U.S. is run­ning out of time to re­write NAFTA

The Republican Herald - - BUSINESS - BY PAUL WISE­MAN

WASH­ING­TON — Pres­i­dent Don­ald Trump’s team is run­ning out of time to re­write a trade pact with Canada and Mex­ico, and Amer­ica’s top trade of­fi­cial says the coun­tries are still far apart.

The im­passe over the North Amer­i­can Free Trade Agree­ment comes as the U.S. is con­fronting China and spar­ring with its al­lies over U.S. tar­iffs on im­ported steel and alu­minum.

“The NAFTA coun­tries are nowhere near close to a deal,” U.S. Trade Rep. Robert Lighthizer said Thurs­day. Lighthizer cited “gap­ing dif­fer­ences” on issues rang­ing from farm trade to la­bor stan­dards to in­tel­lec­tual prop­erty pro­tec­tions.

“We of course will con­tinue to en­gage in ne­go­ti­a­tions, and I look for­ward to work­ing with my coun­ter­parts to se­cure the best pos­si­ble deal for Amer­i­can farm­ers, ranch­ers, work­ers and busi­nesses,” Lighthizer said.

If ne­go­tia­tors can’t agree on a re­vamped North Amer­i­can Free Trade Agree­ment soon — House Speaker Paul Ryan set an in­for­mal Thurs­day dead­line — the talks could drag into 2019. Or Trump could carry out his threat to aban­don the agree­ment he’s la­beled a job-killing “dis­as­ter” and throw com­merce among the three NAFTA coun­tries into dis­ar­ray.

“The win­dow is clos­ing rapidly,” said Dan Ujczo, a trade lawyer at Dick­in­son Wright in Colum­bus, Ohio.

NAFTA is hardly the only ur­gent item on the ad­min­is­tra­tion’s trade agenda. Trump was ex­pected to meet Thurs­day with China’s Vice Premier Liu He to try to avert a trade war. Liu will also meet with a U.S. team led by Trea­sury Sec­re­tary Steven Mnuchin.

The U.S. and China, locked in a con­flict over Bei­jing’s de­mand that Amer­i­can com­pa­nies turn over tech­nol­ogy to gain ac­cess to the Chinese mar­ket, have threat­ened to slap tar­iffs on $50 bil­lion of each other’s goods. And Trump has asked Lighthizer to find an ad­di­tional $100 bil­lion in Chinese prod­ucts to tax.

The prospect of a trade war be­tween the world’s two big­gest economies has un­nerved global fi­nan­cial mar­kets and alarmed ma­jor com­pa­nies.

“The stakes are too high for these talks to fail,” said Chris­tine McDaniel, a se­nior re­search fel­low at Ge­orge Ma­son Univer­sity’s Mer­ca­tus Cen­ter. “The U.S. econ­omy, its firms, its work­ers, and its peo­ple all de­pend on be­ing able to buy and sell with their coun­ter­parts at home and across the globe ev­ery day.”

Talk­ing to re­porters Thurs­day, Trump down­played the prospect of a suc­cess­ful ne­go­ti­a­tion with Bei­jing:

“Will that be suc­cess­ful?” the pres­i­dent asked. “I tend to doubt it.”

Trade sanc­tions could dis­rupt busi­ness be­tween the coun­tries and po­ten­tially threaten jobs. Con­sumers would be hurt by higher prices for im­ported prod­ucts that are hit by tar­iffs.

In the mean­time, Ja­pan, a staunch U.S. ally, is threat­en­ing to go to the World Trade Or­ga­ni­za­tion to protest Trump’s tar­iffs on im­ported steel and alu­minum. The pres­i­dent im­posed the tar­iffs in March, ar­gu­ing that reliance on im­ported met­als posed a threat to Amer­ica’s na­tional se­cu­rity. He ex­empted the Euro­pean Union, Canada and Mex­ico — but not Ja­pan — until June 1.

The steel and alu­minum tar­iffs have an­tag­o­nized tra­di­tional Amer­i­can al­lies. Those coun­ties want per­ma­nent ex­emp­tions from the tar­iffs. Or they want them with­drawn al­to­gether. Don­ald Tusk, pres­i­dent of the Euro­pean Coun­cil, tweeted Mon­day of the United States that “with friends like that who needs enemies.”

NAFTA has long been a fo­cus of Trump’s ire. But achiev­ing a NAFTA do-over to the pres­i­dent’s sat­is­fac­tion has al­ways seemed a long­shot. When it took ef­fect in 1994, NAFTA ended most trade bar­ri­ers among the U.S., Canada and Mex­ico. Trade surged within the NAFTA bloc. Amer­i­can farm­ers who ex­port corn and other prod­ucts ben­e­fited from the deal.

But many U.S. man­u­fac­tur­ers, notably au­tomak­ers, moved pro­duc­tion to Mex­ico to cap­i­tal­ize on low la­bor costs, and shipped their prod­ucts back to the United States. The in­flux of im­ports swelled Amer­ica’s trade deficit with Mex­ico, which amounted to $69 bil­lion last year.

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