Issue of the week: A softer U.S. line on NAFTA
President Trump “has gone squishy” on the North American Free Trade Agreement, said Peter Coy in Bloomberg Businessweek. With NAFTA renegotiations slated to begin Aug. 16, many analysts expected the Trump administration “to take a hard, nationalistic line” on updating the three-way pact with Mexico and Canada. Earlier this year, Trump called the 1994 agreement “the worst trade deal maybe ever signed anywhere,” and threatened to slap a 20 percent tariff on Mexican goods to pay for the border wall. But instead of a wholesale overhaul, Trump is now aiming for a modest revamp. The official objectives released by the White House last week “aim to tune up, not gut” the trade pact, with a U.S. recommitment to tariff-free, quota-free trade with its neighbors, along with some tough, but largely symbolic, language about reducing trade deficits. The rest of the 17-page document is “mostly mainstream ideas for furthering trade liberalization, such as speeding goods through customs.” Overall, the administration’s stated goals “are surprisingly tame.”
Free-trade advocates “are breathing sighs of relief,” said Jonathan Swan in Axios.com. Some feared that administration hard-liners like Steve Bannon and National Trade Council Director Peter Navarro would include “poison pills,” such as new border taxes, that would render the negotiations “dead on arrival.” But there’s nothing in the White House’s game plan “that terrifies establishment Republicans on Capitol Hill or the Mexicans and Canadians who’ll ultimately be sitting across the negotiating table.” Still, “disguised in the dry, sanitized language” of the administration’s objectives were “fighting words,” said Ana Swanson in The Washington Post. Two possible points of contention: The White House wants to move disputes over anti-dumping duties and other retaliatory trade measures from an international arbitration panel to a U.S. trade court. It also wants to scrap a special exemption for Canada and Mexico that protects them from U.S. tariffs and quotas designed to help specific industries “seriously injured” by international trade. You can expect both countries to fight back hard against these proposed changes.
“The stakes are high,” said The Economist. The U.S. does roughly a quarter of its trade in goods and services with Canada and Mexico. “The three economies tend to grow or shrink together and have integrated supply chains.” So far, the Trump administration’s aims for NAFTA appear to be “closer to revision than destruction.” But if U.S. negotiators end up emphasizing more-Trumpian themes at the table, “the talks could take an angry turn.” That would be a shame, said Mary Anastasia O’Grady in The Wall Street Journal. Less than 13 percent of the total U.S. trade deficit is with its NAFTA partners. What’s more, continental free trade helps U.S. companies to be more competitive globally. Because U.S. automakers can rely on production facilities in all three NAFTA countries, they “turn out cars and trucks that compete on price and quality all over the world.” The White House’s objectives “are largely constructive. But Trump protectionists have planted a few land mines.”