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US to Push for Lower Trade Gap in NAFTA Talks

July 18, 2017
Since NAFTA came into force in 1994, the U.S. trade gap in goods with Mexico had soared from a $1.3 billion surplus to a $64 billion deficit, the U.S. Trade Representative said.

The United States on  July 17 said it would work to shrink trade deficits with Canada and Mexico in talks to renegotiate the landmark 1994 North American Free Trade Agreement (NAFTA).

The Trump administration has focused on boosting domestic manufacturing while cutting trade deficits -- which it sees as damaging to the economy -- a move that risks undoing the free trade efforts of prior administrations.

The U.S. Trade Representative said that when NAFTA talks begin next month, Washington also will seek to lower trade barriers for produce and industrial goods -- while eliminating subsidies U.S. officials say are unfair in trade with the two neighboring nations.

"President Trump continues to fulfill his promise to renegotiate NAFTA to get a much better deal for all Americans," U.S. Trade Representative Robert Lighthizer said.

"Too many Americans have been hurt by closed factories, exported jobs, and broken political promises."

USTR released the NAFTA negotiating objectives as required prior to the start of the talks, which will be held under a pressing political timeline due to elections next year in the U.S. and Mexico.

President Donald Trump retreated from his threat to exit NAFTA, but has described the agreement as a "disaster" that has drained the US of wealth and jobs.

A Recipe for Success?

Mexico's economic ministry said in a statement it "welcomes" the U.S. objectives, saying they "will contribute to defining the issues on the negotiating table with greater clarity and the timeline for modernizing the agreement."

Economists agree the trade pact -- which accounts for about $1 trillion in annual trade between the three nations -- can be updated.

But they have warned against attempting to reduce bilateral deficits, which would face practical hurdles and slim chances of success.

Jeffrey Schott of the Peterson Institute for International Economics said the U.S. negotiating objectives were a plausible start to the process, but unlikely to achieve that stated goal.

"If one is trying to conclude these talks very quickly, you're not going to be able to cover everything that's in this long list of objectives," he said.

However, the talks will not significantly reduce bilateral trade deficits since in most cases the negotiators will be powerless to affect the private buying decisions of companies and consumers, he said.

"These objectives could lead to a successful negotiation but one that will be difficult and where not all the objectives can be achieved," Schott said.

A former Treasury Department official, Schott co-chairs a U.S. government advisory committee on trade and the environment that presented arguments to the USTR.

The Trump administration in recent weeks has been deluged with thousands of public comments on how the 23-year-old trade pact should be improved and modernized.

Since NAFTA came into force in 1994, the U.S. trade gap in goods with Mexico had soared from a $1.3 billion surplus to a $64 billion deficit, USTR said.

In Canada, the U.S. faced difficulties in accessing markets for dairy, wine and grain, which the USTR said the current version of NAFTA was "unequipped" to address.

But while the bilateral deficit has increased, trade among the three countries has soared and the deal forms the backbone of cross-border manufacturing arrangements, including for autos.

The USTR objectives also call for strengthening labor and environmental commitments that are currently only part of NAFTA side agreements.

And Washington will seek to add a chapter on the digital economy and call for the elimination of state enterprises' unfair trade practices, as well as "burdensome" restrictions on intellectual property.

Copyright Agence France-Presse, 2017

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