WASHINGTON/OTTAWA/MEXICO, CITY – President Donald Trump said the U.S. wants to reduce trade imbalances with Mexico and Canada and boost exports of everything from farm goods to financial services as it prepares to kick off talks to revamp the North American Free Trade Agreement.
The office of Trump’s top trade negotiator on Monday released the administration’s list of negotiating objectives for talks with Mexico and Canada that are expected to begin as early as Aug. 16. At the top of Trump’s list: “Improve the U.S. trade balance and reduce the trade deficit with Nafta countries.”
The 17-page summary turns into policy a pledge that Trump made repeatedly during the campaign, when he complained about unfair trade practices by America’s rivals and vowed to tear up trade deals that weren’t in the country’s interests. But making the goal explicit may complicate the chances of reaching a new agreement, with both Mexico and Canada under their own domestic pressures not to cave to U.S. demands. The U.S. had a $63 billion trade deficit in goods and services with Mexico last year, and a $7.7 billion surplus with Canada.
The administration’s emphasis on reducing trade deficits is a “major concern” that could complicate the negotiations, said Chad Bown, senior fellow at the Peterson Institute for International Economics in Washington. “It’s not something achievable through trade policy,” said Bown, who was a senior trade economist to the Council of Economic Advisers during the Obama presidency. “You’re inevitably setting yourself up for failure if that’s your goal.”
The negotiating summary acknowledges that some Americans have benefited from the market access provided by the 23-year-old accord. But it adds that deal “created new problems for many American workers,” coinciding with the explosion of U.S. trade deficits and the reduction of manufacturing.
“Too many Americans have been hurt by closed factories, exported jobs and broken political promises,” U.S. Trade Representative Robert Lighthizer said in a statement, adding that he plans to negotiate a “fair deal.”
The document suggests the administration may seek to bolster its ability to restrict imports. The U.S. in the summary of objectives said it wants to eliminate the NAFTA global safeguard exclusion “so it does not restrict the ability of the United States to apply measures in future investigations” and end the Chapter 19 dispute mechanism, which allows cases on dumping and unfair subsidies to be reviewed by a bilateral panel.
Changes to NAFTA could reshape more than $1.2 trillion in annual trade and shake up the supply chains of companies from Ford Motor Co. to Caterpillar Inc. The renegotiation will test Trump’s pledge to seek fairer trade deals across the globe and attract production back to America.
The negotiating summary also pledges to strengthen so-called rules of origin dictating the amount of North American content included in products, eliminate barriers to U.S. investment in all sectors, and secure commitments from Canada and Mexico not to manipulate their currencies.
Democratic Sen. Ron Wyden, the ranking member of the Senate Finance Committee, called the negotiating document “hopelessly vague” on issues ranging from intellectual property rights to currency manipulation. Wyden said it’s surprising the administration is seeking outcomes in some areas that were achieved through the Trans-Pacific Partnership, which Trump withdrew the U.S. from shortly after his inauguration.
Lighthizer was required to notify Congress by Monday of the administration’s objectives for renegotiating the North American Free Trade Agreement with Mexico and Canada. The administration began three months of domestic consultations in May under the so-called fast-track process that enables the government to seek a simple yes-or-no vote from Congress on new trade deals.
Lighthizer told members of the Senate Finance Committee last month that the U.S. plans to start talks with Canada and Mexico on Aug. 16, once consultations with U.S. lawmakers are complete. Trump has threatened to withdraw from NAFTA if Mexico and Canada don’t agree to more favorable terms for the U.S.
Commerce Secretary Wilbur Ross has acknowledged that there’s a logic to wrapping up talks by early next year before Mexico’s presidential election in mid-2018 and America’s midterm election that November. But Lighthizer told senators last month that the administration won’t impose “artificial deadlines.”
Canadian Prime Minister Justin Trudeau has long welcomed a new round of NAFTA talks, saying the deal could benefit from an update and calling for it to draw on increased labor and environmental standards included in the Canada-European Union trade pact, which is set to take provisional effect in September. He declined to “speculate” on Trump’s priorities during a visit to the U.S. National Governors Association conference this month.
Canada’s Foreign Affairs Minister Chrystia Freeland said in a statement the nation welcomes the opportunity to modernize NAFTA to “reflect new realities.”
Mexican President Enrique Pena Nieto’s administration has said it’s committed to keeping North America tariff-free and is prepared to walk away from the negotiating. Government officials and corporate executives are trying to boost trade ties with South America as a backup should NAFTA end and result in reduced shipments to the U.S.
Mexico’s government didn’t immediately respond to the Trump administration’s negotiating objectives. The nation’s officials have called for NAFTA talks to finish by the end of this year to prevent them from mixing with election politics ahead of the presidential vote. They have repeatedly listed e-commerce, energy and telecommunications as areas where NAFTA could be expanded because the industries have changed from when the deal took effect.
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