NAFTA negotiators struggle to reach consensus on deficits, manufacturing

U.S., Canadian, and Mexican government officials charged with renegotiating the North American Free Trade Agreement (NAFTA) expressed disappointment in the outcome of the fourth round of the talks completed on Tuesday, but vowed to stay at the table.    U.S., Canadian, and Mexican government officials charged with renegotiating the North American Free Trade Agreement (NAFTA) expressed disappointment in the outcome of the fourth round of the talks completed on Tuesday, but vowed to stay at the table.
   This latest round took place in Arlington, Va., starting Oct. 11 and covering seven 12-hour days of discussions among nearly 30 groups.
   While the negotiators said they nearly completed discussions on changes NAFTA’s competition chapter, as well as made progress on other substantive topics such as customs and trade facilitation, digital trade, good regulatory practices, and certain sectoral annexes, disagreement reportedly heated up over how the United States wants to level the playing field on trade deficits between the countries.
   “NAFTA has resulted in a huge trade deficit for the United States and has cost us tens of thousands of manufacturing jobs,” said U.S. Trade Representative Robert Lighthizer in prepared remarks at the conclusion of the fourth round of NAFTA talks. “The agreement has become very lopsided and needs to be rebalanced. We of course have a $500 billion trade deficit. So for us, trade deficits do matter. And we intend to reduce them.”
   Lighthizer said, so far, there is “no indication” that Canada and Mexico are willing to make changes to balance the NAFTA trade deficits. 
   “Now I understand that after many years of one-sided benefits, their companies have become reliant on special preferences and not just comparative advantage,” he said. “Countries are reluctant to give up unfair advantage.”
   Lighthizer also continued to hammer Canada and Mexico on manufacturing policies that depend on exports to the United States. 
   “It is important also to remember that to some extent, NAFTA is an investment agreement, and it is unreasonable to expect that the United States will continue to encourage and guarantee U.S. companies to invest in Mexico and Canada primarily for export to the United States,” he said. “All parties must understand this and be reasonable if there is any chance for these negotiations to be successful.  
   “I think we should all take the time between now and our next round to realistically assess what can be done to arrive at a balanced, modern agreement,” he added.
   Canadian Foreign Affairs Minister Chrystia Freeland warned that U.S. proposals “turn back the clock on 23 years of predictability, openness and collaboration under NAFTA…In some cases, these proposals run counter to World Trade Organization rules. This is troubling.”
  Freeland was also critical of ongoing U.S. calls for national content rules, which she said would harm the already well-established, interconnected supply chains of North America’s shippers.
   Later in the day, she told reporters that the Canadian negotiators “hope for the best and for the best possible outcome” from the NAFTA negotiations, but warned that Canadians should also “prepare for the worst possible outcome, and we certainly are.”
   Despite these concerns, Freeland also said she saw “concrete evidence of good will” from her U.S. counterparts to conclude a new NAFTA that will benefit the three trade partners. 
   Although Mexico, as well as Canada, plan to hold their ground during the NAFTA renegotiation rounds, Mexican Secretary of Economy Ildefonso Guajardo Villarreal said his country remains committed to the agreement and warned that walking away from it would harm the national economies of the three countries.
   “None of us want to end this process empty-handed, and there is no reason for that,” he said in a statement at the closing of the fourth round of NAFTA negotiations.   
   “NAFTA partners are working hard to ensure the new agreement provides a solid framework to create jobs, economic growth and opportunity for the people of North America,” Lighthizer said. “Ministers have reaffirmed their mandate to chief negotiators to reach an agreement in a reasonable period of time. Negotiators will continue intersessional engagement, as well as intensive consultations with their respective stakeholders.”
   Mexico will host the fifth round of talks in Mexico City from Nov. 17-21. Additional negotiating rounds will be scheduled through the first quarter of 2018.