Rhetoric over: 3-nation efforts to revise NAFTA begin today
WASHINGTON — Of all the trade deals he lambasted on the campaign trail as threats to American workers, President Donald Trump reserved particular scorn for one: The North American Free Trade Agreement.
The NAFTA agreement with Mexico and Canada was “the worst trade deal in history,” candidate Trump declared. He accused NAFTA of having swollen America’s trade deficit with Mexico, pulled factories south of the border and killed jobs across the United States.
Trump promised to renegotiate the 23-year-old deal — or walk away from it. Now the time has come. Five days of talks aimed at overhauling NAFTA begin today in Washington, with negotiations to follow in Mexico and Canada.
The United States has never before tried to overhaul a major trade agreement. So analysts aren’t sure what will emerge from the talks.
But it’s clear that delivering on Trump’s campaign promises will be difficult. A new version of NAFTA would require approval from a divided Congress. And even an improved NAFTA might not deliver the payoff Trump and his supporters are hoping for: The restoration of millions of lost manufacturing jobs.
Economists and trade analysts do see opportunities to improve NAFTA, which eliminated most barriers on trade among the United States, Canada and Mexico. If nothing else, the pact could be updated to reflect the growth of the digital economy.
But a technocratic rewrite is unlikely to satisfy Trump supporters and NAFTA critics who want a revamped agreement to shrink America’s trade
deficit and return jobs to the United States.
A more aggressive approach — demanding more made-in-America content for products that qualify for NAFTA’s duty-free status, for example — risks imperiling some benefits that Americans think the trade deal provided to them.
American farmers, for example, fear losing easy access to the Mexican market. Manufacturing companies have built supply chains that crisscross NAFTA borders; they worry about having investments jeopardized. And Canada and Mexico are sure to respond to any harsh American demands with their own.
Plus, the clock is ticking. Next year brings a presidential election in Mexico and congressional elections in the United States. Forging a complex agreement will be even tougher if the political temperature is running hot.
Last month, the Trump administration listed its objectives for the renegotiation. Some of them will meet fierce resistance from Canadian and Mexican negotiators.
The administration has riled Canada, for example, by saying it wants to eliminate a dispute-resolution process established under NAFTA. That process lets Mexico and Canada appeal unfavorable rulings by U.S. courts and agencies in trade cases. They can appeal to five-person NAFTA panels, composed of two members from each county in the dispute and a fifth that usually alternates between them. The panels’ rulings are binding.
But the panels have a reputation for overturning U.S. trade decisions. That is especially so in cases involving Canadian softwood timber imports to the United States — a long-standing source of conflict. America complains that Canada subsidizes its loggers, allowing them to dump cheap timber in the United States.
“We lose lots of sales,” says Jason Brochu, co-president of Pleasant River Lumber in Dover-Foxcroft, Maine. “It’s not fair to have subsidized lumber come in unchecked.” The ruling panels, he says, lack “a proper dispute-resolution process.” He’d like to see them eliminated.
That idea causes heartburn in Ottawa. Before they could rely on the panels, Canadians “felt they were not getting a fair shake” in U.S. courts and administrative proceedings, says Daniel Ujczo, a trade lawyer with Dickson Wright in Columbus, Ohio. “They see (the panels) as something they earned.”
The United States also wants more leeway to slap tariffs on imports that are found to hurt American industry. For now, NAFTA limits America’s ability to use that power in cases involving Canada and Mexico. If America imposes taxes on their exports, would Canada and Mexico retaliate with their own tariffs?