By William Mauldin and Paul Vieira
WASHINGTON -- The Trump administration launched the
renegotiation of the North American Free Trade Agreement Wednesday
by laying out a starkly different vision from that of its two
continental trading partners of how the pact has worked and how
radically it should be rewritten.
The wide gap between the administration's opening rhetoric and
the positions of Mexico and Canada suggests a difficult road ahead
in redoing the 23-year-old accord, even discounting for the
posturing at the opening of any negotiation.
"We believe that Nafta has fundamentally failed many Americans
and needs major improvements," U.S. trade representative Robert
Lighthizer said at the opening of talks in Washington. "We need to
assure that the huge trade deficits do not continue."
Mr. Lighthizer said Mr. Trump, who vilified Nafta in the 2016
presidential campaign, isn't interested in just modernizing the
pact and "tweaking" commercial rules, but rather wants new features
to reduce the U.S. trade deficit with its two neighbors.
The disparate approaches have worried some business leaders, who
see a risk that political leaders could dig in on opposing
positions and hurt the ability of negotiators on the ground to
strike a deal. Mr. Trump has repeatedly warned he could pull the
U.S. out of Nafta.
"Canada doesn't view trade surpluses or deficits as a primary
measure of whether a trading relationship works," Canadian Foreign
Minister Chrystia Freeland said, noting that the U.S. has a surplus
in trade of goods and services with Canada. Ms. Freeland touted the
"deep friendship our countries share."
Mexico's Economy Minister Ildefonso Guajardo said his country
"thinks that Nafta has been a strong success for all parties."
Mr. Guajardo said achieving a consensus won't be easy. "Let's
not be mistaken, the first challenge we have is to find a common
ground among the three countries," he said. "For a deal to be
successful, it has to work for all parties involved; otherwise it
is not a deal."
Mr. Lighthizer pointed to Nafta's success for many U.S. farmers,
but he said it has hurt many others. The U.S. wants to boost rules
to protect intellectual property, guard against currency
manipulation and make changes to dispute-resolution mechanisms in
Nafta to "protect our national sovereignty," he said.
Given Mr. Trump's fiery rhetoric on trade, Mr. Lighthizer's tone
"isn't going to shock anyone, but is the kind of posturing you
expected to happen privately," said Mark Warner, a trade lawyer who
practices in New York and Toronto.
The benchmarks for success Mr. Lighthizer laid out suggest a
tough path ahead. The rising U.S. trade deficit with Mexico and the
sharp drop in American manufacturing jobs are particularly
difficult issues to address in trade agreements. Economists and
former officials point to broader macroeconomic forces as playing
far larger roles than trade does in creating deficits and jobs.
Mr. Lighthizer has yet to define exactly how the U.S. intends to
negotiate a new pact that reduces trade imbalances among Nafta
partners. Advisers to the Trump administration have discussed
injecting some specific deficit-reduction benchmarks into the pact
or demanding new provisions that officials believe could have that
effect.
One of the main ways Trump officials are looking to move the
needle on deficits is by tightening the "rules of origin," the
requirements governing what portion of a product has to come from
within the trading bloc to qualify for tariff-free treatment. In
his opening remarks, Mr. Lighthizer seemed to suggest the U.S.
could set a standard not only for North American content, as Nafta
currently does, but also for U.S.-specific content -- a demand the
trading partners would almost certainly resist.
Auto-parts makers from all three countries have warned officials
about the risks to the industry's integrated supply chain if
changes to Nafta make it harder to ship parts across the
continent's borders. Still, said Flavio Volpe, head of the
Automotive Parts Manufacturers' Association, a Canadian lobby
group, "you are going to have to give a little bit, otherwise
there's no victory for the American administration side."
The Trump administration is still working with U.S. lawmakers
and business groups in many key areas and isn't expected to propose
new Nafta text this week on automotive rules of origin, currency
manipulation or a controversial form of arbitration known as
investor-state dispute settlement, according to people familiar
with the U.S. negotiating position.
The three countries opened the talks in a Washington hotel
ballroom with flags from each nation lined up behind the ministers
and chief negotiators.
Mexico, whose economy has been transformed the most by Nafta,
was represented by a large delegation including formal and informal
advisers and members of the Mexican Senate who flew in for the
event.
Ms. Freeland, the senior Canadian official, made a point of
giving some of her remarks in Spanish, in an apparent show of
solidarity with the Mexicans also facing U.S. demands.
The ballroom was also filled with industry lobbyists --
officially designated "stakeholders" -- with interests in the
talks, from farm groups to retailers, as well as groups
representing consumers and labor.
Officials hope to hold several rounds of talks this fall and
complete negotiations as soon as early next year, before the
political season heats up in Mexico and the U.S. Following the
current first round, officials are expected to meet in coming weeks
in Mexico City for the next round.
--Jacob M. Schlesinger contributed to this article.
Write to William Mauldin at william.mauldin@wsj.com and Paul
Vieira at paul.vieira@wsj.com
(END) Dow Jones Newswires
August 16, 2017 16:29 ET (20:29 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.