Auto industry is job No. 1 for U.S. negotiating team
Trump’s trade czar opens discussions by blaming deal for manufacturing carnage
WASHINGTON Early indications are pointing to a potential No. 1 priority for the U.S. in a renegotiated NAFTA: automobiles.
It’s the specific issue that was mentioned first, at greatest length, and in most detail by Donald Trump’s trade czar as talks got underway Wednesday.
Robert Lighthizer pointed to the carnage in the manufacturing sector as the reason so many Americans view NAFTA as a failed agreement.
“Thousands of American factory workers have lost their jobs because of these provisions,” Lighthizer said in his opening remarks.
He said the U.S. also sought changes to the dispute-resolution system and a general rebalancing of trade relationships.
Lighthizer said he completely shares President Donald Trump’s views on trade — that the U.S. wants substantial changes to NAFTA. He appeared to walk back Trump’s quote a few months ago that suggested he only wanted some minor tweaking with Canada.
“I want to be clear: He is not interested in a mere tweaking of a few provisions and a couple of updated chapters,” Lighthizer said.
“We feel that NAFTA has fundamentally failed many, many Americans and needs major improvement.”
Along with the emphasis on autos, Lighthizer said the U.S. seeks a new dispute-settlement mechanism that respects national sovereignty and democratic processes.
That question has been a historic irritant with Canada. It was the final issue resolved on the final night of negotiations in the 1987 agreement. At issue is whether international panels should have power to settle cross-border disputes between companies.
Canada doesn’t want American courts deciding irritants like softwood lumber.
Reacting to Lighthizer’s statement, a Canadian trade expert who has sat on the dispute panels, Peter Clark, said there’s probably room for compromise, like possibly allowing extraordinary appeals to domestic courts: “Is there some middle ground? Can we set up a panel of retired Canada and U.S. judges, for instance?”
Another Canadian observer admits he was surprised by the tone.
“It’s an aggressive posture,” said Dan Ujczo, a Canada-U.S. attorney with Dickinson Wright.
“It’s somewhat unorthodox to come out with that level of negative comments about the existing agreement and to lead with our most difficult issues first.
“Most observers thought this would be an opening session of planning discussions over coffees and cocktails. But it’s clear the need for speed is taking over.”
On the crucial autos file, Lighthizer listed four priorities:
A higher North American content requirement to avoid a tariff. The current rule of origin calls for 62.5 per cent of a car’s parts to be made in North America.
Substantial U.S. content in cars. It was unclear whether he was advocating a new, specific requirement for U.S. content — a move that would surely be controversial — or whether he was simply stating that the desired changes should positively affect the region, with more cars being made in the U.S.
Stricter monitoring to make sure companies comply with the rules of origin. Lighthizer said country of origin “should be verified, not deemed.” Labour provisions should be included in the agreement and be as strong as possible.
Tougher labour standards. Some insiders in Canada and the U.S. suggest better worker conditions in Mexico, and more pay, would not only be good for Mexicans but also for making non-Mexican production more cost-effective and preserving vehicle production in Canada and the U.S.
A Canadian auto-industry representative at the talks said he’s not worried by what he heard: “There’s no anxiety about it with us,” said Flavio Volpe, president of the Automotive Parts Manufacturers’ Association.
For example, Volpe interpreted Lighthizer’s words to mean that he’s hoping for more production in the U.S. as a spinoff effect of a stronger North American industry, not as a demand that plants move there from other countries. But he urged negotiators to be very careful when touching the current rules. He warned of ample possibilities for unintended consequences.
“It’s not simple,” Volpe said. “If you make it too onerous, does a company or supplier say, ‘Forget about compliance. I’ll just pay the tariff.”’
That means production would actually shift abroad: Companies would simply pay the tariffs, ranging from 2.5 to 6.1 per cent, as a cheaper alternative to following complicated new rules.
Most observers thought this would be an opening session of planning discussions over coffees and cocktails. But it’s clear the need for speed is taking over.