[CTC] (CLIP): Trump Administration Signals It Would Seek Mostly Modest Changes to NAFTA (WSJ; 03/30/17)

[Hubbard, Gary]

Attached is today's updated WSJ report on the Trump Administration proposals being reviewed for NAFTA negotiations.
gary/usw-retired
>ghubbard at usw.org<mailto:ghubbard at usw.org>

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WALL STREET JOURAL - Mar. 30, 2017
https://www.wsj.com/articles/trump-administration-signals-it-would-seek-mostly-modest-changes-to-nafta-1490842268
*         Trump Administration Signals It Would Seek Mostly Modest Changes to Nafta
One change would be in government-procurement section of deal that could open up door for 'Buy American' policies

By Bob Davis and William Mauldin | Updated March 30, 2017 | 4:23 p.m. ET
211 COMMENTS <https://www.wsj.com/articles/trump-administration-signals-it-would-seek-mostly-modest-changes-to-nafta-1490842268#livefyre-toggle-SB12711645461998504051204583053503205874068>
WASHINGTON-The Trump administration is signaling to Congress it would seek mostly modest changes to the North American Free Trade Agreement in negotiations with Mexico and Canada, a deal President Donald Trump called "a disaster" during the campaign.
According to an administration draft proposal being circulated in Congress by the U.S. trade representative's office, the U.S. would keep some of Nafta's most controversial provisions, including an arbitration panel that lets investors in the three nations circumvent local courts to resolve civil claims. Critics of these panels said they impinge on national sovereignty.
The draft, reviewed by The Wall Street Journal, talks of seeking "to improve procedures to resolve disputes," rather than eliminating the panels.
The U.S. also wouldn't use the Nafta negotiations to deal with disputes over foreign-currency policies or to hit numerical targets for bilateral trade deficits, as some trade hawks have been urging.

However, in one far-reaching change, the draft proposal calls for allowing a Nafta nation to reinstate tariffs in case of a flood of imports that cause "serious injury or threat of serious injury" to domestic industries.

The document appears to be a compromise between the desires of trade hawks to use Nafta renegotiations as a way to set a new trade agenda and moderates who back the U.S. traditional commitment to free trade. U.S. lawmakers are split along those lines as well.

The draft could be revised. The administration must give Congress 90 days' notice under trade law before beginning formal Nafta renegotiations. It isn't clear that Canada and Mexico would agree to the changes the U.S. seeks.

In a meeting in February with Prime Minister Justin Trudeau of Canada, Mr. Trump signaled that he wanted small changes in Nafta-at least as it pertains to Canada-but didn't offer any details.

The U.S. trade representative's office declined to comment.

Mexico's government had no immediate response to the draft proposal. Private-sector economists largely welcomed it as far less drastic than proposals to undo the trade accord or impose quotas that restrict trade. But they cautioned that it was still early in the process.

"The proposal looks to be very in line with existing U.S. trade laws," said Luis de la Calle, an economist who was on the original negotiating team for the Mexican government.

Mr. de la Calle said "snap-back" tariffs to safeguard industries already exists in Nafta. He cited a 1996 move by the U.S. to put tariffs on brooms from Mexico, a move that was scrapped later that year after Mexico put retaliatory tariffs on some U.S. products like Tennessee whiskey and North Carolina wood furniture.

The difference, said Mr. de la Calle, is that under the proposed changes, Mexico wouldn't be able to take the case to international court, but would have to litigate in the U.S.

He added, however, that since Nafta is a reciprocal treaty, U.S. firms would have to litigate in Mexico courts if Mexico imposed safeguards.

Jeffrey Schott, a trade scholar at the Peterson Institute for International Economics, a free-trade think tank, said that the measures reimposing tariffs-called a "snapback" in trade lingo-was also sought by the Clinton administration 24 years ago. It became a side deal to Nafta, but didn't have much effect, he said.

The letter accompanying the Nafta draft, which was sent to members of the Senate Finance Committee, among others, said the U.S. trade deficit with Canada and Mexico "demands that this administration take swift action to revise the relationship."

But the draft doesn't propose specific measures that would close the deficit. So-called rules of origin-the percentage of a product that must be produced in Nafta countries-could be set in a way that "supports production and jobs in the United States," the draft said. The document doesn't provide any details of how that would be done or what level of domestic content the U.S. would seek.

Another substantial change could emerge in the government-procurement section of Nafta, which currently requires the U.S. government to consider bids from Mexican and Canadian companies on domestic infrastructure projects.

In the draft objectives, Mr. Trump's administration is seeking "to establish rules that require government procurement to be conducted in a manner that is consistent with U.S. law and the administration's policy on domestic procurement preferences," which could open up the door for Mr. Trump's "Buy American" policies. Meanwhile, U.S. contractors could lose business in Mexico and Canada.

Mr. Schott noted that a number of the proposed negotiating objectives echo provisions in the Trans-Pacific Partnership, a 12-nation trade pact among Pacific Rim countries. Mr. Trump campaigned heavily against the TPP. The president pulled the U.S. from the deal on his first working day in office.
Among the TPP-style provisions the U.S. would seek, according to the draft, are protections of digital trade and commerce, tougher intellectual property enforcement and requirements that state-owned companies operate in a commercial fashion.
Former President Barack Obama's administration had hoped to use TPP to set standards for state-owned firms in the Pacific as a way to influence Chinese behavior.
The proposed labor and environmental provisions-particularly important to Democrats-also echo the TPP, Mr. Schott said. The U.S. would seek to include such provisions in the body of Nafta-they are now in a side deal-and have them enforced in the same way that other Nafta requirements are enforced. Ultimately, that could mean imposing tariffs if the dispute isn't worked out among the parties.
Many supporters of Mr. Trump's approach to trade had hoped he would include binding currency rules in Nafta and use that as a template for deals with Asian countries.
Even if currency isn't included in the main Nafta negotiations, U.S. officials could still strike a side-deal on currency with counterparts in Mexico. Mr. Obama's administration won new currency guidelines in a deal meant to accompany the TPP, but critics across Congress complained that the currency deal wasn't binding, and lawmakers never brought the TPP to a vote.
Corrections & Amplifications
A side deal to the North American Free Trade Agreement covering import surges came into effect in 1993. An earlier version incorrectly suggested that part of the deal was blocked by Mexico.
Write to Bob Davis at bob.davis at wsj.com<mailto:bob.davis at wsj.com> and William Mauldin at william.mauldin at wsj.com<mailto:william.mauldin at wsj.com>
Appeared in the Mar. 30, 2017, print edition as 'U.S. Softens Call for Shift On Nafta.'
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Gary Hubbard (Retired)
USW Public Affairs
Washington, DC
>ghubbard at usw.org<mailto:ghubbard at usw.org>



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