[CTC] Lighthizer: ‘Historic’ NAFTA 2.0 could win labor and business support, lead to ‘paradigm change’ in Congress

[Arthur Stamoulis]

Inside US Trade

Lighthizer: ‘Historic’ NAFTA 2.0 could win labor and business support, lead to ‘paradigm change’ in Congress

October 18, 2017 
 
U.S. Trade Representative Robert Lighthizer on Tuesday said he was seeking to shake up the congressional voting landscape for free trade deals, suggesting a retooled NAFTA could be a “historic agreement” backed by both the business community and labor unions -- as well as their champions on Capitol Hill.
 
“I think in the final analysis business is going to support it, if we do it well. In the final analysis we can get labor to support it; if we do that then we’re in a whole new ballgame now and going forward,” Lighthizer said after a contentious fourth round of NAFTA talks, which ended in a decision to delay the next discussions <https://insidetrade.com/node/160657>. “I think there are ways to do that, have it be something that’s balanced and really, in my judgment, at least more market-oriented.”
 
Lighthizer said he hoped to “get back to the days where there was a substantial majority of people in both parties that voted for these trade agreements,” adding “that is my objective right now. I want to have a huge number of Republicans and a huge number of Democrats.”
 
A broadly bipartisan deal would be “truly be a historic agreement and it could be really a paradigm change in terms of the way the Congress reacts to trade and that’s really what my objective is at this point,” he said.
 
A former congressional staffer, however, called that objective impossible, saying the Trump administration’s approach instead was more likely to lead both parties to oppose a new deal.
“In my experience, most Democrats oppose trade agreements because they oppose trade agreements,” the former staffer told Inside U.S. Trade. “If the Lighthizer paradigm shift is to somehow force trading partners to accept policies that erect a bunch of new trade barriers, then his historic achievement will probably be an implementing bill that achieves majority bipartisanship -- against the deal.”
 
And Lighthizer, in his post-round briefing to reporters, acknowledged that for observers who have followed previous trade negotiations and their fate on Capitol Hill, his vision was “pretty unlikely.”
 
“But,” he said, “I think it’s important for the trading system that we end up re-establishing a solid majority for the kinds of things we’re doing. And that we not keep operating right on the fringe.”
 
He said he hoped to “find that line” that would allow for an agreement that is backed by the opposite ends of the spectrum on trade policy.
 
One business source, however, said “trade has long been a bipartisan issue” -- citing the U.S.-Panama Free Trade Agreement, which passed the Senate in 2011 with an overwhelming majority of 77 votes.
 
Dan Ujczo, international trade lawyer at Dickinson Wright, told Inside U.S. Trade that “USTR Lighthizer is nobly attempting to build a broad coalition in Congress by giving every interest its slice of NAFTA.”
 
“Unfortunately,” Ujczo added, “it may end up being a death by a thousand cuts for the NAFTA as no solid coalition will find common ground.”
 
Lighthizer said the changes the U.S. is seeking in the investor-state dispute settlement could serve as a vehicle to get unions on board. Sources have toldInside U.S. Trade those changes include an opt-in mechanism and carveouts for investors to bring cases for indirect expropriation as well as on the basis of due process and fair and equitable treatment.
 
Lighthizer said the proposed moves would not result in businesses shutting down.
 
Instead, he faulted the business community for wanting its cake and eating it too: On one hand, he said, businesses are asking for free trade and the opportunity to make money via a free-market system. On the other hand, he added, they say they “would also like the United States’ government to more or less guarantee that we don’t have to worry about political risk.”
 
“So instead of buying political risk insurance, or instead of calculating political risk into their decision about a dollar and cents decision, what they’re doing is saying ‘no, we want a thumb on the scale,’” Lighthizer said, adding that he found it “odd” that business wants investment protections because “unfortunately, it doesn’t work that way in the market.”
 
The USTR claimed that business groups opposed to ISDS changes could, under the deal he hopes to strike, “make a little less money or make more money in a different way and we can get the trade deficit down and we can also have what I would consider, at least in the investment realm, to be a market-based investment decision.”
 
“And I think if we do that, business will be fine; and I think if we do that, labor will come along and say ‘this is a step in the right direction and it’s worth changing the paradigm and doing that,’” he added.
 
Lighthizer told reporters “I know you’re all sitting there thinking it’s impossible -- and you may be right -- but, the day will come, I think, when you’ll come in and say ‘yeah, that’s precisely right, it could be done.’”
 
One business source told Inside U.S. Trade that while there are areas in which the private sector could compromise to get a new NAFTA, there are also unresolvable areas of tension between the business community and the Trump administration.
 
Among those areas for potential compromise, the source said, was a sunset clause “we can deal with, we can water down,” and government procurement, which “we can fix.” But the U.S. proposal for a domestic content requirement in a new deal’s auto rules of origin, the source added, represented “a fundamental disagreement.”
 
The source said the auto rules of origin proposal would “seek to export union jobs” and end up “driving away high-paying American jobs and making our region less competitive.” President Trump, the source added, “would be hurting the very union workers he's claiming to protect.”
 
Lighthizer also reiterated that his focus was on winning the president’s approval <https://insidetrade.com/node/160596> and said that while the option to withdraw from the deal was an alternative, it is not currently under consideration.
 
“We think about it all the time. These are all questions of alternatives. But there’s no active process going on right now,” Lighthizer said. “We’ll see. We had this round, I’ll report to the president on this round. That’s what I do after every round. I go through, I report to the president and we talk about it.”
 
Before a retooled deal can get to Trump or Congress, however, Lighthizer must overcome significant objections to U.S. proposals voiced by Canada and Mexico. Those “conceptual gaps” were exposed during the fourth round of talks, Lighthizer said earlier in the day, adding that he was “surprised and disappointed at the resistance to change.”
 
The next round of NAFTA talks has been pushed back to Nov. 17-21, in Mexico City, the three countries announced on Tuesday, with the negotiations now slated to last into the first quarter of 2018. -- Jenny Leonard (jleonard at iwpnews.com <mailto:jleonard at iwpnews.com>)
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