What Trump Wants From NAFTA Is What He Had With TPP
The Trump Administration has just spelled out what it wants from a renegotiated NAFTA. Basically what it wants is the Trans Pacific Partnership, the very agreement that Trump rejected on his third day in office as a ‘disaster.’
When President Trump was telling The Economist earlier this month about the kind of changes he would insist on as a price for renegotiating NAFTA, specifics eluded him as he evaded the magazine’s questions about what a ‘fair’ NAFTA deal would look like. But he did make several one-word references to the magnitude of the changes – ‘massive’ and ‘huge.” In notifying Congress that the Administration was renegotiating NAFTA, U.S. Trade Representative Robert Lighthizer spelled out the kind of changes he would seek – and if they are massive or huge, they were also already mostly embedded in TPP.
In his letter to Congress, Lighthizer pointed out that many chapters of NAFTA were outdated and did not ‘reflect modern standards.’ The first example he offered was digital trade – which was part and parcel of the TPP agreement. Lighthizer went on to cite the need for NAFTA to offer modernized provisions to address intellectual property rights. The United States has long wanted this; TPP provided it.
The service sector? For years, the United States has hankered to open up Canadian and Mexican service industries like insurance, accounting and express delivery, where the U.S. is at the leading edge. The TPP agreement would have achieved that. New provisions to address labor and environmental standards, areas where U.S. companies already must meet domestic legal requirements while many competitors are free to cut costs? It’s one of Lighthizer’s goals for NAFTA renegotiations; Mexico, along with Vietnam and other developing economies, already agreed to that under TPP.
What are some of the areas left out of the USTR’s letter? In the past, President Trump has offered a specific criticism of NAFTA, under which Mexico has applied its value-added tax to imports but not to its own exports. But Lighthizer’s letter to Congress does not even mention taxes at all much less Mexico’s VAT – a practice it shares with about 160 countries, including the entire EU, and which the Trump administration is still considering implementing in the form of a Border Adjustment Tax (BAT).
Then there is currency manipulation, which Trump often offered as the biggest problem in trade. As recently as a week after his inauguration, Trump vowed to include a clause preventing currency manipulation in all future trade deals. But currency isn’t even mentioned in the Lighthizer letter.
After foregoing all of the trade concessions it picked up in TPP, the United States is now back to square one. And it is going back to the starting line without one of their biggest advantages. The United States was already at an end point when it comes to wringing concessions out of its neighbors. It is important to keep in mind that both Mexico and Canada were reluctant to make many of the concessions they did under TPP. The inducement to both of them was the value of the total Pacific Rim market. Mexico, for example, was disinclined to agree to labor and environmental reforms. Nonetheless, through TPP negotiations it reluctantly agreed to concessions in both areas, such as protection of collective bargaining. The United States obtained these and other goals among its NAFTA partners by working to get them into the TPP agreement – therefore giving the two North American trading partners better access to sell their products in the nine other TPP partners’ markets. U.S. negotiators used access to the Pacific market to further open up the Mexican and Canadian markets.
The Trump Administration doesn’t even appear to be seeking any more under NAFTA than its predecessor had already obtained under TPP. It sounds like President Trump has already thrown a great deal away – all the advances made in the Trans Pacific Partnership.
