NAFTA Negotiations Underway as U.S. Seeks to Tackle Trade Deficits

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Global Trade

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Renegotiation of the North American Free Trade Agreement (NAFTA), the 23-year-old trilateral trade agreement, has been a talking point for President Donald Trump. After all, let’s not forget: during the first presidential debate last September, Trump called NAFTA “the worst trade deal ever signed, maybe anywhere.”

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In January, Trump pulled the U.S. from the Trans-Pacific Partnership negotiate under former President Barack Obama. In April, Trump reportedly nearly pulled the U.S. from NAFTA, but ultimately backed off after conversations with Canadian Prime Minister Justin Trudeau and Mexican President Enrique Peña Nieto.

With that, the stage was then set for the first round of negotiations, which kicked off Aug. 16 in Washington, D.C. The talks are scheduled to continue until Aug. 20.

In recent months, the Trump administration made it clear that attacking the sizable trade deficits the U.S. has with Mexico and Canada will be a major focus of the negotiations. United States Trade Representative Robert Lighthizer said as much in his opening statement:

“I’ve always thought that communities along our borders have a particular equity in this agreement. In many cases their lives, businesses, and families are very much on both sides of the dividing line,” Lighthizer said. “They too are hardworking men and women trying to raise a families and accumulate wealth. We must keep their interests paramount. But for countless Americans, this agreement has failed. We cannot ignore the huge trade deficits, the lost manufacturing jobs, the businesses that have closed or moved because of incentives — intended or not — in the current agreement.”

According to Census Bureau data, in 2016 the U.S. had a $64 billion trade deficit with Mexico and an $11 billion deficit with Canada. In 1994, when NAFTA went into effect, the U.S. had a $1.3 billion trade surplus with Mexico.

This year, from January-June, Census Bureau data show a nearly $36.3 billion trade deficit with Mexico and a $10.5 billion trade deficit with Canada.

As with most things, various stakeholders have differing opinions on the success of NAFTA.

Trade has boomed within the three-member group since the deal went into effect in 1994. In submitted statements earlier this year, industry heads largely opined NAFTA had been a success, but that it needed modernizing.

In June, Thomas J. Gibson, president and CEO of the American Iron and Steel Institute, wrote in a memo to the Office of the United States Trade Representative: “The American steel industry views NAFTA as a successful agreement, but after 23 years, one that can also be modernized and strengthened.”

Ask the average American worker, however, many of whom have seen their jobs move elsewhere since the advent of the agreement, and they might have a different opinion.

“The U.S. Government has certified that at least 700,000 Americans have lost their jobs due to changing trade flows resulting from NAFTA,” Lighthizer said. “Many people believe that number is much, much bigger than that.”

A 90-day consultation period with Congress and the public kicked off May 18. In late June, the Office of the USTR held public hearings over three days regarding NAFTA, welcoming comments from lawmakers, businesses and other stakeholders.

Earlier this year Lighthizer announced John Melle, the assistant U.S. trade representative for the Western Hemisphere, will serve as the chief negotiator during the NAFTA talks. Melle has worked for the Office of the USTR since 1988.

The Trump administration clearly does not want small changes — it wants a wholesale shift in the calculus of the agreement.

“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 a few provisions and a couple of updated chapters. We feel that NAFTA has fundamentally failed many, many Americans and needs major improvement.”

What happens over the next few days of negotiations remains to be seen. Thus far, rules of origin for goods produced in the region and dispute settlement were among the topics on the agenda, according to Reuters.

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The current round of negotiations will continue through Sunday. The next round is scheduled to be held next month in Mexico.

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