US aims to cut trade deficits through Nafta revamp: Trump

Bloomberg

President Donald Trump said the
US wants to reduce trade imbala-nces with Mexico and Canada and boost exports of everything from farm goods to financial services as it prepares to kick off talks to revamp the North American Free Trade Agreement.
The office of Trump’s top trade negotiator released the administration’s list of negotiating objectives for talks with Mexico and Canada that are expected to begin as early as August 16. At the top of Trump’s list: “Improve the US trade balance and reduce the trade deficit with Nafta countries.”
The 17-page summary turns into policy a pledge that Trump made repeatedly during the campaign, when he complained about unfair trade practices by America’s rivals and vowed to tear up trade deals that weren’t in the country’s interests. But making the goal explicit may complicate the chances of reaching a new agreement, with both Mexico and Canada under their own domestic pressures not to cave to US demands. The US had a $63 billion trade deficit in goods and services with Mexico last year, and a $7.7 billion surplus with Canada.
The administration’s emphasis on reducing trade deficits is a “major concern” that could complicate the negotiations, said Chad Bown, senior fellow at the Peterson Institute for International Economics in Washington. “It’s not something achievable through trade policy,” said Bown, who was a senior trade economist to the Council of Economic Advisers during the Obama presidency. “You’re inevitably setting yourself up for failure if that’s your goal.”
The negotiating summary acknowledges that some Americans have benefited from the market access provided by the 23-year-old accord. But it adds that deal “created new problems for many American workers,” coinciding with the explosion of US trade deficits and the reduction of manufacturing.
“Too many Americans have been hurt by closed factories, exported jobs, and broken political promises,” US Trade Representative Robert Lighthizer said in a statement, adding that he plans to negotiate a “fair deal.”
The document suggests the administration may seek to bolster its ability to restrict imports. The US in the summary of objectives said it wants to eliminate the Nafta global safeguard exclusion “so it does not restrict the ability of the United States to apply measures in future investigations” and end the Chapter 19 dispute mechanism, which allows cases on dumping and unfair subsidies to be reviewed by a bilateral panel.
Changes to Nafta could reshape more than $1.2 trillion in annual trade and shake up the supply chains of companies from Ford Motor Co. to Caterpillar Inc. The renegotiation will test Trump’s pledge to seek fairer trade deals across the globe and attract production back to America.

RULES OF ORIGIN
The negotiating summary also pledges to strengthen so-called rules of origin dictating the amount
of North American content included in products, eliminate barriers to
US investment in all sectors, and secure commitments from Canada
and Mexico not to manipulate their currencies.
Democratic Senator Ron Wyden, the ranking member of the Senate Finance Committee, called the negotiating document “hopelessly vague” on issues ranging from intellectual property rights to currency manipulation. Wyden said it’s surpr-
ising the administration is seeking outcomes in some areas that
were achieved through the Trans-Pacific Partnership, which Trump withdrew the US from shortly after his inauguration.
Lighthizer was required to notify Congress by Monday of the administration’s objectives for renegotiating the North American Free Trade Agreement with Mexico and Canada. The administration began three months of domestic consultations in May under the so-called fast-track process that enables the government to seek a simple yes-or-no vote from Congress on new trade deals.
Lighthizer told members of the Senate Finance Committee last month that the US plans to start talks with Canada and Mexico on Aug. 16, once consultations with US lawmakers are complete. Trump has threatened to withdraw from Nafta if Mexico and Canada don’t agree to more favorable terms for the US.