By on August 16, 2017

nafta-secretariat

The first round of the North American Free Trade Agreement renegotiations begins on Wednesday. U.S. President Donald Trump, Mexican President Enrique Peña Nieto, and Canadian Prime Minister Justin Trudeau have planned to meet in Washington, D.C. on August 16th and stay through the 20th to discuss trade policy. Afterward, NAFTA debates will be led by U.S. Trade Representative Robert Lighthizer, Canadian Foreign Minister Chrystia Freeland, and Mexican Economy Minister Ildefonso Guajardo.

While this all began as a Trump campaign promise to renegotiate a better deal for the United States (or abandon the trade agreement entirely), it has evolved over the last six months into an opportunity to modernize NAFTA policies. There’s no firm deadline for the three countries to reach an agreement, but Mexico is pushing for the process to wrap up before its presidential campaign begins in earnest in February.

The United States has said its primary goal for the talks is shrinking its $64 billion trade deficit with Mexico, as well as its $11 billion deficit with Canada. It also wants to strengthen NAFTA’s rules of origin, eliminate Chapter 19 trade dispute mechanisms, and stop currency manipulation among trading partners — even those that apply less to North American partners.

Automakers and suppliers have been clear they want ensure fluid movement of product between countries and are opposed to tightening the rules of origin, especially as they relate to vehicle parts.

“In terms of the rules of origin, the overall goal is to address concerns about doing more to incentivize and create more manufacturing and more manufacturing jobs in the United States,” an unnamed U.S. official told Reuters in an interview. “I think each country expects benefits for itself from those rules of origin, and I think that’s what you’re seeing reflected in our objective statement.”

U.S. Senator John McCain publicly cautioned the Trump administration not to force “new barriers that could harm our ability to trade with our closest neighbors.”

“I urge the administration to pursue an outcome that does not pick winners or losers, but further promotes the free flow of trade with Mexico and Canada that has and will continue to boost our economy,” said McCain.

Canada’s primary sticking point is the elimination of Chapter 19. Freeland has even gone so far as to suggest her country could walk away from the talks if the U.S. insisted on eliminating preexisting mechanisms to resolve trade disputes between the three NAFTA participants.

Speaking on Tuesday, prior to a meeting with Guajardo at the Canadian embassy in Washington, Freeland said she looked forward to a “productive, constructive conversation.” Meanwhile, Guajardo said he wanted to exercise caution.

“I have always said a negotiator cannot be an optimist. He has to be a realist with a positive approach,” he told reporters.

[Image: NAFTA Secretariat]

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19 Comments on “NAFTA Renegotiations Begin, Automakers Worried Over Rules of Origin...”


  • avatar
    DeadWeight

    Donald J. Trump is GOING TO MAKE AMERICA GREAT AGAIN.

    #MAGA

  • avatar
    nemosdad

    Matt, there was an 8 billion dollar surplus last year with Canada. Where is the 11 billion deficit number from?
    Is it an average? If so by the end of the fiscal year that average will be close to zero.

    • 0 avatar
      Lou_BC

      @nemosdad – I think it depends on whose figures you want to use and what goes into the calculation.

      • 0 avatar
        nemosdad

        Lou_BC, there should be a common metric used to determine these numbers. If not, I’m still curious where the source of the info is from.
        I’m Canadian and as far as I know we (Canada) bought more from the states than they bought from us.
        The numbers can be skewed by oil or energy in general. If a downturn in oil affects the trade balance by this much, what is the long term surplus/deficit?
        Crap on it. I’ll Google Fu it tomorrow.

      • 0 avatar
        ect

        Lou, trade in goods is very tightly measured. Most countries have adopted the Harmonized System Tariff and HS Code system, which assigns classification numbers to all goods. StatsCan publishes export and import data, by country and 6-digit HS code, to the nearest dollar. I assume the US does the same. There shouldn’t be any debate about what the actual numbers are for trade in goods.

        Trade in services, I think, would be more difficult to measure since there is often no tangible product that formally crosses a border. If a Hollywood movie is shown in Canada, that’s pretty visible and measurable.

        On the other hand, I’ve done legal and consulting work for US and European clients, and I’ve no idea how those transactions get measured, or if they get measured at all. Not that my work is going to measurably alter the balance of trade (ah, if only!), but multiplied by all those who are engaged in international services transactions in one form or another, it illustrates the issue.

  • avatar
    ect

    According to the USTR, “The U.S. goods and services trade surplus with Canada was $12.5 billion in 2016”.

    The US surplus in services was (as per USTR) $24.6 billion, which suggests a deficit in trade in goods alone of $12.1 billion.

    People manipulate these numbers to suit their agenda, but the aggregate of goods and services is the truest approach, especially as services have become a more and more important component of US foreign trade.

  • avatar
    FOG

    Are all Matt’s articles void of substance and information? This is the second one I have come across today that was thinly veiled criticism and dislike without any merit.

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