President Trump has tried to bring his abrasive dealmaking style to the North American Free Trade Agreement negotiations, but the fourth round of talks ended Tuesday without any sign that Canada and Mexico were planning to knuckle under to U.S. demands.
Ministers from both nations said that the U.S. proposals unveiled over the past week went well beyond their countries’ own red lines, though they agreed to remain at the negotiating table and extend talks through the end of March 2018.
In a reflection of Trump’s stance, U.S. Trade Representative Robert E. Lighthizer exchanged sharp words with his Canadian and Mexican counterparts at a briefing Tuesday afternoon, saying he was “disappointed” that they were “reluctant to give up unfair advantages.” He asserted that “trade deficits do matter and we intend to reduce them.”
The negotiators’ rhetoric comes as the White House appears to be leaning toward its more strident voices on trade.
While Lighthizer has taken the lead, Peter Navarro, a top White House trade adviser who lost his senior perch within the administration, remains influential. Last month, he circulated two documents that he created, stating without any supporting facts or data that a weakened manufacturing base could lead to a host of socioeconomic problems, including “higher abortion rate” and “increased spousal abuse.”
During the past week of negotiations, Lighthizer has introduced several particularly controversial proposals. They included a sunset clause that would require the renewal of the agreement every five years; rules of origin that would tighten U.S. requirements for domestic content, especially for automobiles, to qualify for zero-tariff treatment; and an end to the transnational courts that settle international business disputes.
He also laid out limits on U.S. procurement from companies in Canada and Mexico while demanding greater access for U.S. companies seeking to sell goods and services to those governments. Canada’s foreign affairs minister, Chrystia Freeland, said that the proposal left Canada and Mexico combined with less access to the U.S. procurement process than Bahrain.
Although NAFTA was designed 23 years ago to encourage investment and the freer flow of goods between the three countries, “continuing to design a national manufacturing policy largely dependent on exports to the United States for balance cannot long continue,” Lighthizer said. He added that “it is unreasonable to expect that the United States will continue to encourage and guarantee U.S. companies to invest in Mexico and Canada primarily for export to the United States.”
“We have seen no indication that our partners are willing to make any changes that will result in a rebalancing and a reduction in these huge trade deficits,” Lighthizer said. “Now I understand that, after many years of one-sided benefits, their companies have become reliant on special preferences and not just comparative advantage.”
Freeland said that an agreement “cannot be achieved with a winner-take-all mind-set.” She said that what negotiators had seen over the past few days was “a series of unconventional proposals” that “make our work much more challenging.”
Freeland countered that U.S. proposals to increase U.S. national content in goods given favored treatment within NAFTA “would severely disrupt supply chains” and “put in jeopardy tens of thousands of jobs.”
She said that U.S. proposals “would turn back the clock on openness and predictability” and “in some cases run counter to World Trade Organization rules.”
Freeland said that Canada does not consider bilateral trade balances to be the most important indicators in trade talks, but she noted that the United States has only a slight, $8 billion trade surplus in goods and services with Canada and that, in manufactured goods alone, the United States has a $36 billion surplus with Canada.
Though Trump has called NAFTA the “worst agreement ever,” he has heard from a cacophony of voices within the White House on how he should proceed on his trade threats.
White House National Economic Council Director Gary Cohn has tried to press Trump to be cautious, worried about what abrupt changes might mean for the United States and the global economy. Commerce Secretary Wilbur Ross has focused much of his attention on dealing with what he views as trade imbalances between the United States and China, although some of those decisions have also been delayed as the White House has focused on NAFTA.
Lighthizer has emerged in recent weeks as one of the most strident voices within the White House, pushing back on foreign ministers and business groups that have urged caution.
Congressional Republican leaders have expressed opposition to the hard-line stance the White House has taken in the NAFTA talks, urging it to move much more slowly. And many business groups have also pushed back, saying that the Trump administration’s threats to withdraw from NAFTA could throw the economy — particularly exports — into turmoil. Congress would probably have to vote on major changes to NAFTA as part of a new ratification, but the White House has mostly rejected congressional warnings so far.
“With Mexico running up to a presidential election in the middle of next year, to ask their president to do things to help the United States at the expense of Mexico is a non-starter in negotiating terms,” said C. Fred Bergsten, senior fellow at the Peterson Institute for International Economics.
In Mexico, politicians reacted angrily to the U.S. stance. Dolores Padierna, a leftist senator who serves on a congressional committee that tracks the NAFTA talks, said of Trump: “This New York magnate has a sick hatred of Mexico; his words and proposals are like poison snakes.”
She said that Mexico’s secretary of economy, Ildefonso Guajardo Villarreal, should leave the talks.
At the news conference Tuesday, Guajardo said that “in order for the efforts of Mexico, the United States and Canada to be fruitful, we must understand that we all have limits.” He added “despite our current differences, we must ensure that the decisions we make today do not come back and haunt us tomorrow.”
Matthew Kronby, a former Canadian trade negotiator who worked on Canada’s recent free-trade agreement with the European Union, suggested that the hard-line U.S. tactics were not meant to get an agreement.
“My question is whether the objective is to put forward proposals that Canada and Mexico and even the U.S. Congress wouldn’t be able to accept and use that as a pretext to start the process of withdrawal. That may be the administration’s endgame,” he said.
The break in NAFTA negotiations Tuesday coincided with an announcement by Canadian jet maker Bombardier that it would partner with European aircraft manufacturer Airbus. The deal might give Bombardier an avenue to circumvent the punitive 300 percent in preliminary tariffs the Commerce Department has slapped on the company since Sept. 26.
It also puts Airbus in a stronger position to compete with Boeing, which had filed the trade complaint against Bombardier.
The Bombardier case also shows how difficult it is to draw bright national borders around products. For the company’s CS100 jets, it orders fuselage parts made in Shenyang, China. The jet’s wings are made in Belfast, where their assembly sustains a few thousand jobs. The landing gear comes from German and French suppliers. The engine, which has a competitive advantage in fuel efficiency, is made by Connecticut-based Pratt & Whitney.
Aaron Gregg in Washington, Gabriela Martinez and David Agren in Mexico City, and Alan Freeman in Ottawa contributed to this report.
Correction: This article has been corrected to say that the United States has an $8 billion trade surplus in goods and services with Canada. An earlier version said it had a slight $8 billion deficit.