After Calling Nafta ‘Worst Trade Deal,’ Trump Appears to Soften Stance
“These actions are designed to let the world know that this is another step in the president fulfilling his campaign promise,” said Wilbur L. Ross, the secretary of commerce. He said the findings would “form the basis for decision-making by the administration” on how to approach trade deficits in the future, including in a renegotiation of Nafta.
“For the first time, we’re looking comprehensively at the source of what has been a large and persistent trade deficit that has contributed to job losses, the loss of our manufacturing base and other things,” said Peter Navarro, the director of Mr. Trump’s National Trade Council.
The president is poised to give Congress the legally required 90 days’ notice of his intention to renegotiate Nafta, the 1994 pact with Canada and Mexico. In a draft letter circulated among members of Congress this week, the administration proposed adding a provision to allow tariffs to be reinstated if a flood of imports threatens to harm a domestic industry.
Mr. Trump also wants to adjust the agreement’s rules of origin, or how much of a product must be made in a Nafta country. And he wants Nafta partners to expand the market for United States-made goods in their government procurement.
“The persistent U.S. deficit in goods trade with Canada and Mexico demands that this administration take swift action to revise the relationship to reflect and respond to 21st-century challenges,” read the letter, signed by Stephen Vaughn, the acting United States trade representative.
Mr. Trump has often said that the United States could abandon Nafta altogether if renegotiating it is not possible. But the hawkish rhetoric of the campaign has given way to more measured statements on trade from the administration that track more closely with the stance of many congressional Republicans, who are avid promoters of free trade and deeply skeptical of policies they view as restrictive or protectionist.
“In terms of what we consider to be President Trump’s economic nationalist objectives and what he has said previously about Nafta, the list of negotiating terms was relatively benign,” said Scott S. Lincicome, an international trade lawyer at White & Case.
American business welcomed the additional specifics on trade policy. “The details in the letter have whet our appetite for more,” said John Murphy, senior vice president for international policy at the U.S. Chamber of Commerce.
The tone of the eight-page draft letter, which was reported by The Wall Street Journal, did not echo Mr. Trump’s campaign speeches. Nowhere was there a mention of his threats to pull out of the agreement.
Antonio Ortiz-Mena, a former Mexican trade official, said the letter suggested a softening in tone but also contained several proposals that were likely to prompt a strong response from the Mexican government.
“There are some specific problems,” said Mr. Ortiz-Mena, now a senior adviser at Albright Stonebridge Group in Washington. “But in terms of the language used during the campaign and at the beginning of the administration, it’s not as far-reaching as some people could have expected.”
The assessment that the actual policies of the United States might not end up being as harsh as those espoused by Mr. Trump during the campaign is reflected in the confidence in the Mexican peso. Measured against a basket of currencies, it has gained about 17.5 percent in value since the inauguration, more than any other major currency. On Thursday, it traded at 18.72 pesos to the dollar, approaching the levels it held before Mr. Trump’s victory.
The Canadian government declined on Thursday to comment directly on the draft letter, because Nafta negotiations have not begun. “Should notice of intent to renegotiate be given, Canada is prepared to discuss improvements at the appropriate time,” said Global Affairs Canada, the country’s foreign ministry.
Among Canadian trade experts, the proposals were met with relief, but the suspense has not ended. While the draft letter did not completely dismiss Nafta, it outlined American priorities that could threaten Canadian industries. “It’s not ripping up Nafta, but there are a bunch of sticks of dynamite contained in those pages,” said Mark Warner, a Canadian-American trade lawyer based in Toronto. “It’s going to be a messy, hard-slogging negotiation.”
The letter calls for expanding market access among the three countries and eliminating licensing and permit barriers that tend to stall commerce. It also calls for maintaining “reciprocal access” for textile and apparel products.
Rather than scrap Nafta’s arbitration tribunals, regarded by some free-trade critics as secretive bodies that give private corporations unbridled power to challenge foreign governments outside the court system, the letter proposed to “maintain and seek to improve procedures” for settling disputes.
It made no mention of currency policy, an issue many trade experts had thought might be on the table.
The administration did give itself room to get tougher. The proposal for reinstating tariffs, often referred to as a snapback, was billed as a “safeguard mechanism” to protect domestic industries. The draft also suggested efforts to “level the playing field” on tax treatment. Such measures could bring objections from Canada and Mexico.
Mr. Trump’s economic advisers have argued that Mexico uses its value-added tax as a tariff that puts the United States at a disadvantage. The president has called for a tax on companies that move their operations to Mexico and try to sell products in the United States. Republicans in Congress are considering a “border adjustment tax” that would make imports more expensive.
Automakers and car dealers have expressed concerns that changes to Nafta could disrupt the strong vehicle market in the United States. General Motors, Ford and Fiat Chrysler operate plants in Mexico that supply models popular with American consumers, such as pickup trucks. Their assembly plants in the United States also rely on a steady flow of parts made by Mexican suppliers.
The industry, including dealers, is particularly worried that Mr. Trump will follow through on the border tax on vehicles imported from Mexico.
The 90-day window gives members of Congress and industry players time to weigh in before the Trump administration opens the negotiations.
“There is much to like about it,” Representative Kevin Brady, Republican of Texas and chairman of the House Ways and Means Committee, said of the draft letter. “There are areas where we are going to make suggestions.”
Continue reading the main story