At NAFTA Kickoff, U.S., Mexico And Canada Already Show Signs Of Disagreement

Aug 16, 2017
Originally published on August 16, 2017 1:46 pm

Officials from the U.S., Mexico and Canada met Wednesday to begin renegotiations of the North American Free Trade Agreement. In an opening statement, U.S. Trade Representative Robert Lighthizer praised President Trump for the fact that these negotiations were even happening.

"American politicians have been promising to renegotiate NAFTA for years, but today, President Trump is going to fulfill those promises," he said.

The agreement, crafted under Presidents George H.W. Bush and Bill Clinton, went into effect in 1994. It eliminated tariffs on most goods traded among the three countries and imposed other rules in areas like intellectual property and labor standards. Wednesday's kickoff is the culmination of a process that began in May, when Lighthizer formally notified Congress that the administration would renegotiate the deal "to support higher-paying jobs in the United States and to grow the U.S. economy."

Trump made criticizing trade agreements a central part of his campaign, and his criticisms of NAFTA were at times grandiose: He called it the "worst deal ever made in the history of the world" and "a one-way highway out of the United States." Despite that tough talk, he said earlier this year he had decided that instead of "terminating" NAFTA, he would seek to renegotiate it.

Lighthizer acknowledged that NAFTA has benefited some Americans, like farmers and ranchers who found new markets for their goods in Canada and Mexico. However, he also said the deal had "fundamentally failed many, many Americans and needs major improvement," adding that the deal had cost hundreds of thousands of jobs (an assertion that some analyses have disputed).

"The views of the president about NAFTA, which I completely share, are well-known," he said. "I want to be clear that he is not interested in a mere tweaking of a few provisions and a couple of updated chapters."

As one trade analyst told NPR's Chris Arnold last week, however, those changes may not be nearly as large as the president had indicated in the past.

"We see the changes as departing from much of the rhetoric of the campaign," Jaime Reusche, a vice president at Moody's who follows Mexico, told NPR. "We see them as relatively modest."

In lambasting the deal, Lighthizer struck a far more negative tone than his foreign counterparts. Canadian Foreign Minister Chrystia Freeland characterized the deal as positive, emphasizing economic benefits to both her country and the U.S., and Mexican Secretary of the Economy Ildefonso Guajardo likewise called the agreement a "strong success for all parties."

The statements included subtler hints of differences already manifesting themselves before the negotiations. For example, Freeland characterized the trade deficit between Canada and the U.S. as "balanced," but stressed that her country doesn't focus heavily on these numbers: "Canada doesn't view trade surpluses or deficits as a primary measure of whether a trading relationship works."

Lighthizer, meanwhile, lamented the U.S. trade deficit with Canada. In doing so, he opted to give a 10-year count of the deficit — that figure is at $365 billion. The deficit with Canada just last year, however, was around $11 billion.

(Either way, many economists say that bilateral trade deficits aren't usually that important. As former U.S. Trade Representative Carla Hills told NPR in April, "Bilateral trade deficits are not as relevant as your overall trade deficit," she said. "I have a deficit with my grocery, and I have a surplus with my clients. But I can't have a surplus with my grocer. I have to buy from them.")

According to multiple analyses, NAFTA has not been the "disaster" for the U.S. economy that the president once claimed it to be. According to a 2017 Congressional Research Service report, the overall economic effect was "relatively small." Likewise, a 2012 survey showed that top economists overwhelmingly agreed that "on average, citizens of the U.S. have been better off with the North American Free Trade Agreement than they would have been" otherwise.

But then, this is what makes trade a complex political issue. The benefits tend to be widespread, but the costs tend to be acute. A trade agreement might modestly improve the lives of many Americans (think lower prices or a greater assortment of goods), but it can also devastate a much smaller population of Americans by displacing their jobs.

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