If nothing else, U.S. Trade Representative Robert Lighthizer gets high marks for consistency.
Since August, when re-negotiations for the North American Free Trade Agreement began, Lighthizer has said the U.S. wants to rebalance trade with Canada and Mexico.
Some economists and trade experts have dismissed Lighthizer’s comments as posturing and a tactic to put pressure on Canada and Mexico.
That analysis may be flawed because it’s been six months, and Lighthizer hasn’t moved from his key message.
A U.S. Department of Agriculture economist said there’s a reason for Lighthizer’s consistency.
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In July 2017, the Office of the U.S. Trade Representative released its objectives for the NAFTA re-negotiations.
Steven Zahniser of the USDA Economic Research Service, said the message in the 18 page document is plain: the U.S. wants to re-balance trade.
“Improve the U.S. trade balance and reduce the trade deficit (in goods) with the NAFTA countries,” the first line in the document says.
The USTR summary of its objectives repeats that message in several ways:
- “The new NAFTA will be modernized … (to) reflect a fairer deal, addressing America’s persistent trade imbalances in North America.”
- “Most importantly, the new NAFTA will promote a market system that functions more efficiently, leading to reciprocal and balanced trade among the parties.”
The USTR goal of balanced trade was on full display in late January, when Lighthizer, Canadian Foreign Affairs Minister Chrystia Freeland and Mexico’s economy minister, Ildefonso Guajardo, spoke following the sixth round of NAFTA negotiations in Montreal.
President Donald Trump has repeatedly said that NAFTA is the worst trade deal in history. Consequently, the U.S. administration requested the deal be modernized, which led to formal talks between the three nations. Those negotiations began in August.
Lighthizer, 90 seconds into his comments in Montreal, said the U.S. has a trade deficit in goods with Canada.
“Using Canadian statistics, Canada sold the United States $298 billion, US dollars, in 2016,” he said.
“We sold Canada $210 billion dollars in goods.”
He then addressed the complaint, repeatedly raised by Canadian officials, that the U.S. demand to rebalance trade is absurd. Freeland has said trade negotiations are about achieving mutual benefit, not a process where one side must win and the other must lose.
Lighthizer doesn’t see it that way.
“I think there is some misunderstanding here that the United States is being unfair in these negotiations. That is not the case.”
When one country has a sizable trade deficit, it’s reasonable to ask why, Lighthizer said.
“I ask Canadians … is it not fair for us to wonder whether this imbalance could in part be caused by the rules of NAFTA?” he said.
“Would Canada not ask the same question if the rules were reversed?”
Lighthizer described the U.S. approach to the NAFTA talks in terms of fairness and equity, but Canadian officials have a different perspective.
Denis Landreville, lead negotiator on regional agreements with Agriculture Canada, said Lighthizer and U.S. negotiators have taken an “old guard” approach to the talks, “when the U.S. was in a position to impose its will and not have to give anything in exchange.… The U.S. views NAFTA as having benefitted Canada and Mexico, and not benefitting the U.S.”
That explains why Lighthizer has put forward proposals that would tilt the scales in U.S. favour, such as changing the rules of origin around automobile manufacturing so that half of all content comes from the U.S., eliminating a mechanism to resolve disputes between the trading nations, and rules that would effectively prevent Canadian and Mexican companies from winning government procurement contracts in the U.S.
It’s hard to know if Lighthizer and Trump will back down from their objective of rebalancing trade, but it’s unlikely that Canada or Mexico will force their hand.
A more likely scenario is that pressure from U.S. business groups, which mostly support NAFTA, could soften Lighthizer’s position.
“We see the USTR and the administration grappling somehow, trying to reconcile U.S. objectives with stakeholder interests,” Landreville said at the Canadian Agri-Food Policy Conference, which was held late last month in Ottawa.
“We see stakeholders in the U.S. particularly vocal about suggestions (of) withdrawal (from NAFTA).”
