NAFTA members ‘finally’ discuss core issues, Lighthizer says

Members of the North American Free Trade Agreement closed the anti-corruption chapter during the sixth round of negotiations, however, the United States and Canada disagreed over trade balance numbers.    U.S. Trade Representative Robert Lighthizer on Monday said members of the North American Free Trade Agreement (NAFTA) “finally” started to discuss core issues of the deal and closed the anti-corruption chapter during the Montreal round, but divergent claims between him and his Canadian counterpart over which country had a bilateral goods trade deficit in 2016 revealed fundamental trade divisions continue between those parties.
   Notably, during a Monday press conference closing out the sixth round of negotiations in Montreal, both Lighthizer and Canadian Foreign Affairs Minister Chrystia Freeland selected the opposite country’s statistics in an effort to explain that his and her own respective country ran a bilateral goods trade deficit in 2016.
   Freeland pointed to U.S. Bureau of Economic Analysis statistics indicating the U.S. manufactured goods surplus with Canada totaled $35.9 billion in 2016, but said that Canada doesn’t consider trade deficits and surpluses to be the “ultimate arbiter” of the merits of trade.
   On the U.S. side, Lighthizer cited Canadian government statistics showing an $87 billion Canadian goods trade surplus over the U.S. that year. Lighthizer also noted that “the projected figure” for 2017 “showed that the surplus will be even larger” when the numbers are finalized. “We need to modernize and we need to rebalance,” he said.
   A Trump administration official declined to comment on whether Lighthizer’s continual public focus on U.S. goods trade balances, as opposed to services trade balances, reflected any administration prioritization to address issues related to certain social classes and/or labor sectors.
   During the press conference, Lighthizer asked “is it not fair” that the U.S. government is exploring whether the cited trade imbalance is partly attributable to the rules of NAFTA, and asked whether Canada would “not ask the same question if the situation were reversed?”
   Earlier during the press conference, Lighthizer said the U.S. has been approaching the NAFTA renegotiation fairly, despite critical opinions that have been voiced over the last several months.
   “I think there is some misunderstanding here that the United States is somehow being unfair in these negotiations,” he said. “And that is not the case. Free trade agreements are essentially grants of preferential treatment to other countries in exchange for approximately equal rounds of preferential treatment in their economy. Thus, it is reasonable from time to time to assess whether the bargain house turned out to be equitable.”
   During the round, Canada made a proposal to include modernized car components and research activities in calculations for automotive regional value content under NAFTA’s rules of origin.
   Lighthizer criticized Canada’s proposal, though, saying it “may actually lead to less regional content than we have now, fewer jobs in the United States, Canada and likely Mexico.” He said it was the “opposite” of what the U.S. had intended in its proposal.
   The U.S. has proposed an 85 percent North American value content requirement and a 50 percent U.S. content requirement for automobile trade between NAFTA parties.
   Freeland said Canada came to the negotiating table in Montreal with creative, workable proposals to compromise with U.S. pitches, including the U.S.’s NAFTA auto proposal.
   “Our job is not to cause the dismantling of the cross-border supply chains that have made our auto industry the envy of the world,” Freeland said. “Our job is not to weaken North American competitiveness, it is to strengthen it.”
   Canada also tabled an alternative to an earlier U.S. proposal to enact a process to automatically sunset the agreement every five years unless it passes a review by the parties, Freeland said.
   Additionally, Canada proposed an alternate measure to a U.S. proposal for an optional investor-state dispute settlement (ISDS) mechanism “that responds directly to U.S. concerns about being subject to ISDS,” she said.
   Progress was made in the areas of sanitary/phytosanitary measures, customs and trade facilitation, technical barriers to trade, and telecommunications, Freeland said.
   Customs and trade facilitation measures under consideration are “much more advanced” than provisions in the World Trade Organization Trade Facilitation Agreement, “and definitely much stronger than what we were achieving in TPP,” Mexican Economy Secretary Ildefonso Guajardo said during the press conference.
   While Lighthizer characterized negotiations as “slow,” he stated that “some real headway” was made during the sixth round of talks, which ended Monday.
   Freeland agreed that talks were “beginning to bear fruit,” while championing the current NAFTA, but said the 24-year-old deal should be modernized.
   She noted the recent historic highs of the U.S. stock market and strongest employment rate in recent U.S. history “are not the signs of an economic system that is broken.”
   NAFTA parties are “in a much better moment in this negotiation at this point” than they were when talks started in August, Guajardo said.
   “Mexico is committed to intensify our engagement, and we will continue working constructively to solve pending issues,” he said. “Mexico will contribute to this process, and we’ll be happy to host you in late February in the seventh round of negotiations in Mexico City.”