Nafta Talks Lurch Ahead Without Signs of Major Progress

The latest round of talks came as the Trump administration promised to upend America’s trade agreements with the goal of creating better deals for domestic manufacturers.

In recent days, Mr. Trump has threatened to withdraw from a trade pact with South Korea. And late last month, he laced into Canada and Mexico for being “very difficult” in the Nafta negotiations, offering a warning in a post on Twitter that he “may have to terminate” the agreement.

The lack of concrete progress raises questions about whether the three countries will be able to rewrite Nafta this year, if at all. Thus far, Canada and Mexico have made it clear that they will not be cowed by Mr. Trump’s threats to unilaterally scrap the trade agreement, a move that would most likely damage the United States economy.

“I think they might be tougher than the Trump administration thought,” Chad P. Bown, a senior fellow at the Peterson Institute for International Economics, said of Canada and Mexico. “Trade negotiations are always challenging.”

For the United States, reducing trade deficits remains the top priority. Also looming over the talks are contentious changes that Mr. Lighthizer wants to make to Nafta’s “rules of origin” that would compel carmakers to use more parts made in the United States. He also wants to overhaul the pact’s dispute settlement system to give the United States more leverage.

In the current talks, Canada’s top concerns include low wages in Mexico and so-called right-to-work laws that have weakened unions and labor standards in some parts of the United States.

Ms. Freeland noted in her closing remarks that Nafta had yielded substantial economic benefits for the United States since it was enacted in 1994 and said that the trade relationship between the United States and Canada was “reciprocal,” a principle that Mr. Trump prizes.

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Echoing comments made recently by Vice President Mike Pence, Ms. Freeland said she was confident that the three countries could find a way to reach a deal that is a “win, win, win.”

“All three parties are absolutely committed to getting this done,” Ms. Freeland said.

For Mexico’s part, a top priority remains finding ways to incorporate President Enrique Peña Nieto’s 2014 energy program in a modernized Nafta. This would further open up Mexico’s energy sector to private investment and could reduce the United States’ trade deficit with Mexico.

While many details remain to be worked out, the course of the Nafta talks is also likely to be directed by politics and the passions of Mr. Trump. The decision on Tuesday by Mr. Trump to end the Obama-era executive action that shields young undocumented immigrants from deportation could ratchet up tension between the countries. And Mr. Trump’s ongoing commitment to making Mexico finance a border wall rankles its leaders.

“It is hard to reconcile the political language of the U.S. leaders and their aggressiveness and their sense of being abused by Mexico in the relationship,” said Alejandro Gómez-Strozzi, Mexico’s undersecretary of economy from 2000 to 2006. “Nafta needs some improvement, but not in the light that is being portrayed by the U.S. president.”

Mr. Trump may have to decide if he wants to tweak the deal and call it a win, get bogged down in painstaking details or bail on Nafta entirely.

Most trade experts agree that achieving a major rewrite of Nafta in the next few months is a long shot, if only because most major trade pacts take years to reach. To veterans of big trade agreements, the lack of immediate breakthroughs is not necessarily bad news for Nafta, but the urge to rush the negotiations could prove to be counterproductive.

“As you’re thinking about the timetable, you need to make sure you have enough time to consult with Congress, consult with stakeholders and find creative solutions to new problems,” said Michael Froman, who was a trade representative under President Barack Obama.

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Article source: https://www.nytimes.com/2017/09/05/business/economy/nafta-negotations.html?partner=rss&emc=rss