U.S. calls for major changes as NAFTA talks begin

Keith Laing
Detroit News Washington Bureau

Washington — U.S. officials pushed for major changes to the North American Free Trade Agreement as negotiations with their counterparts from Canada and Mexico began Wednesday in Washington. They said that President Donald Trump is not interested in minor tweaks to the controversial trade deal he railed against as a candidate.

U.S. Trade Representative Robert Lighthizer said in opening remarks of the four-day negotiation that that the president is looking for wholesale changes to the trade agreement that has been blamed for lost jobs in the U.S. auto industry.

“The views of the president about NAFTA, which I completely share, are well-known,” Lighthizer said. “I want to be clear that he is not interested in a mere tweaking of few provisions and a couple of updated chapters. We feel that NAFTA has fundamentally failed many, many Americans and needs major improvement.”

The initial round of negotiations between the U.S., Canada and Mexico over changes to the NAFTA in Washington are scheduled to last until Sunday. All three countries pledged Wednesday to work together to “modernize” the controversial trade deal, even as they staked out starkly different positions on the legacy of the agreement.

Lighthizer said the Trump administration is pushing for drastic changes to the NAFTA agreement that was enacted in 1994 to create a free-trade zone between the U.S., Mexico and Canada to “ensure that huge trade deficits do not continue and we have balance and reciprocity.”

He identified the auto sector as an area that will be a central focus on U.S. negotiators in the first round of NAFTA talks, which are scheduled to last until Sunday.

“In the auto sector alone, the U.S. has a $68 billion deficit with Mexico,” he said. “Thousands of American factory workers have lost their jobs because of these provisions.”

Lighthizer referenced proposals from the Trump administration to increase NAFTA rules that require cars have at least 62.5 percent of their parts made in the U.S., Canada or Mexico to qualify for duty-free treatment, and prevent foreign governments from taking steps to ensure the U.S. dollar trades lower against their currencies as possible fixes for the nation’s trade deficit in the auto sector.

Some made-in-America hawks have pushed the Trump administration to advocate for an increase in the requirement to as much as 90 percent of autos to be made with parts that originated in the three countries to receive the exemption.

Administration officials have said Trump wants to “update and strengthen the rules of origin, as necessary, to ensure that the benefits of NAFTA go to products genuinely made in the United States and North America.” The administration has not publicly identified a specific percentage of minimum domestic content that it would like to see.

“Rules of origin, particular on autos and auto content, must require higher NAFTA content and substantial U.S. content,” Lighthizer said Wednesday. “Country of origin should be verified, not deemed. Labor provisions should be included in the agreement and be as strong as possible. The agreement should have effective provisions to guard against currency manipulation.”

Renegotiating NAFTA was a central tenant of Trump’s campaign as he promised voters that he would take steps to improve economic conditions, especially in auto-dependent states in the Midwest.

Trump seized upon discontent with NAFTA, which eliminated tariffs on most goods produced in North America, during his successful presidential campaign. The controversial trade deal has been blamed for auto companies moving production of smaller cars to Mexico.

Lighthizer’s counterparts from Canada and Mexico have said they are open to his calls for modernizing NAFTA, but they stopped short of calling for the type of wholesale changes that the U.S. is pushing for in the latest round of talks over the controversial agreement.

Canadian Minister of Foreign Affairs Chrystia Freeland said her country’s trade with the U.S. since NAFTA was created has been “balanced and mutually beneficial.

“In 2016, Canada and the United States traded $635.1 billion U.S. dollars worth of goods and services, and that exchange was almost perfectly reciprocal,” she said. “In fact, the United States ran a slight surplus with us of $8.1 billion U.S. dollars. And it worth pointing out that we are the biggest client of the United States. Canada buys more from the U.S. than China, the U.K. and Japan combined.”

Freeland added of NAFTA: “The North American free trade area is the biggest economic zone in the world. Canada, the U.S. and Mexico account for a quarter of the world’s GDP (Gross Domestic Product) with 7 percent of its population.

Freeland said Canada’s objective in the NAFTA talks is “to protect NAFTA’s record as an engine of job creation and economic growth,” although she said the country hoped to take advantage of the re-opening of talks about the agreement to “cut red tape for businesses and harmonize regulations” in a bid to modernize NAFTA to bring it up to date.

“Canada is and always has been a trading nation,” she said. “Our approach stems from one essential insight, we pursue trade free and fair, knowing it is not a zero-sum game.”

Mexican Secretary of Economy Ildefonso Guajardo Villarreal offered a similar defense of the NAFTA agreement, even as he agreed the deal could be modernized in the latest round of negotiations between his country, the U.S. and Canada.

“Since its enforcement, NAFTA has more than a trade agreement. It has made us think of ourselves as a region,” he said.

“Mexico believes that NAFTA has been a strong success for all parties, but we also agree there is room for modernization in order to make this agreement even more successful,” Guajardo Villarreal continued. “The issue is not tearing apart what has worked, but rather how we can make our agreement better.”

He cautioned, however: “For a deal to be successful, it has to work for all parties involved. Otherwise, it is not a deal.”


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Twitter: @Keith_Laing