NAFTA Round 3: Is There Enough Time to Reach a New Agreement?

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After two rounds of talks on the renegotiation and modernization of the North American Free Trade Agreement (NAFTA), uncertainty continues to loom.

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The 23-year old trilateral trade deal linking the U.S., Mexico and Canada has been the subject of talks between trade representatives of the countries in recent months.

An initial round of talks was held in Washington, D.C., with a second round coming earlier this month. A third round is scheduled for Sept. 23-27 in Ottawa.

Renegotiation of the deal, which President Donald Trump once referred to as possibly the worst trade deal ever, has not seemed to gain much traction through two rounds of talks.

In a closing statement after the recently concluded round of talks in Mexico City, United States Trade Representative Robert Lighthizer again laid out the U.S. delegation’s goals:

“The American delegation is focused on expanding opportunities for American agriculture, services, and innovative industries. But, as I alluded to in my opening round, we also must address the needs of those harmed by the current NAFTA, especially our manufacturing workers. We must have a trade agreement that benefits all Americans, and not just some at the expense of others. I am hopeful we can arrive at an agreement that helps.”

While Lighthizer said the parties “found mutual agreement on many important issues,” other reports indicate the negotiators are still far apart.

The New York Times reported that, during a question-and-answer session Monday at the Center for  Strategic and International Studies (CSIS), Lighthizer said negotiations were “moving at warp speed, but we don’t know whether we’re going to get to a conclusion, that’s the problem.”

During his opening statement prior to taking questions, Lighthizer said support for free trade in recent decades has been “eroding” among the electorate.

“There has been a growing feeling that the system that has developed in recent years is not quite fair to American workers [and] manufacturing, and that we need to change,” he said.

The ambitious timeline for the talks is further complicated by elections in the three countries next year: U.S. midterms, the Mexican presidential election and provincial election in Canada. Producing a mutually agreed upon and revamped trade deal by the end of the calendar year will require the negotiations to move at breakneck speed.

On Monday, Mexican Economy Minister Ildefonso Guajardo said rules of origin and the U.S. trade deficit with Mexico are the issues that will determine whether a new deal can be reached, Reuters reported.

The trade deficit has been a primary talking point for the U.S., one which Lighthizer referred to Monday at the CSIS.

“I think it is reasonable to ask, when faced with decades of large deficits, globally and with most countries in the world, whether the rules of trade are causing part of the problem,” he said.

The U.S. had a $63.4 billion trade deficit with Mexico in 2016. Though the first seven months of 2017, the U.S. has a $41.2 billion trade deficit with Mexico, up from approximate $37 billion through the first seven months of 2016.

Another idea that has come up in renegotiation talks that has generated pushback is that of a sunset clause.

According to The New York Times report, Secretary of Commerce Wilbur Ross said the administration was considering such a clause, which would mean that the trade deal would expire after five years unless all parties voted to continue it. (Lighthizer declined to expand on the idea of a sunset clause vis-a-vis NAFTA during the CSIS event.)

Aside from NAFTA, Lighthizer called China the biggest challenge for the global trading market, adding that the World Trade Organization is not equipped to tackle the challenges China presents.

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“We must find other ways to defend our companies, workers, farmers, and indeed, our economic system,” he said.

Following this coming weekend’s round of talks in Ottawa, four more rounds of talks remain on the negotiating agenda this year.

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