The Trump administration on Thursday formally notified Congress of its intent to renegotiate the North American Free Trade Agreement, a step forward on a campaign promise that was widely popular among voters but has unsettled the U.S. companies that have constructed their businesses around the trade deal's provisions.
The notification starts the clock on a 90-day period in which Congress will consult with the administration about its goals. Negotiations with Canada and Mexico will begin as soon as Aug. 16, the administration said.
The statement, sent from U.S. Trade Representative Robert E. Lighthizer to Congressional leaders Thursday morning, offered few, if any, details on what specifically the administration hoped to change.
It also did not include the type of harsh rhetoric the president has used to describe NAFTA or the trade practices of Canada and Mexico in the past. On the campaign trail and in office, President Trump derided NAFTA as a “horrible deal for the United States,” “the worst trade deal maybe ever” and “a defective agreement."
In a call with reporters Thursday morning, Lighthizer stressed that the administration hopes to improve and update the deal rather than scrap it altogether.
“I would note that many of these negotiations will be bilateral and many of the issues are bilateral, but our hope is that we will end up with a structure that is similar to what we have now,” he said. “If that proves to be impossible, we will move in another direction.”
Lighthizer, who is the administration’s main trade negotiator and whose confirmation process dragged on until last week, said that the pact had been successful for some industries, such as agriculture, but that for others, such as manufacturing, it had not.
“We should build on what has worked in NAFTA but change and improve what has not,” he said.
The arguments were popular with voters, but businesses and some congressmen have expressed reservations about the plan to renegotiate, fearing that missteps from the administration could lead to unintended consequences and impair valuable export markets.
Economists generally agree that NAFTA has benefited the U.S. economy overall by increasing trade. Yet like all trade deals, its benefits have been broadly distributed over the U.S. population, while its negative consequences have been felt sharply by a smaller group of people who have lost their jobs as industries have reorganized throughout North America.
Tom Donohue, president and chief executive of the U.S. Chamber of Commerce, said the group welcomed the opportunity to modernize NAFTA for the 21st century. “If we all do our jobs well, the result will be a stronger agreement that spurs economic growth and job creation, not just in the United States, but across North America,” he said.
In recent speeches, Donohue has said that 14 million American jobs depend on trade with Canada and Mexico and that the first objective of the administration should be to “do no harm.”
“Congress and the Administration must work hand-in-hand if we are to achieve the high-standard trade agreements our country needs to grow,” Sen. Orrin G. Hatch (R-Utah) said in a statement. “I'm confident that through close consultation we can chart a course that not only strengthens this vital trade pact but also preserves our strong economic partnerships with Canada and Mexico.”
Democrats, many of whom opposed NAFTA or supported its reform, criticized the administration for not going far enough.
Sen. Ron Wyden (D-Ore.) called the letter "disappointingly vague," but added that he was encouraged that Lighthizer had told him that eliminating NAFTA's Chapter 19 would be a priority in the discussions. Under Chapter 19, NAFTA countries create a panel of judges from two countries to rule on anti-dumping and countervailing duty claims. In 1993, the Canadian lumber industry won a victory over their U.S. counterparts in a Chapter 19 decision on U.S. barriers to imported lumber.
Reps. Richard E. Neal (D-Mass.) and Bill Pascrell Jr. (D-N.J.) called the Thursday announcement disappointing “for those of us who believe that U.S. trade policy — and NAFTA — needs fundamental reform.”
“The tone and substance of the letter cannot be squared with the statements the President made describing NAFTA as a ‘disaster’ and the ‘single worst trade deal’ the United States ever negotiated,” the congressmen said in a statement. “The letter, on the other hand, emphasizes that the Administration’s goal is merely to ‘improve’ and ‘modernize’ NAFTA.”
Canadian Foreign Minister Chrystia Freeland said in a statement that the trade agreement had resulted in economic growth and the creation of millions of jobs. “We are steadfastly committed to free trade in the North American region and to ensuring that the benefits of trade are enjoyed by all Canadians,” she said.
In his remarks Thursday morning, Lighthizer noted that the deal was negotiated more than 23 years ago and was in need of updates. NAFTA does not contain regulations pertaining to e-commerce, and it lacks the tougher environmental standards and intellectual-property protections of more recent trade deals.
Yet trade experts point out that digital, environmental and intellectual-property provisions were all incorporated in the Trans-Pacific Partnership, a 12-nation trade deal negotiated by the Obama administration that included the United States, Canada and Mexico and was seen by many businesses and trade experts as a kind of NAFTA 2.0.
It remains to be seen whether many of the administration’s goals for renegotiating NAFTA are drawn from provisions in the TPP. Trump heavily criticized the TPP during the campaign and signed a presidential memo to formally withdraw the United States from the deal as one of his first actions in office.
Business leaders are watching closely for more information on the administration’s primary goals in negotiation.
The roughly one-page letter Lighthizer sent to members of Congress on Thursday contained few details about the administration's plans. An earlier eight-page draft of the letter, leaked to the public in late March, outlined the administration's plans in slightly more specific terms.
The U.S. trade representative is required by Congress to publish more-detailed objectives at least 30 days before formal negotiations begin.
The draft letter indicated a much more conventional approach to negotiation than many had expected, given Trump’s fiery rhetoric about trade deals on the campaign trail.
The draft letter called for restricting federal procurement to U.S. suppliers, reexamining an often-criticized legal process that settles disputes between investors and governments, and renegotiating NAFTA's rules of origin, which determine how much raw material from outside North America can be included in goods that qualify for the favorable terms of the trade pact.