Early Indications Suggest Tough Negotiating Ahead in NAFTA Re-Do

WASHINGTON (CN) – Strong words, starkly different positions, and a sense of uncertainty dominated the opening round of talks on Wednesday on the future of the North American Free Trade Agreement.

The formal talks the trade agreement will continue in Washington, D.C. through August 20, but the negotiations born from the meetings are expected to continue long after, rotating between Washington and cities in the other member nations.

President Donald Trump has called the 23-year-old trade agreement “the worst trade deal maybe ever signed anywhere, but certainly ever signed in this country,” and vowed to replace it.

On the U.S. side, the lead negotiator is  John Melle, the assistant trade representative for the Western Hemisphere at the U.S. Trade Representative office. Melle worked on the original NAFTA agreement, which was enacted in 1994.

The agreement between Canada, Mexico and the U.S., created a tri-lateral trade bloc and eliminated barriers to investment between the countries.

It also established rules on food safety, intellectual property rights, labor and environmental policies.

According to the BBC, since its inception, the volume of trade between the nations has tripled.

But some, including President Trump, dismiss the agreement as a job killer that encouraged manufacturers to relocate plants in Mexico and caused the U.S. trade deficit with Mexico to grow.

Trump threatened to simply kill the deal in April but quickly back-tracked, opting to renegotiate instead.

The stakes heading into the negotiations are high.

According to CNN Money, an estimated 14 million jobs are tied in one or another trade with Canada and Mexico, and the cross-border generates about $ 1 billion in economic activity daily.

U.S. Trade Representative Robert Lighthizer opened the talks Wednesday by reiterating the president’s call for fewer imports from Mexico and Canada, more exports of U.S. goods into the two countries, and greater access to Canadian markets by U.S. firms.

“The U.S. government has certified at least 700,000 Americans have lost their jobs due to changing trade flows resulting from NAFTA. Many people believe that number is much, much bigger than that,” he said.

Since then, he said, the U.S. has undergone a “persistent” trade deficit, one that totaled nearly $57 billion last year.

“Thousands of American factory workers have lost their jobs because of these provisions. In recent years, we have seen some improvement in our trade balance with Canada. But over the last 10 years, our deficit in goods has exceeded $365 billion,” Lighthizer added. “The views of the President about NAFTA, which I completely share, are all well known … we feel that NAFTA has fundamentally failed many, many Americans and needs major improvement.”

During these negotiations, the U.S. is angling for reviews on “rules of origin” standards, particularly on cars, and revamped labor provisions. Major car manufacturers often recoil at the idea of changing the current trade agreement, arguing that their own international competitiveness is dependent on vast North American supply chains.

Lighthizer also said that a new agreement should include provisions to protect against currency manipulation and third party dumping, where one country dumps its imports into another below cost.

Canada began the talks on Wednesday saying it hoped to make NAFTA “more progressive” by strengthening current labor and environmental protections.

Chrystia Freeland, Canada’s foreign minister, said her nation is not prepared to kowtow to U.S. demands without a fight.

“We pursue trade, free and fair, knowing it is not a zero sum game. It is worth pointing out that we are the biggest client of the U.S. Canada buys more from the U.S. than China, the United Kingdom and Japan combined,” Freeland said.

Freeland comes to the table with a starkly different view on NAFTA than the Trump administration. Earlier this week, Freeland described the talks as a chance to “make what is already a good agreement, even better.”

Mexico, a pact partner which endures the brunt of the Trump administration’s derogatory comments over the deal, launched talks on Wednesday by pushing for clearer migration rules for seasonal laborers, improved border infrastructure and more collaboration with companies dominating the telecommunication industry.

The challenge will be to find common ground. During talks on Wednesday, Mexico’s economy minister, Ildefonso Guajardo said the negotiation process begins when all parties commit to avoid going backward and work toward mutually beneficial goals.

“The process that begins today is not about going back to the past,” he said. “For a deal to be successful, it has to work for all parties, otherwise it is not a deal.”

If a new agreement is reached, it will still need congressional approval. But Trump could still pull out of NAFTA on his own.

Article 2205 of the pact says, “a party may withdraw from this agreement six months after it provides written notice of withdrawal to other parties. If a party withdraws, the agreement shall remain in force for remaining parties.”

The president could claim however that withdrawal under this provision “self-terminates” the agreement, but this is also murky. Section 109b of the pact states “during any period in which a country ceases to be a NAFTA country, sections 101 through 106 shall cease to have effect with respect to such country,” but the agreement itself is unclear on what must happen in order for a country to cease being “a NAFTA country.”

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