a force and covers a market of nearly 500 million people, including by addressing e-commerce and the growing role of trade in services.
The timeline for the talks is expected to be accelerated, given elections in Mexico in July 2018, as well as the US legislative calendar, with seven to nine rounds expected to finish the revisions by the end of the year. Large negotiating teams from Canada, Mexico and the United States will meet through Sunday to develop the new text of the pact.
They are due to reconvene September 5 in Mexico City, with a third round expected in Canada thereafter. Another likely source of dispute is Washington's desire to eliminate an infrequently used dispute resolution process under which a NAFTA panel can overrule one country's decisions on dumping of goods at below-market prices.
Washington views Chapter 19 as unfair, since it can overrule decisions made by US agencies on imports thought to receive unfair subsidies. But for Canada, which has successfully used the process against the United States, Chapter 19 is non-negotiable.
Comments
Comments are closed.