U.S. demands steep concessions, not ‘mere tweaking’ in NAFTA talks

The Trump administration will demand steep concessions from Canada and Mexico in NAFTA talks, including a US-content requirement for cars and trucks made in the free-trade zone.

Robert Lighthizer, President Donald Trump’s trade czar, delivered this stark message on the opening day of NAFTA talks in Washington.

NAFTA “has fundamentally failed and needs major improvement,” Mr. Lighthizer told a hotel ballroom full of trade negotiators from the three countries.

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He served message that the U.S. will not accept the Canadian and Mexican strategy of turning the NAFTA talks into an exercise in simply updating the deal to cover the digital economy.

Mr. Trump, he said, “is not interested in a mere tweaking of a few provisions and the updating of a couple of chapters.”

“We cannot ignore the huge trade deficits, the lost manufacturing jobs, the businesses that have closed or move because of the incentives – intended or not – in the current agreement,” Mr. Lighthizer said.

He zeroed in on the rules of origin that dictate how much content in products must be produced in the NAFTA zone to qualify for tariff-free treatment between the three countries. The rules are particularly important for the auto industry.

Not only does the U.S. want to tighten the rules, Mr. Lighthizer said, but it also wants to guarantee some of the content is made in the U.S.

Such a move is certain to meet strident opposition from Mexico and Canada at the bargaining table – as well as from the auto industry itself.

The first round of talks lasts until Sunday, and is expected to pack in discussions on at least 27 different elements of NAFTA. These include such controversial subjects as Chapter 19, the dispute resolution system that has helped Canada in the long-running softwood lumber dispute to the anger of the U.S.

The largest single blocks of time have been set aside for discussing investment, which includes Canada’s desire to roll back a NAFTA chapter that allows businesses to sue governments for unfavourable policy decisions; and the digital economy, including a U.S. push for Canada to raise its $20 “de minimis” amount – what consumers can buy online across borders without paying duty – to the $800 US level that American consumers enjoy.

Mr. Trump called the negotiations after repeatedly promising last year to tear up the deal, which he blames for job losses in the manufacturing sector.

Canada and Mexico struck a completely different tone from the US at the opening session.

Foreign Minister Chrystia Freeland opened by showing a photograph of American and Mexican firefighters heading to battle wildfires in British Columbia and spoke of the “deep friendship our countries share.”

She said trade is “not a zero-sum game” and Canada does not believe the trade deficit – Mr. Trump’s personal economic fixation – is important in evaluating if trade is working.

Ms. Freeland described trade between Canada and the U.S. as “balanced and mutually beneficial” and pointed out that Canada buys more U.S. goods than China, the United Kingdom and Japan put together.

Mexican Economy Secretary Ildofenso Guajardo, for his part, said any changes to the deal have to ensure more trade and not less.

The talks, he said, must not be “about going back to the past.”

“Mexico believes NAFTA has been a strong success for all parties,” he said.