U.S. tar­gets trade deficits with NAFTA part­ners

Sun Sentinel Palm Beach Edition - - NEWS - By Don Lee Wash­ing­ton Bureau don.lee@la­times.com

WASH­ING­TON — The Trump ad­min­is­tra­tion Mon­day un­veiled its highly an­tic­i­pated plans for rene­go­ti­at­ing the North Amer­i­can Free Trade Agree­ment, ex­plic­itly stat­ing that its key ob­jec­tive is to re­duce the trade deficit with Canada and Mex­ico — an aim that most economists say is mis­guided as the fo­cus of a trade pol­icy.

The re­lease of the ad­min­is­tra­tion’s bar­gain­ing ob­jec­tives for NAFTA sets the stage for ne­go­tia­tors to be­gin talks as early as midAu­gust.

The 18-page doc­u­ment from the Of­fice of the U.S. Trade Rep­re­sen­ta­tive sug­gests that the Trump ad­min­is­tra­tion is seek­ing a com­pre­hen­sive re­view and wide-rang­ing changes to the pact, with a new chap­ter on the dig­i­tal econ­omy and other pro­vi­sions and rules to mod­ern­ize NAFTA.

Much of the ne­go­ti­at­ing ob­jec­tives are vaguely stated, likely re­flect­ing the ad­min­is­tra­tion’s re­luc­tance to make com­mit­ments that at this stage could make things more dif­fi­cult po­lit­i­cally and at the bar­gain­ing ta­ble.

The blue­print con­tained none of the harsh lan­guage or threats to pull out of NAFTA that marked Pres­i­dent Don­ald Trump’s rhetoric dur­ing the cam­paign and into his pres­i­dency. Trump has re­peat­edly stated that he would ter­mi­nate the agree­ment if it could not be sig­nif­i­cantly im­proved in fa­vor of Amer­i­can in­ter­ests.

In its NAFTA ne­go­ti­at­ing road map, the ad­min­is­tra­tion made clear it wanted to strengthen trade reme­dies to se­cure fairer and what it called “re­cip­ro­cal” trade. The USTR said it would seek to elim­i­nate a chap­ter in NAFTA that al­lows Canada and Mex­ico to chal­lenge U.S. anti-dump­ing du­ties by turn­ing to an in­de­pen­dent panel of ar­biters.

The Trump ad­min­is­tra­tion also said it planned to set up an “ap­pro­pri­ate mech­a­nism” to en­sure coun­tries avoid ma­nip­u­lat­ing their ex­change rate to gain an ad­van­tage on trade.

But the USTR largely pa­pered over other con­tentious is­sues. For ex­am­ple, it in­di­cated that the U.S. would seek to “up­date and strengthen” so-called rules of ori­gin, which es­sen­tially sets a floor on the value of non-North Amer­i­can-made com­po­nents that can go into goods and re­ceive NAFTA’s duty-free treat­ment. But no quan­ti­ta­tive tar­get was spec­i­fied, nor was there even a state­ment say­ing that U.S. ne­go­tia­tors would be look­ing to raise the lo­cal-con­tent min­i­mum.

On la­bor, the USTR said it would re­quire NAFTA coun­tries to adopt in­ter­na­tion­ally ac­cepted stan­dards that call for the right to or­ga­nize and abol­ish com­pul­sory la­bor, as well as set­ting “ac­cept­able” pay and work con­di­tions, some­thing many la­bor ad­vo­cates have wanted, es­pe­cially for Mex­ico.

“But what’s miss­ing is the as­sur­ance of steps that must be taken for the rights to be real,” said Rep. Sandy Levin, D-Mich., the for­mer rank­ing mem­ber of the House Ways and Means Com­mit­tee.

Levin’s con­cerns were echoed by civil so­ci­ety groups and other Demo­cratic law­mak­ers on other mat­ters as well, in­clud­ing en­vi­ron­men­tal rules and “Buy Amer­ica” pro­cure­ment poli­cies.

“The doc­u­ment is quite vague, so while ne­go­ti­a­tions can start in 30 days, it’s un­clear what will be de­manded on key is­sues, whether im­prove­ments for work­ing peo­ple could be in the off­ing or whether the worst as­pects of the (Tran­sPa­cific Part­ner­ship) will be added, mak­ing NAFTA yet more dam­ag­ing for work­ing peo­ple,” said Lori Wal­lach, di­rec­tor of Pub­lic Cit­i­zen’s Global Trade Watch.

The early crit­i­cisms of the USTR ob­jec­tives point to the po­lit­i­cal bat­tle ahead as Trump seeks to over­haul not only NAFTA but U.S. trade pol­icy more gen­er­ally.

The U.S. Cham­ber of Com­merce is­sued a short state­ment af­ter the re­lease of the ob­jec­tives, nei­ther en­dors­ing nor crit­i­ciz­ing the over­all plan. Many busi­nesses have been wor­ried about the pos­si­bil­ity that Trump’s stri­dent po­si­tion on trade could lead to sig­nif­i­cant changes or even a dis­man­tling of NAFTA that could un­der­mine the gains over the past 23 years, and the so­phis­ti­cated sup­ply chains and oper­a­tions that con­nect the three coun­tries eco­nom­i­cally.

“We com­mend the ad­min­is­tra­tion’s recog­ni­tion that we must do no harm to the Amer­i­can jobs, busi­nesses, and in­dus­tries that de­pend on trade with Canada and Mex­ico,” the cham­ber said.

Canada and Mex­ico are the United States’ sec­ond and third top trad­ing part­ners af­ter China. To­tal U.S. trade — im­ports and ex­ports — with Canada and Mex­ico has tripled from 1993, to $1.2 tril­lion in 2016.

But the U.S. trade deficit has in­creased sig­nif­i­cantly with Mex­ico over the last two decades. And with Amer­i­can man­u­fac­tur­ers con­tin­u­ing to re­lo­cate there, Trump has sel­dom passed up the op­por­tu­nity to trash NAFTA, re­peat­edly call­ing it a “dis­as­ter” and ear­lier this year say­ing he was close to with­draw­ing from the agree­ment.

Trump in par­tic­u­lar has fo­cused on the U.S. trade deficit with Mex­ico, which to­taled $64 bil­lion last year. The U.S. has trade deficits with prac­ti­cally ev­ery ma­jor coun­try, and the pres­i­dent has made low­er­ing and elim­i­nat­ing trade deficits his pri­mary eco­nomic fo­cus.

In a nod to Trump’s em­pha­sis on that, the USTR said in re­leas­ing its ob­jec­tives that this is the first time that it has in­cluded deficit re­duc­tion as a spe­cific aim for NAFTA rene­go­ti­a­tions. Most economists, how­ever, say that the trade deficit re­flects broader eco­nomic im­bal­ances, specif­i­cally the gap be­tween U.S. in­vest­ment and sav­ings and that re­duc­ing the deficit may do lit­tle to bring back jobs to the U.S.

Trump is look­ing to rene­go­ti­ate other trade agree­ments as well. Ear­lier this month, Robert Lighthizer, Trump’s U.S. Trade Rep­re­sen­ta­tive, took the first step to­ward mak­ing changes in the free trade pact with South Korea, say­ing that the five-year-old deal hasn’t turned out well for the U.S.


Pres­i­dent Trump’s ad­min­is­tra­tion on Mon­day re­leased a plan for rene­go­ti­at­ing NAFTA with Canada and Mex­ico.

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