Trump threatens to terminate NAFTA

Keith Laing
Detroit News Washington Bureau

Washington — President Donald Trump is threatening to blow up the North American Free Trade Agreement as negotiators from the United States, Canada and Mexico gather in Washington for a fourth round of talks.

Trump said in an Forbes interview that was published Tuesday: “I happen to think that NAFTA will have to be terminated if we’re going to make it good. Otherwise, I believe you can’t negotiate a good deal... .

“[The Trans-Pacific Partnership] would have been a large-scale version of NAFTA,” Trump said. “It would have been a disaster.”

Asked about the possibility of negotiating a separate deal with Canada and Mexico if NAFTA falls apart after meeting with Canadian Prime Minister Justin Trudeau at the White House Wednesday, Trump said: “We’ll see what happens. We have a tough negotiation and it’s something you will know in the not too distant future because we are going to be discussing NAFTA and we will be discussing defense.”

Trudeau put a happier face on the NAFTA talks after Wednesday’s meeting with the president.

“We gave a good partnership and there are always ways to improve it, always issues we need to talk through and that’s why having an ongoing constructive relationship between the president and prime minister is really important,” said Trudeau, who also met Wednesday with members of the powerful U.S. House Ways and Means Committee on Capitol Hill.

Negotiators from the U.S., Canada and Mexico are scheduled to meet Wednesday through Sunday as they seek to hammer out an agreement that would be acceptable to all three nations. The first three rounds of talks between the three countries over potential changes to NAFTA were held in Washington, Mexico City and Ottawa.

Trump administration officials have said the U.S. 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 identified a specific percentage of minimum domestic content that it would like to see.

NAFTA supporters have raised alarm bells about the Trump administration introducing “poison pills” into the recent talks.

U.S. Chamber of Commerce President Tom Donohue said in a speech in Mexico on Tuesday, “Let me be forceful and direct. There are several poison-pill proposals still on the table that could doom the entire deal.”

Donohue identified proposals from the Trump administration to impose a sunset clause that would stipulate that the revised trade agreement would terminate after five years unless all three countries agree it should continue and increasing the percentage of parts that are used in cars and other products that have to made in the U.S., Canada or Mexico to qualify for duty-free treatement under the deal as troublesome to negotiators from Canada and Mexico.

Donohue said the Trump administration has also proposed changes to the NAFTA agreement’s Investor-State Dispute Settlement system, which allows individual companies to sue countries for alleged discriminatory practices. Critics have said the system allows companies to go around domestic courts to sue governments in cases that involve international law disputes.

The Trump administration is considering “eliminating this important tool, or making it somehow optional,” according to Donohue.

“ISDS is a long-standing mechanism for using neutral arbitration to resolve investment disputes,” Donohue said in his Mexico speech. “And for the record, the U.S. government has never lost a case.”

On rules of origin, the Trump administration has said it wants to “incentivize the sourcing of goods and materials from the United States and North America.” Administration officials point to a study released by the U.S. Commerce Department showing the percentage of U.S. content of manufactured goods that are imported from Canada dropped from 21 percent to 15 percent from 1995 to 2011. while the percentage of U.S. content in goods imported from Mexico fell from 26 percent to 16 percent during the same period.

“NAFTA supporters assert that the U.S. content in cars assembled in Canada and Mexico is particularly high and that therefore our $70 billion-plus trade deficits with our NAFTA partners are not worrisome,” U.S. Commerce Secretary Wilbur Ross wrote in an op-ed in the Washington Post. “That would be a great argument if it were correct. But it isn’t. That argument is neither true of motor vehicles nor of manufactured goods in general.”

U.S. Rep. Debbie Dingell, D-Dearborn, said in an interview with The Detroit News the Trump administration’s hard line stances on NAFTA could end up endangering the entire agreement.

“The next few weeks are critical,” said Dingell, who has co-introduced a proposal that calls for increasing the NAFTA region content requirement to 90 percent. “The Canadians are really worried, there’s no question.”

Dingell criticized Trump’s apparent eagerness to pull out of the NAFTA agreement completely.

“President Trump came to Michigan and he made promises and that’s why people voted for him,” she said. “They want him to bring jobs back and protect jobs here.”

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Twitter: @Keith_Laing