[CTC] WSJ: A Looming Nafta Debacle

[Arthur Stamoulis]

Here’s a good example of the corporate line on the NAFTA negotiations: that USTR is being too ambitious with all this stuff about jobs, wages, ISDS, etc.; that Dems would never support it even if he reached a deal; and that there should be a “skinny NAFTA” instead that locks in the “modernizations” corporations have been pushing for.  

Arthur Stamoulis
Citizens Trade Campaign
(202) 494-8826



https://www.wsj.com/articles/a-looming-nafta-debacle-1526681665?mod=searchresults&page=1&pos=3 <https://www.wsj.com/articles/a-looming-nafta-debacle-1526681665?mod=searchresults&page=1&pos=3>
 
OPINION/ REVIEW & OUTLOOK

A Looming Nafta Debacle

The U.S. trade rep is setting Trump up for a major political failure.
By the Editorial Board
May 18, 2018
 
Trade officials missed a Thursday deadline to wrap up a renegotiated North American Free Trade Agreement, and the chances are rising that there won’t be a deal at all this year. This looming fiasco is the result of the failed negotiating strategy of U.S. trade rep Robert Lighthizer, who works for a deal-making President but can’t seem to make a deal.
 
The missed deadline this week means there may not be enough time left in the Republican Congress to hold a vote, even in a lame-duck session. Good luck getting cooperation from Democratic House Speaker Nancy Pelosi next year. It may also not be possible to get a new Nafta text to the current Mexican Senate in time for a vote in its lame-duck session that ends August 30.
 
The blame for this mess belongs to Mr. Lighthizer, who has overplayed his hand with excessive demands that have increased political opposition in Mexico, Canada and the U.S. They include a $16 minimum wage for Mexican factory workers, the end of international panels to protect U.S. investment abroad, and a five-year sunset provision, among others. Mr. Lighthizer persuaded President Trump that he could make a deal on these preposterous terms, but instead he’s set up his boss for an embarrassing political and economic failure.
 
He’s also courting more economic trouble if Mexico elects economic nationalist Andrés Manuel López Obrador in its presidential election on July 1. AMLO, as he’s known, wants to restore the pre-Nafta corporatist Mexico, which was run by monopoly businesses and labor unions. AMLO is leading in the polls, and his Morena Party and its allies may have a majority in the new Mexican Congress.
 
Mr. Lighthizer will then have to negotiate with his mirror Mexican image. AMLO has promised to revisit recent energy reforms that opened Mexico to private domestic and foreign investment, and he waxes lyrical about the good old days of protected Mexican agriculture. When Mexico passed the Trans-Pacific Partnership recently, AMLO supporters in Congress voted against it. The opportunity to consolidate energy and telecom reforms using Nafta modernization will have been lost.
 
The U.S. trade rep is also setting Republicans up for losses in the midterm elections. The threat of retaliation against American farm products is a cause of great concern in farm states that are already struggling with low crop prices. Add the growing threats of retaliation from Japan and Europe over steel tariffs, and Chinese tariffs against U.S. farm goods, and Mr. Lighthizer could cost the GOP control of the House and Senate.
 
Mr. Lighthizer still has one potential self-rescue option if he’s willing to come down from his personal Mount Olympus—a streamlined rewrite known as “skinny Nafta.” This would include limited changes to Nafta that wouldn’t alter U.S. law, and thus wouldn’t require a vote in the U.S. Congress.
 
Trade officials have largely completed new or revised Nafta chapters on energy, digital trade, telecom, financial services, technical barriers to trade and customs, none of which need congressional approval. Changes to rules-of-origin in autos can also be made without a showdown vote in Congress, and Mexico has long signaled a willingness to compromise.
 
President Trump, Canadian Prime Minister Justin Trudeau and Mexican President Enrique Peña Nieto could sign skinny Nafta by the end of May. Mexico’s Senate would still have to approve it, but Mr. Peña Nieto could call the chamber back before the presidential election and get it passed.
 
This would be a significant victory for Mr. Trump. He would have locked in Mexico as an energy and telecom market for American companies, secured access to Mexican consumers for American farmers, expanded market access for financial services and laid down firm rules for digital trade. He will also have resolved great uncertainty in automobile production, while putting the Nafta issue behind him so he and his economic team can focus on China.
 
The alternative is to hold fast to the Lighthizer poison pills that Mexico and Canada refuse to accept and settle in for what could be years of combat with a mercantilist Mexican government. That strategy puts at risk the present economic benefits of continental commerce and tens of billions of dollars of future sales and income gains for Americans.
 
If Mr. Trump wants to avoid that ugly legacy, he needs to order Mr. Lighthizer to cut a deal now, or get a new trade negotiator whose motto isn’t the artlessness of no deal.

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