Trump Administration Signals It Would Seek Mostly Modest Changes to Nafta
30 March 2017 - 3:26PM
Dow Jones News
By Bob Davis and William Mauldin
WASHINGTON -- The Trump administration is signaling to Congress
it would seek mostly modest changes to the North American Free
Trade Agreement in upcoming negotiations with Mexico and Canada, a
deal President Donald Trump called a "disaster" during the
campaign.
According to an administration draft proposal being circulated
in Congress by the U.S. trade representative's office, the U.S.
would keep some of Nafta's most controversial provisions, including
an arbitration panel that lets investors in the three nations
circumvent local courts to resolve civil claims. Critics of these
panels say they impinge on national sovereignty.
The draft, reviewed by The Wall Street Journal, talks of seeking
"to improve procedures to resolve disputes," rather than
eliminating the panels.
The U.S. also wouldn't use the Nafta negotiations to deal with
disputes over foreign currency policies or to hit numerical targets
for bilateral trade deficits, as some trade hawks have been
urging.
However, in one far-reaching change, the draft proposal calls
for allowing a Nafta nation to reinstate tariffs in case of a flood
of imports that cause "serious injury or threat of serious injury"
to domestic industries.
The document appears to be a compromise between the desires of
trade hawks to use Nafta renegotiations as a way to set a new trade
agenda and moderates who back the U.S. traditional commitment to
free trade. The Congress is split along those lines as well.
The draft could be revised. The administration must give
Congress 90 days' notice under trade law before beginning formal
Nafta renegotiations. It is far from clear that Canada and Mexico
would agree to the changes the U.S. seeks.
In a meeting last month with Canadian Prime Minister Justin
Trudeau, President Trump signaled that he wanted small changes in
Nafta -- at least as it pertains to Canada -- but didn't offer any
details.
The U.S. trade representative's office declined to comment.
Jeffrey Schott, a trade scholar at the Peterson Institute for
International Economics, a free-trade think tank, said that the
measure reimposing tariffs -- called a "snapback" in trade lingo --
was also sought by the Clinton administration 24 years ago when it
negotiated side deals to Nafta. Mexico didn't agree to the
changes.
The letter accompanying the Nafta draft, which was sent to
members of the Senate Finance Committee, among others, said the
U.S. trade deficit with Canada and Mexico "demands that this
administration take swift action to revise the relationship."
But the draft doesn't propose specific measures that would close
the deficit. So-called rules of origin -- the percentage of a
product that must be produced in Nafta countries -- could be set in
a way that "supports production and jobs in the United States," the
draft said. But the document doesn't provide any details of how
that would be done or what level of domestic content the U.S. would
seek.
Another substantial change could emerge in the
government-procurement section of Nafta, which currently requires
the U.S. government to consider bids from Mexican and Canadian
companies on domestic infrastructure projects.
In the draft objectives, the Trump administration is seeking "to
establish rules that require government procurement to be conducted
in a manner that is consistent with U.S. law and the
administration's policy on domestic procurement preferences," which
could open up the door for Mr. Trump's "Buy American" policies.
Meanwhile, U.S. contractors could lose business in Mexico and
Canada.
Mr. Schott noted that a number of the proposed negotiating
objectives echo provisions in the Trans-Pacific Partnership, a
12-nation trade pact among Pacific Rim countries. Mr. Trump
campaigned heavily against the TPP. The president pulled the U.S.
from the deal on his first working day in office.
Among the TPP-style provisions the U.S. will seek, according to
the draft, are protections of digital trade and commerce, tougher
intellectual property enforcement and requirements that state-owned
companies operate in a commercial fashion. The Obama administration
had hoped to use TPP to set standards for state-owned firms in the
Pacific as a way to influence Chinese behavior.
The proposed labor and environmental provisions -- particularly
important to Democrats -- also echo the TPP, said Mr. Schott. The
U.S. would seek to include such provisions in the body of Nafta
agreement -- they are now in a side deal -- and have them enforced
in the same way that other Nafta requirements are enforced.
Ultimately, that could mean imposing tariffs if the dispute isn't
worked out among the parties.
Many supporters of Mr. Trump's approach to trade had hoped he
would include binding currency rules in Nafta and use that as a
template for deals with Asian countries.
Even if currency isn't included in the main Nafta negotiations,
U.S. officials could still strike a side-deal on currency with
counterparts in Mexico. The Obama administration won new currency
guidelines in a deal meant to accompany the TPP, but critics across
Congress complained that the currency deal wasn't binding, and
lawmakers never brought the TPP to a vote.
Write to Bob Davis at bob.davis@wsj.com and William Mauldin at
william.mauldin@wsj.com
(END) Dow Jones Newswires
March 30, 2017 00:11 ET (04:11 GMT)
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