Former U.S. amb. to Mexico: How to update NAFTA
Trade negotiators plan to take small steps forward in a second round of talks to rework the North American Free Trade Agreement this weekend, trying to ignore daily threats from U.S. President Donald Trump to tear it up if he does not get his way. Video provided by Reuters
There is little doubt that the North American Free Trade Agreement, NAFTA, needs to be updated and improved. This despite the fact that virtually every independent economist who studied the results has called its first 23 years of existence a success in Canada, Mexico and the United States.
The first round of negotiations to modernize NAFTA finished after five days of discussions in Washington. The second round began in Mexico City on friday. As is usual in such negotiations, nothing of substance has yet been accomplished. The United States main negotiator, Robert Lighthizer, put forth several objectives reflecting the rhetoric of President Donald Trump. Chief among those was that the U.S. trade deficit with NAFTA countries must be closed and that should be accomplished through changes in NAFTA. The Canadian and Mexican negotiators mostly listened and asked clarifying questions during that first round.
If the ambitious timetable to complete negotiations by the end of this year or very early in 2018 is to be achieved, the second round and subsequent five rounds scheduled for the remainder of 2017 must discuss and produce substantive decisions starting with the talks in Mexico City. That’s possible — but difficult. The good news is that the negotiators from all three countries are seasoned professionals who are committed to results.
There are several pressing issues, most of which have been put forth by the United States — including finding a way to reduce America’s trade deficit through Nafta NAFTA. Most economists agree that the trade deficit issue is bogus and not a problem for the United States. Mexico insists that such trade deficits be tackled by expanding markets, not reducing trade or creating trade barriers. Then there is the issue of how to resolve disputes. While the United States wants to eliminate most of the current dispute resolution language, Canada will insist that it be retained or at least be the basis for updating.
There are many more difficult questions to resolve, such as how much North American content a finished auto must include to be considered a NAFTA-protected product; how to better integrate North America’s bountiful energy resources; how to improve labor mobility across the region; how to strengthen environmental protection and make that a part of the Treaty; and how to have fair rules for digital trade and intellectual property protection. E-commerce did not even exist when NAFTA was first negotiated. And there are other equally difficult decisions to reach in this short timetable.
Whether all this can be done depends on leadership and vision. When NAFTA was first negotiated, it was considered a breakthrough for trade agreements. Its success owed much to the goodwill and common objectives of the leadership of all three countries. And on the U.S. side it was truly bipartisan. President Ronald Reagan first outlined the vision for the U.S., which was then pushed through by Presidents George H.W. Bush and Bill Clinton.
Hopefully, President Trump’s incendiary rhetoric against NAFTA continues to be mere posturing. Commerce Secretary Wilbur Ross and chief negotiator Lighthizer have both said that the negotiations “should do no harm” to the agreement. They recognize that some four million U. S. jobs depend on open trade with Canada and Mexico. They understand that the two countries are our number one and two markets for U.S. goods and services. American business leaders know that net employment in all three countries has increased because of NAFTA. They know that opening markets to digital trade, agriculture and energy will increase American jobs even more. They know that if negotiations fail, the result will be fewer markets for U.S. enterprises. Agriculture could be one of the biggest losers as the World Trade Organization’s 20% tariff for Mexican agricultural imports takes effect, and Mexico turns to other countries for its farm product needs.
So for the next few months, it is mandatory that American business and agricultural interests, as well as workers who have jobs because of North American trade, stay engaged and press our government to reach agreements that modernize NAFTA. If they do, I am confident the economic benefits to our citizens as well as to North America will be huge.
Ambassador James R. Jones is chairman of Monarch Global Strategies and a former United States Ambassador to Mexico.