Trade Compliance

GHY discusses changes to international trade regulations and explores cutting-edge compliance strategies.

Trump Administration Calls for “Major Improvement” of NAFTA

Posted August 16, 2017

U.S. Trade Representative Robert Lighthizer kicked off the first round of NAFTA renegotiation talks in Washington today with a combative warning that the Trump administration intends to do far more than “mere tweaking” of the deal as it works to significantly overhaul a free trade agreement that he said has “fundamentally failed many, many Americans.”

In his inagural speech, Lighthizer fully endorsed President Trump’s opinion of NAFTA as being one of the worst in history. “The views of the president on NAFTA – which I completely share – are well-known,” the USTR said, rather ominously for anyone familiar with Trump’s rhetoric.

The bombastic tone of Lighthizer’s opening remarks was a stark contrast to the stated aims of Canadian Foreign Affairs Minister Chrystia Freeland and Mexican Economy Minister Ildefonso Guajardo Villarreal who emphasized the strong trading relationship among the NAFTA partners and expressed an eagerness to modernize the 23-year-old trade agreement for the mutual benefit of all three countries.

“We cannot ignore the huge trade deficits, the lost manufacturing jobs, the businesses that have closed or moved, because of incentives – intended or not – in the current agreement. The numbers are clear,” Lighthizer stated.

Actually, this isn’t “clear” at all, as noted by a 2015 Congressional Research Service report summarizing multiple studies which found that “in reality, NAFTA did not cause the huge job losses feared by the critics or the large economic gains predicted by supporters.”

Despite acknowledging the agreement has benefited “many Americans,” particularly in the U.S. agricultural sector, Lighthizer argued that NAFTA has also been a failure “for countless Americans” and indicated that over the next several months the administration expects to hammer out a “major improvement” to the deal.

In addition to reducing persistent trade deficits with Mexico and Canada, the Trump administration aims to update provisions throughout the agreement to support American manufacturing and expand market access for U.S. exports. It is also looking to modernize the agreement by incorporating enhanced labour and environmental side agreements into the core of the pact and adding a new chapter dealing with the digital economy.

“My hope is that together we will produce a result which moves us to freer markets, fairer and more balanced trade and stronger ties between our three countries,” Lighthizer said.

According to a CBC News report, Freeland “opened her remarks by brandishing photographs of American and Mexican firefighters who have been dispatched to help fight the wildfires ravishing British Columbia. That neighbourly, collegial spirit will be front of mind as trilateral talks get underway, she said.” 

Reiterating much of the statement delivered on Monday broadly outlining Canada’s objectives, Freeland called the renegotiations a “historic project” that should serve as an engine for economic growth and jobs, to cut red tape for business and to make the deal more progressive for labour, the environment, gender equality and Indigenous rights. 

While observing that it shouldn’t necessarily be the primary metric for how well a trade agreement is working, in a nod to the Trump administration’s near-obsessive focus on reducing the U.S. trade deficit, Freeland noted that the bilateral relationship and $635 billion in goods and services traded annually between the two countries has in recent years become more balanced and mutually beneficial, and is now “almost perfectly reciprocal.”