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US: Trade Deficits Key to Renegotiating NAFTA

18 July 2017

US - The United States on Monday launched the first salvo in the renegotiation of the 23-year-old North American Free Trade Agreement (NAFTA), saying its top priority for the talks was shrinking the US trade deficit with Canada and Mexico.

In a much-anticipated document sent to lawmakers, US Trade Representative Robert Lighthizer said he would seek to reduce the trade imbalance by improving access for US goods exported to Canada and Mexico under the three-nation pact.

For the first time in a US trade deal, the administration also said it wants "appropriate" provisions to deter currency manipulation by trading partners. The move appeared aimed at future trade deals rather than specifically at Canada and Mexico, which are not considered currency manipulators.

The 17-page document asserted that no country should manipulate its currency exchange rate to gain an unfair competitive advantage, an allegedly often-cited complaint about China in past years.

Shortly before the release of the document, President Donald Trump lashed out against trade deals and unfair trade practices, saying he would take more legal and regulatory steps during the next six months to protect American manufacturers.

Canadian Minister of Foreign Affairs Chrystia Freeland said the US list was "part of its internal process" although a source familiar with Canadian government thinking said the document was "not earth shattering."

Trade experts have argued that shrinking the yawning US trade deficit will not be achieved by revising trade deals but rather by boosting US savings.

"The first bullet point shows their preoccupation with bilateral trade deficits, and that's unfortunate," said Chad Brown, a senior fellow and trade expert at the Peterson Institute for International Economics. "There's not much that trade policy and trade agreements can do to change those. That's more of a macroeconomic issue."

Among the priorities, Mr Lighthizer said the administration would seek to eliminate a trade dispute mechanism that has largely prohibited the United States from pursuing anti-dumping and anti-subsidy cases against Canadian and Mexican firms.

There was no mention of active disputes between the United States and Canada over softwood lumber and dairy products, but the document targeted a range of agricultural non-tariff barriers, including subsidies and unfair pricing structures, that are currently at the heart of those standoffs.

NAFTA has quadrupled trade among the three countries, surpassing $1 trillion in 2015, but the US trade deficit with Mexico exceeded $63 billion last year.

TheCattleSite News Desk

Top image via Shutterstock



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