United States begins negotiations with harsh words
Key question: Will bombast translate into new agreement?
WASHINGTON — The renegotiation of the North American Free Trade Agreement is off to a rocky start.
The Trump administration lectured Canada and Mexico on the failures of the current agreement at an opening news conference Wednesday morning, while behind closed doors negotiators began to seek significant concessions from the United States’ neighbors.
“We feel that NAFTA has fundamentally failed many, many Americans and needs major improvement,” said Robert Lighthizer, the U.S. trade representative, who is leading the U.S. team aiming to overhaul the 25-yearold agreement.
The Canadian and Mexican representatives were publicly pleasant, emphasizing their commitment to regional trade and the benefits resulting from a regional alliance. But both nations also say the current agreement is not tilted against the United States.
The talks that began Wednesday are the first of several scheduled rounds between now and the end of the year, when the three nations hope to conclude a deal. It is a very fast timetable in the world of international negotiations, reflecting political imperatives in all three nations more than the practical realities of an immensely complex negotiation.
Both Mexico and the United States have national elections scheduled next year.
The overarching issue is the importance of trade deficits. Americans buy more goods and services from Mexico than Mexicans buy from the United States. Last year, the difference was $55.6 billion. The Trump administration regards this number as an indictment of the current trade deal — evidence that Mexico is taking advantage of the United States.
While trade with Canada has been more balanced in recent years, Lighthizer said Wednesday that over time the United States has run a significant trade deficit with Canada, too.
Such trade deficits, Lighthizer said, “can’t continue.” President Donald Trump has made it clear that he regards trade deficits as a primary measure of the nation’s economic health.
Mexico and Canada, however, are united in discounting the importance of trade deficits.
“Canada doesn’t view trade surpluses or deficits as a primary measure of whether trade works,” Chrystia Freeland, Canada’s minister of foreign affairs, said Wednesday.
Mexico has been even more pointed in resisting the assertion that there is a problem. The economy minister, Ildefonso Guajardo Villarreal, told a Mexican Senate commission last week that he was “delighted to analyze the situation that we call ‘trade rebalancing’ if and when we manage to improve that through expanding trade, not restricting it.”
A key question looming over the negotiations is how the Trump administration’s public bombast will translate into the details of the negotiations. The administration in its early months has repeatedly talked tough and then sought to conciliate trading partners.
The administration, for example, insists that it wants to do away with a system of independent arbitration that allows companies to seek the elimination of tariffs. The system has been used primarily by Mexican and Canadian companies to force the United States to abandon protectionist measures found to be in violation of the agreement.
Another area of potential conflict concerns the automobile industry. The United States wants to discourage importation of auto parts from countries outside the NAFTA region. Under the current agreement, a car assembled in Mexico can be imported into the United States without paying an import tax if at least 62.5 percent of the car, measured by value, was made in North America. The Trump administration wants to raise that bar, and to require that a significant portion of those parts come from the United States.
The United Automobile Workers union has long sought such a change.
There is general agreement among the three nations that NAFTA needs to be modernized. Tere is broad support for stronger enforcement of workplace and environmental protections. Indeed, the three nations already renegotiated NAFTA once as part of the discarded Trans-Pacific Partnership agreement.
Some issues appear relatively straightforward. The Trump administration is eager to insert provisions addressing currency manipulation. Canada and Mexico float their currencies, and are unlikely to resist the symbolic gesture.
But on more substantive issues, both Canada and Mexico have shown a growing willingness to resist U.S. demands.
Luis de la Calle, a former NAFTA trade negotiator for Mexico, said the shock value of Trump’s bluster and threats had diminished since the presidential election.
Trump also will need to win congressional support for a revised agreement. Democrats, who have long sought changes to NAFTA, share many of his stated goals, but Trump’s political problems could complicate any alliance.
There is also little if any congressional support for the administration’s threat to withdraw from the trade agreement if Canada and Mexico resist improvements.
Freeland spoke first Wednesday, and began by holding up pictures of U.S. and Canadian firefighters working together, images that she said “illustrate the deep friendship that our countries share.”
Guajardo Villarreal struck a similar tone. “NAFTA has been more than a trade agreement,” he said. “It has made us think of ourselves as a region.”
Lighthizer began by acknowledging that NAFTA had benefited groups including U.S. farmers and communities along the Mexican border.
Then he insisted that the agreement was broadly damaging to the United States, causing the loss of hundreds of thousands of jobs.
“The views of the president about NAFTA, which I completely share, are well known,” Lighthizer said. “I want to be clear that he is not interested in a mere tweaking of a few provisions and a couple of updated chapters.”
He concluded, “And now, we will get down to work.”