US NAFTA position: more than a tweak, less than do-over
by Sarah Goldfeder
July 19, 2017
s promised, the Office of the United States Trade Representative (USTR) issued a 17-page report Monday on Washington’s negotiating goals for the upcoming NAFTA talks. The release came an hour after President Donald Trump hosted an event highlighting goods made in each of the 50 states for “Made in America week.” The sequence ensured that the Made in America event got top billing on the US evening news, and the NAFTA report was only a footnote for Americans. Although there were rumours that the report was not quite ready, with even the late-afternoon timing thought to be a result of last-minute edits, the document turned out to be thoughtful, even clever. It will give the Canadians and the Mexicans plenty of material to parse, muse over and debate in the 30 days before negotiations begin.
It’s a notable accomplishment for an administration that, until that day, had not met any of its other self-imposed deadlines. As if to reinforce that, the latest health care bill died yet another death — the second time the attempt to repeal and replace Obamacare has gone down in flames. Section 232 reports, designed to evaluate whether levels of certain imports are threatening national security, have yet to be released on steel and aluminum. They were promised for the end of June. There are few signs of compromise on the budget or on tax reform, and the debt ceiling looms like a storm cloud on the horizon. The border wall has taken on mythic proportions but is no closer to being built. Foreign policy goals are confused, restated and reinvented on an almost weekly basis. The one part of Trump’s administration that appears able to strike a deal is his trade team.
The one part of Trump’s administration that appears able to strike a deal is his trade team.
By appointing a trade hawk, Wilbur Ross, to the Department of Commerce and choosing the relatively moderate, eminently professional Robert Lighthizer as the Trade Representative, Trump has placed his trade strategy in the sweet spot. He is able to tweet, threaten and cajole the other NAFTA partners while at the same time presenting them with a team that appears ready to negotiate a “win-win-win” result. The list of goals released on July 17 is a masterpiece of quiet trade diplomacy, designed to drive the hard bargain that the Trump political base is looking for. Rumours that the administration will pick a career bureaucrat, John Melle, as the lead NAFTA negotiator suggest an unexpected respect for trade professionals. John Melle has spent his entire career on trade issues in the Western hemisphere. It would be hard to find an American with more experience working on NAFTA.
The new document reflects, in many ways, the draft letter sent by the then acting USTR to the Republicans on the House Ways and Means Committee in April. The language is more measured, the crafting careful, but the intent is clear: the US wants more than a tweak of NAFTA, but less than a do-over. The aim is clearly a modernization of NAFTA; goals and language from the Trans-Pacific Partnership (TPP) agreement, negotiated only a year or two ago, are found in the document on many issues that have yet to be addressed in the NAFTA setting. Using words of diplomacy – maintain, promote, seek, provide, build, ensure, improve and establish – the USTR has built a foundation for a reasonable discussion.
But read between the lines and you’ll find glimpses of the zero-sum game President Trump prefers.
From the veiled threat of U.S. import “sensitivities” (ie. higher tariffs on certain commodities) to the clearly stated demand for de minimis standards for cross border deliveries that match those of the US (ie. $800), the USTR has included specifics that Canadian and Mexican negotiators will note. The language on agriculture will have Canada preparing its defence of supply management policies on dairy, poultry and eggs. The proposed elimination of the Chapter 19 dispute settlement mechanism in NAFTA takes aim at the softwood lumber industry in Canada. Robert Lighthizer (and John Melle) will remember the history of that chapter and understand exactly the degree of concern the stated goal of elimination will provoke in Canada.
All that said, it is important to note that none of this comes as a surprise to anyone watching this file with professional interest. The document reflects exactly what most trade watchers expected. As a statement of US intentions, it is, by definition, one-sided. To look for concessions at this juncture is to miss the point: this document was created to support the Trade Promotion Authority (which gives the President the authority to present a negotiated agreement for a direct, up or down vote in Congress.) The report is also not final: the USTR has a lot of work yet to do, the language is more vague than specific and many of the points are reworkings from earlier documents related to the TPP. Changes in posture and details that reflect the focus back to a tripartite agreement rather than the 12-party TPP are yet to come.
Canada should read the USTR report as a document for US domestic consumption. It is directed at Congress. The USTR must gain the trust of the House of Representatives to ensure a clean vote at the end of the Trade Promotion Authority process. If the legislative branch is not convinced that the executive has listened to it, and Congress gets out the microscope on every detail of the negotiations, constituent politics may overwhelm the process. Trade, in the Trump vocabulary, is synonymous with unfairness, with an overall sense of having been robbed of what is rightly yours. It is not, in Trump terms, a way to ensure economic growth, or create a strong middle class, or stabilize the neighbourhood. This document is the USTR’s first attempt to gain the necessary political support from Congress to tame the domestic discussion.
The one clear take-away from this week’s release is that this administration is serious about starting talks on August 16. Ready or not…