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Trump Administration Notifies Congress of Intent to Launch Nafta Talks

The Trump administration informed U.S. lawmakers that it intends to launch formal negotiations on overhauling the North American Free Trade Agreement, a big bet by President Donald Trump that he can win concessions from Canada and Mexico, and push a deal through Congress.

Mr. Trump, who called the trade deal a “disaster” on the campaign trail, threatened to pull the U.S. out of Nafta as recently as last month and is seeking to bring maximum negotiating leverage to the talks.

“Today, President Trump is fulfilling one of his key promises to the American people,” U.S. Trade Representative Robert Lighthizer told reporters on Thursday.

In a letter to congressional leaders, Mr. Lighthizer said the administration will start talks with Canada and Mexico as soon as 90 days from Thursday, in line with congressional rules on negotiating trade deals subject to expedited consideration by lawmakers.

Still, Canada and Mexico have only limited room to make deep concessions to Washington, given their own domestic political situations. Mr. Lighthizer said he hopes to wrap up negotiations by the end of the year, a key goal for officials worried Mexico’s presidential election next year could weigh on the talks.

Mr. Trump was elected in part with a message of regaining American manufacturing jobs, and Mr. Lighthizer said Thursday that manufacturing will be a key focus of the talks.

“Sectors such as manufacturing, particularly with regard to Mexico, have fallen behind, he said.

“Nafta was negotiated 25 years ago, and while our economy and businesses have changed considerably over that period, Nafta has not,” Mr. Lighthizer wrote in the letter. “For example, digital trade was in its infancy when Nafta was enacted.”

Many economists and trade experts say it will be hard to structure a trade deal that brings back labor-intensive manufacturing jobs, especially when wages are so much lower south of the border. Labor standards, included as an annex to the original Nafta deal as implemented in 1994, will be front and center in this year’s talks, Mr. Lighthizer said.

Mr. Lighthizer’s assertion that Nafta has been bad for American manufacturers will be hotly contested by the American business community, which has argued that the pact has done a lot to sustain some U.S. factories by creating more efficient continental supply chains that allowed U.S. firms to better compete globally.

Mr. Lighthizer didn’t mention the supply chains in his comments Thursday, but the Business Roundtable, a trade association of large U.S. companies, stressed it in its own letter released Thursday morning outlining its goals for the renegotiation.

“The planned negotiations should not weaken or undermine Nafta given its many benefits for the United States,” the letter said. “We think it is very important to…not disrupt supply chains that have been built up and greatly benefit U.S. businesses, workers and consumers over the last two decades.”

In Canada, officials have repeatedly said they stand ready to begin formal talks on Nafta, with the aim of making improvements to the decades-old trade pact. Canada has much at stake in renegotiations, as three-quarters of all Canadian exports — or the equivalent of 20% of its total economic output — are U.S. bound.

Mexican officials sent notice to lawmakers months ago that they are ready to begin talks. Mexico has the most at stake in any renegotiation, since exports account for more than a third of its economy, and 90% of its exports are manufactured goods, mostly sent to the U.S.

The 2016 political season brought a deep skepticism of U.S. trade policy, and the Trump administration will have to strike a fine balance if it wants to win the backing of a majority of lawmakers in the House and Senate, required for any final deal that significantly overhauls Nafta.
Source: Dow Jones

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