U.S. comes out swinging in trade talks
Experts split over significance of tough American rhetoric
WASHINGTON— The first day of NAFTA talks, Foreign Affairs Minister Chrystia Freeland said, was just about “setting the table.”
Well, the host welcomed his guests by smashing some dishes.
U.S. President Donald Trump’s top trade official opened the North American Free Trade Agreement renegotiations on Wednesday with aggressive criticism of the deal, declaring that it has “fundamentally failed many, many Americans” and promising to seek “major” change rather than marginal tweaks.
U.S. Trade Representative Robert Lighthizer’s opening statement stood in sharp contrast to the friendly language of Freeland, who called NAFTA an “engine of job-creation and economic growth,” and Mexican Economy Secretary Ildefonso Guajardo Villarreal, who said the agreement had fostered continental harmony.
“We cannot ignore the huge trade deficits, the lost manufacturing jobs, the businesses that have closed or moved,” Lighthizer said at a hotel in Washington.
Freeland shrugged off Lighthizer’s words, saying Canada was prepared for “moments of rhetoric” during the talks. And trade experts were divided on whether Lighthizer’s public aggressiveness suggested the actual negotiating would be contentious.
Lighthizer’s audience for the statement was not Canadian or Mexican negotiators but Trump himself, said Bob Fisher, a U.S. negotiator in the original NAFTA talks and now managing director of Hills and Co.
“There are public statements and there are private negotiations. And most negotiators will tell you, you don’t negotiate in public, you negotiate in private. The dynamics between the two can be very different,” Fisher said.
Mickey Kantor, U.S. commerce secretary and trade representative under Bill Clinton, said Trump’s team “has a tendency to say things that are either not correct or political positioning.”
“I’m not saying that’s what Bob Lighthizer was doing. All I’m saying is you can take all of this with a grain of salt and sit down at the table,” Kantor said in an interview.
But Lawrence Herman, a trade lawyer in Canada, said the administration was signalling that Canada is in for some “very tough and I think unsettling discussions with our American friends.”
“When you open with a rather aggressive and somewhat unyielding demand, it’s somewhat hard to then walk away from those without appearing to have made concessions. And I don’t think the Trump administration is amenable to making many concessions,” Herman said in an interview.
Freeland, who met with her two counterparts jointly and one-onone, emphasized that the talks had not proceeded into the detailed “weeds” on any issue. She declined to discuss Lighthizer’s manner behind closed doors.
“Our discussions at the table are private, and it’s important to be able to have private discussions,” she said at a news conference at the Canadian Embassy.
The launch of the high-stakes negotiations was a major moment for the economies of the three countries and personally for Trump, who campaigned on a promise to transform or terminate the 23-year-old deal.
But it was overshadowed in the U.S. by the continuing fallout from Trump’s inflammatory response to the white supremacist violence in Charlottesville, Va., on Saturday. Freeland condemned the racists in remarks before a meeting with Sec- retary of State Rex Tillerson and then again at the embassy.
Trump did not speak or tweet about the negotiations. And they were not treated by the U.S. media as even the top Trump-related economic news: Trump’s primary advisory council of big-business chief executives decided on Wednesday to disband.
There was broad agreement from the three countries that NAFTA needs to be updated for the modern digital economy. Beyond that, there were substantial differences — not only on policy but on the actual state of the trade relationship.
Lighthizer, channelling Trump, railed Wednesday about trade deficits, suggesting they would be a major focus for him. Freeland said Canada-U.S. trade is “almost perfectly” balanced — and, echoing the views of most economists, said deficits are not a good method for measuring whether a trade relationship is working.
“Canada is and always has been a trading nation. Our approach stems from one essential insight: we pursue trade, free and fair, knowing it is not a zero-sum game,” she said.
There was one early substantive disagreement, on the subject of auto manufacturing.
As Canada and Mexico expected, Lighthizer raised the issue of “rules of origin.” Trump’s administration would like to raise the percentage of cars and auto parts that must be manufactured in North America for the product to be exempted from tariffs.
But Lighthizer went beyond North America content requirements in his opening statement, floating the idea of introducing a U.S.-specific minimum. Freeland and Villarreal later said they opposed a national-origin rule.
“Obviously, it will not be the best practice to introduce that type of rigidity,” Villarreal said.
Jerry Dias, president of the Unifor union, which represents Canadian autoworkers, said Lighthizer was probably just “loading up” his Day One list of demands, a common bargaining tactic. Dias said he was confident the U.S. would not punish Canada’s auto industry.
“Ultimately, they will say unequivocally: When it comes to auto, the problem’s not Canada; the problem’s Mexico,” he said.
Other remarks from the three officials hinted at further challenges to come. Lighthizer said the U.S. wants a system for resolving NAFTA disputes that respects its “sovereignty.” Canada, conversely, wants to preserve the independent “Chapter 19” tribunal system that exists outside of U.S. courts.
The three countries are ambitiously attempting to conclude negotiations by the beginning of 2018, mindful of the mid-2018 Mexican elections.
The first round of negotiations will run until Sunday; the second and third rounds will be held in Mexico and Canada.
This round will run from Wednesday to Sunday.