US GOALS FOR THE NEW NAFTA - A CONJECTURE

"We want to claim or reclaim some manufacturing employment that has settled itself in Mexico."

John Magnus

June 23, 2017

Like last Friday's featured quote, today's is from the preliminary comments made by TradeWins president, J ohn Magnus, acting as a panel moderator at GBD's June 23 event. Earlier we shared with you his thumbnail estimation of the U.S. trade posture towards the European Union. He offered similar comments on America's apparent goals for a revised NAFTA. The first round of NAFTA renegotiation got under way in Washington yesterday, beginning with a fairly challenging opening statement from the U.S. Trade Representative, Ambassador Robert Lighthizer. We shall turn to that in a moment.

First, though, this is as good a time as any to review the assessment that John Magnus offered back in June. "Okay, what about NAFTA?," he asked. These points were his answer:

Content, Rules of Origin. "We apparently would like to wring out non-North American content as fully as possible from the goods that have NAFTA eligibility."

Jobs. " We want to claim or reclaim some manufacturing employment that has settled itself in Mexico."

Trade Deficits. "And we would like to have a smaller, bilateral merchandize trade deficit with Mexico."

Dairy. "We want to extract concession from Canada on some offensive issues, most notably dairy trade. I'll let you decide what the word offensive modifies in all of that. It could be our behavior in relation to dairy trade." 

 
Investment and Trade Remedies. "We want to overhaul some of the NAFTA's institutional provisions and dispute resolution provisions and most notably the ones that sit in chapters 19 and 11".

Government Procurement. "We want to really have a new or continue our new mania for Buy American, meaning that we want to, apparently, refrain from deepening the NAFTA in regard to government procurement. And that matters because our NAFTA partners have some interesting requests and proposals in that category."

The Cases. "And we seem to want to continue to treat even the highest profile trade remedy proceedings - examples: softwood lumber for Canada, sugar for Mexico - as basically matters of pure law enforcement as opposed to some part of our trade policy that we would be prepared to bargain over."

Doubtless you have already read or read about Ambassador Lighthizer's opening statement yesterday. Certainly, it was important, but its importance is bound to fade somewhat as the negotiations -- and all that is said and written about them -- move on to specific issues. But while it is still fresh, here are a few thoughts on the statement and on the negotiations now in their second day. 

First, of course it was a tough statement. It had to be. It was the United States that called for these negotiations, and in a sense that was a fallback from  President Trump 's threat to withdraw from NAFTA, to tear it up. And the essential toughness of the statement was in this paragraph: 

Much as we would like to end on that rhetorical flourish, it doesn't quite capture the larger point. NAFTA may have been a mistake. A better set of policies set in motion in the 1990s might have preserved more U.S. manufacturing jobs and led to a stronger U.S. industrial base. The challenge for today's NAFTA negotiators, however, isn't to rewrite the 1990s. That can't be done. Their challenge is to improve a system that is now deeply embedded in the economies of all three countries and to do so without disrupting the lives and livelihoods of those who have successfully adapted to it.