U.S. Seeking a Trade Deficit Reduction in Early NAFTA Talks and Not Much Else


Old Assembly Factory floor

Despite President Trump having initially framed his proposed NAFTA renegotiations as a hardline “America First” endeavor, the administration’s stance has soften significantly. In a recent summary of objectives, U.S. Trade Representative Robert Lighthizer highlighted fairness as the key issue throughout.

Absent were any mention of abandoning the deal if certain conditions were not met and the steep tariffs previously alluded to by the president. In fact, any mention of tariffs specifically targeted their reduction or elimination — for both imported and exported goods. There are, however, numerous examples that reaffirm the Trump administration’s earlier objectives and a handful of inclusions that should please domestic automakers.

The biggest of these is a streamlining of the regulatory practices between participating countries, something manufacturers have wanted for quite some time. While the White House has pressed for deregulation in the United States, automakers have more to gain though uniform regulatory practices between countries. One of the first items in the summary states the importance of promoting “greater regulatory compatibility with respect to key goods sectors to reduce burdens associated with unnecessary differences in regulation, including through regulatory cooperation where appropriate.”

With the automotive industry existing as one of the most heavily regulated industrial businesses on the planet, it isn’t difficult to surmise who Lighthizer is targeting.

Matt Blunt, president of the American Automotive Policy Council, a group representing U.S. automakers, told Reuters the regulatory streamlining would be a boon to automakers. He also said the summary’s focus on eliminating currency manipulation was a worthwhile endeavor.

A statement from Ford Motor Company echoed Blunt’s assertion: “Foreign currency manipulation is the 21st century trade barrier, and we strongly support the inclusion of this top-tier issue in the U.S. negotiating objectives for NAFTA.”

However, currency manipulation hasn’t been much of an issue between the North American partners — indicating that the NAFTA renegotiation is an attempt at being proactive, or will serve as a framework for whatever replaces the Trans Pacific Partnership Agreement.

Also included in the summary are numerous references to bringing labor provisions into the center of the agreement, in the hope that member countries legally adopt standards as recognized in the ILO Declaration. That includes the abolishment of all child labor and the right to organize without fear of repercussion. It also discusses holding participating countries accountable for providing fair minimum wages and worker safety without being explicit as to those guidelines.

While that’s all well and good, it does little to establish clear-cut boundaries or provide the sweeping changes that were initially promised. It does hint at minimizing the country’s trade deficit with Mexico — a double-edged sword, as it technically results in the U.S. having access to exceptionally affordable goods — but there’s nothing mirroring the president’s earlier tough talk.

On Monday, Trump promised to bolster U.S. manufacturing by reducing the $64 billion trade deficit with Mexico while showcasing products made in all 50 states. “No longer are we going to allow other countries to break the rules, to steal our jobs and drain our wealth,” Trump said from the White House’s South Lawn.

However, the summary makes very few strict demands — opting instead to “promote” fairness or “improve” industrial trade disparities. Depending on your politics, it may not have needed to either. But there is a clear distinction between the presidents stern rhetoric and what Lighthizer will be asking for.

If you’re interested, the full document is available on Office of the United States Trade Representative’s website for perusal.