U.S. MAY CLINCH DEAL EARLY NEXT YEAR
Best time is before Mexican election campaign hots up
THE United States could renegotiate the North American Free Trade Agreement (Nafta) by early next year if it sticks to seeking concessions that Mexico and Canada agreed to make in past accords, said former president Barack Obama’s top trade negotiator.
The US may be able to convince its Nafta partners to sign a deal that looks similar to the TransPacific Partnership (TPP), said Michael Froman, who was US Trade Representative until President Donald Trump took office in January.
Froman negotiated the TPP pact linking the US and 11 other nations, which Trump formally withdrew from in January, days after taking office and before Congress voted on it.
Despite the withdrawal, the Trump administration has indicated it may be open to using parts of TPP as a starting point for negotiations on other trade deals.
Commerce Secretary Wilbur Ross this week said the best window to negotiate a Nafta overhaul will close early next year, before campaigning heats up ahead of a general election in Mexico next month.
Mexican officials have expressed interest in clinching a deal by the end of this year.
“That’s a source of potential leverage for the US that the Mexicans are so eager to get this done,” said Froman.
But the talks could derail if the US pushes too hard, he said. “We have a rather long history with Mexico and the feelings of anti-Americanism or concern about being overly accommodative with the US are really just beneath the surface,” he said.
Froman noted that a draft letter to Congress laying out US priorities looked very similar to the goals he pursued in TPP. However, it also contained items likely to be contentious for
Mexico and Canada, such as a promise to “level the playing field on tax treatment.”
US lawmakers have complained that Mexico’s valueadded tax unfairly benefits some Mexican exports, which are exempt from the levy. But it would be unprecedented for the US to try to change another country’s tax system through trade negotiations.
“We’ve never taken on domestic taxation in a trade agreement,” said Froman.
The final letter to Congress, which was sent last month and kicked off 90 days of domestic consultations over Nafta, was less detailed about US goals. Trilateral talks on a new agreement could begin as early as August 16.
The TPP withdrawal, as well as Trump’s decision this week to pull the US out of the Paris climate-change accord, will undermine America’s credibility when pursuing other deals, Froman said.
“It has an effect on US credibility and leadership and the willingness of countries to follow our lead,” he said. “That’s damage we’ll have to repair.”
The US and China announced a 100-day plan in April to address trade irritants between the world’s two biggest economies.
Last month, the US said it had secured better access on a number of fronts, including for US beef producers and financialservices firms.
But Froman said the key test for the administration will be showing results on deeper-seated issues, such as China’s reluctance to tackle overcapacity in sectors such as steel and aluminium.
“China needs to shut down hundreds of thousands of tonnes of steel production, and a whole series of aluminium smelters that don’t make economic sense,” he said. Bloomberg