Oct 18, 2017

Bleak outlook after latest round of NAFTA talks

In a trilateral statement following the fourth round of North American Free Trade Agreement (NAFTA) renegotiations that ended Tuesday in Arlington, Va., U.S. Trade Representative Robert Lighthizer said that Mexico and Canada are unwilling to accept unfair advantages and to rebalance trade between all three parties.

There was no specific mention of agriculture in any of the post-discussion statements.

While a new round of negotiations are scheduled, analysts said Lighthizer’s comments might indicate a new U.S .trade strategy on the horizon, including walking away from the agreement and seeking separate bilateral deals with Canada and Mexico.

A new timeline was also announced. NAFTA talks, which were originally intended to end by December, will extend into the first quarter of 2018.

The closing statement by Lighthizer at the fourth round of NAFTA renegotiations:

“We have now had four rounds and 22 days of negotiations. This has all been squeezed into just over two months. The amount of work by all negotiators from the three countries is extraordinary

I should also thank the congressional and cleared advisors. They have reviewed and helped us with hundreds of pages of very technical text. Nearly everyone involved has been working 12-hour days more or less continuously.

The United States had two objectives in these talks. First, we wanted to update a 23-year-old agreement to reflect our modern economy. Obvious areas for modernization included intellectual property, digital trade, anticorruption, technical standards, financial services and others.

Our President has been clear about our second objective. NAFTA has resulted in a huge trade deficit for the United States and has cost us tens of thousands of manufacturing jobs. The agreement has become very lopsided and needs to be rebalanced. We of course have a five-hundred billion dollar trade deficit. So for us, trade deficits do matter. And we intend to reduce them.

Frankly, I am surprised and disappointed by the resistance to change from our negotiating partners on both fronts. We have made some headway on the first objective, but even here we have sometimes seen a refusal to accept what is clearly the best text available in spite of the countries having agreed to it in the past.

In certain cases, partners who agree to TPP have actually rejected its text here. I would have thought by now we could have cleared chapters dealing with digital trade, telecommunications, anticorruption, and several sectoral annexes, for example.

As difficult as this has been, we have seen no indication that our partners are willing to make any changes that will result in a rebalancing and a reduction in these huge trade deficits. Now I understand that after many years of one-sided benefits, their companies have become reliant on special preferences and not just comparative advantage. Countries are reluctant to give up unfair advantage.

But the President has been clear that if we are going to have an agreement going forward, it must be fair to American workers and businesses that employ our people at home.

Continuing to design a national manufacturing policy that is largely dependent on exports to the United States without balance cannot long continue. It is important also to remember that to some extent, NAFTA is an investment agreement, and it is unreasonable to expect that the United States will continue to encourage and guarantee U.S. companies to invest in Mexico and Canada primarily for export to the United States.

All parties must understand this and be reasonable if there is any chance for these negotiations to be successful. I think we should all take the time between now and our next round to realistically assess what can be done to arrive at a balanced, modern agreement. And I am hopeful that if we do that, we’ll have a successful conclusion to this project in due course.

I’d like to again thank both of my colleagues for your hard work, and I guess probably even more thank their colleagues (negotiators), who have done the lion share of the work over the last months.

I look forward to seeing you all in Mexico City.”

Trilateral statement on the conclusion of the fourth round of NAFTA negotiations:

“Today, United States Trade Representative Robert Lighthizer, Canadian Foreign Affairs Minister Chrystia Freeland and Mexican Secretary of the Economy Ildefonso Guajardo successfully concluded the fourth round of the renegotiation and modernization of the North American Free Trade Agreement (NAFTA). The round took place in Arlington, Virginia, from Oct, 11-17, 2017, covering seven full days of discussions in nearly 30 groups.

Building on the progress made in prior rounds, the United States, Canada, and Mexico have now substantively completed discussions in the Chapter on Competition.

Additionally, negotiators made progress in several other negotiating groups, including customs and trade facilitation, digital trade, good regulatory practices, and certain sectoral annexes.

Parties have now put forward substantially all initial text proposals. New proposals have created challenges and Ministers discussed the significant conceptual gaps among the Parties. Ministers have called upon all negotiators to explore creative ways to bridge these gaps. To that end, the Parties plan on having a longer intersessional period before the next negotiating round to assess all proposals. Mexico will host the fifth round of talks in Mexico City from Nov. 17-21, 2017. Additional negotiating rounds will be scheduled through the first quarter of 2018.

NAFTA partners are working hard to ensure the new agreement provides a solid framework to create jobs, economic growth and opportunity for the people of North America. Ministers have reaffirmed their mandate to chief negotiators to reach an agreement in a reasonable period of time. Negotiators will continue intersessional engagement, as well as intensive consultations with their respective stakeholders.”

– Gary Pullano, FGN Managing Editor