Daily Management Review

In NAFTA Talks, Lowering Of Trade Deficit Made A Priority By The U.S.


The United States has said that its top priority for the talks related to the 23-year-old North American Free Trade Agreement (NAFTA) was shrinking the U.S. trade deficit with Canada and Mexico and thus the country has launched the first salvo in the renegotiation of the trade pact.
By improving access for U.S. goods exported to Canada and Mexico under the three-nation pact, he would seek to reduce the trade imbalance, U.S. Trade Representative Robert Lighthizer said in a much-anticipated document sent to lawmakers.
It wants an "appropriate" provision to deter currency manipulation by trading partners, the administration has also said in what is the first time in a U.S. trade deal. But rather than specifically at Canada and Mexico, which are not considered currency manipulators, the move appeared aimed at future trade deals.
An often-cited complaint about China in past years, no country should manipulate its currency exchange rate to gain an unfair competitive advantage, the 17-page document asserted.
By saying he would take more legal and regulatory steps during the next six months to protect American manufacturers, President Donald Trump lashed out against trade deals and unfair trade practices shortly before the release of the document.
Although a source familiar with the Canadian government's thinking said the document was "not earth shattering," the U.S. list was "part of its internal process", Canadian Minister of Foreign Affairs Chrystia Freeland said.
In order to discuss logistics of the talks, officials from the United States, Mexico and Canada meet in Washington on Tuesday, the source said. NAFTA talks are expected in mid-August even though no date has been announced for the talks.
It would work "to achieve a constructive negotiation process that will allow trade and investment flows to increase and consolidates cooperation and economic integration to strengthen North American competitiveness," Mexico's economy ministry said in a statement
Boosting U.S. savings is a better way to the of the shrinking the yawning U.S. trade deficit will not be achieved through trade deals, trade experts have argued.
"The first bullet point shows their preoccupation with bilateral trade deficits and that's unfortunate," said Chad Bown, a senior fellow and trade expert at the Peterson Institute for International Economics. "There's not much that trade policy and trade agreements can do to change those. That's more of a macroeconomic issue."
The United States has been largely prohibited from pursuing anti-dumping and anti-subsidy cases against Canadian and Mexican firms by a trade dispute mechanism which needs to be eliminated by the administration, and this should be among the other priorities, Lighthizer.
And including subsidies and unfair pricing structures, that are currently at the heart of those standoffs, the document targeted a range of agricultural non-tariff barriers, even though there was no mention of active disputes between the United States and Canada over softwood lumber and dairy products.
In order to ensure that the pact's benefits do not go to outside countries and to "incentivize" the sourcing of U.S. goods, it would seek to strengthen NAFTA's rules of origin, USTR said. It did not specify how much of a product's components must originate from NAFTA countries and offered no details on such incentives.