NAFTA’s long road to completion

The Trump administration must meet a series of statutory deadlines to get NAFTA 2.0 passed through Congress. How far along is it?

Trump has pledged since the early days of his campaign to rewrite NAFTA and to get it done as quickly as possible.

But it’s no small task: Besides working with Canada and Mexico to reach a deal that all three countries find reasonable, U.S. negotiators must also work with Congress to adhere to a series of strict statutory guidelines. Following those rules, laid out under the Trade Promotion Authority law, allows the president to submit the final deal to Congress for a straight up-or-down vote without any amendments, greatly increasing the chances of quick passage.

Here’s a closer look at the steps the administration has taken, how far it has left to go — and whether it still has any chance of passing a deal through the current Congress.

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From Politico

 

 

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BRADY SAYS NO TO ‘SKINNY’ NAFTA

House Ways and Means Chairman Kevin Brady (R-Texas) said he won’t accept a so-called skinny NAFTA deal that’s been rumored to be a possible outcome as talks for a revamped NAFTA appeared to stall over the past week.

mediadc.brightspotcdn-1“I think frankly, we’re too close to a comprehensive, modern NAFTA that addresses a broad range of challenges and opportunities in energy and telecom and digital trade and agriculture that ought to be a part of a modern agreement,” Brady told reporters on Monday. “I don’t want to miss this opportunity by aiming too low.”

The Texas Republican said the best scenario would be for the administration to reach a final deal and for Congress to pass an agreement this year.

“The next best scenario is a modern, pro-growth NAFTA that all three parties agree to this year that we can begin the process of TPA going forward,” he said. “While there are substantive issues left, they have made significant progress and I think all three parties are capable of closing this out.”

Mnuchin leaves the door cracked

I think for right now, we’re still focused on a new NAFTA that would go through Congress, but we easily can look at the skinny deal as an alternative,” Mnuchin said in a Monday interview on CNBC. “That’s something that the president can consider.”

The idea of settling on a “skinny” NAFTA deal that would make only a few changes to the 24-year-old pact has emerged in recent weeks because of continuing logjams on some of the tougher issues in the talks. Basic changes to automotive rules of origin, an issue that has been a major focus in talks so far, and other aspects wouldn’t require a change to U.S. law and therefore would not have to be submitted to Congress for a vote.

GOP SENATORS WARN AGAINST ONE-WAY NAFTA STRATEGY

More than half of Senate Republicans are warning Trump not to force a take-it or leave-it approach to NAFTA by withdrawing from the current pact to force a vote on a new one.

“We are concerned about recent media reports suggesting that you may be considering an ultimatum strategy to pressure Congress into accepting an updated NAFTA, including through threats to withdraw from the original agreement,” 32 Republican senators, led by John Cornyn of Texas, said in a letter to U.S. Trade Representative Robert Lighthizer on Monday.

“In our view, a take-it or leave-it strategy could have negative unintended effects that jeopardize American jobs and economic growth. When discussing NAFTA modernization legislation with Congress, we ask the administration employ a strategy that emphasizes collaboration, rather than conflict,” the senators said.

American Farm Bureau Federation President Zippy Duvall said his group continues to advocate a “do no harm” approach to NAFTA, even if a revamped version of the pact doesn’t appear to be imminent. He said he was still optimistic that the U.S. would strike a deal with Canada and Mexico.

“I think he is very aware of how important it is to agriculture so I think the prospects of him pulling out – I’m not as concerned about that as I was but who’s to say what might happen tomorrow,” he said.

More from the Washington Examiner

TRUMP’S NEW NAFTA OUTLOOK

Steve Mnuchin told “Fox News Sunday” that Trump could tolerate a NAFTA vote slipping into 2019, adding that the president is more interested in striking a good deal with Canada and Mexico rather than wrapping up quickly.

Screen Shot 2018-05-21 at 11.47.17 AM“The president is more determined to have a good deal than he’s worried about any deadline,” Mnuchin said. “So, whether we pass it in this Congress or we pass it in the new Congress, the president is determined that we renegotiate NAFTA.”

At the same time, Trump is still hanging onto “all his alternatives,” Mnuchin said, leaving open the possibility that the president could always resort once again to the threat of withdrawal — or follow through on that threat — if he wants to.

MEXICO’S TOP NEGOTIATOR: NAFTA 2.0 DEPENDS ON FLEXIBILITIES

Mexico’s chief NAFTA negotiator, Kenneth Smith Ramos, said on Saturday that negotiators from the U.S., Mexico and Canada have been able to close more chapters in the talks, but striking a deal will require all three to be willing to compromise for a balanced agreement.

In total, negotiators have closed nine chapters and six sectorial annexes, Smith Ramos posted in series of tweets. Those chapters include: telecommunications, small- and medium-sized enterprises, competition and technical barriers to trade. Annexes have closed on chemicals and pharmaceuticals and medical devices as well.

“The last mile will require flexibility from all 3 parties in order to find the balances that may allow us to close the negotiation,” Smith Ramos said. “Last week we made concrete proposals and will continue to work constructively to reach the best deal possible for Mexico.”

Negotiators continue to work toward a deal that responds “to the needs of the 21st century economy & with state-of-the-art disciplines,” Smith Ramos emphasized.

NAFTA SUPPORTERS: JUST KEEP NEGOTIATING

Lighthizer may have dampened all expectations that a NAFTA 2.0 deal is anywhere close to final, but fans of the deal on Friday encouraged negotiators to continue working — whether that means a vote during this year or next.

“Republicans in Congress continue to urge the administration to bring back a modern agreement that is fully enforceable with binding dispute settlement procedures and which includes strong protections for American businesses and workers competing for customers in Canada and Mexico,” House Ways and Means Chairman Kevin Brady said in a statement on Friday.

Rep. Bill Pascrell, the top Democrat on the Ways and Means’ Trade Subcommittee, echoed Brady’s call for continued negotiations and said the U.S. needs, ” a good deal, not a quick deal.” Business groups including the Business Roundtable also weighed in, saying, “Regardless of whether officials from the U.S., Canada and Mexico can meet specific legislative deadlines, modernizing NAFTA in ways that expand, not restrict, trade should be the administration’s primary objective.”

Lighthizer’s highlights

 Others zeroed in on the specific issues that Lighthizer listed in his statement late last week, in which he cited “gaping differences” remaining on areas including intellectual property protections, market access for agricultural products, de minimis standards and energy — a list that some observers noted was more directed at Canada than Mexico.

The Internet Association, which lobbies on digital trade issues, noted that Lighthizer highlighted two of their major issues when he named IP and customs, saying it was “encouraging” to see him “focused on areas critical to the digital economy.”

“The internet industry looks forward to continuing our work with USTR to promote U.S. law and the goals outlined in TPA to support all American industries in NAFTA,” Jordan Haas, IA’s director of trade policy, said in a statement. “Modernizing NAFTA remains as important as ever for the internet economy and America’s $160 billion digital trade surplus.”

Democrats put the ball in Paul Ryan’s court

Pascrell also teamed up on Friday with Rep. Richard Neal, the top Democrat on Ways and Means, in calling on House Speaker Paul Ryan to clarify what exactly Congress’ next steps are on NAFTA now that negotiators have missed the deadline he set to wrap up talks. Ryan had initially said officials needed to reach a deal by May 17 to have any chance of passing it through Congress this year, though he later said there’s “some wiggle room” and said it’s possible negotiators could take another week or two.

“Noting that in the last 24 hours, you moved the goal posts on your own deadline by a seemingly arbitrary two weeks, at this juncture, we write to ask you, as the author of TPA, what happens now?” Neal and Pascrell wrote in a letter to Ryan sent Friday. “We cannot afford to sit back and be satisfied with the status quo.”

From the Politico newsletter.

NAFTA Is On Life Support. Will Trump Be the One to Pull the Plug?

The Iran Nuclear deal isn’t the only major agreement that President Trump promised voters he would either rewrite or tear up.

Deadlock

After nine months of talks, U.S., Mexican and Canadian negotiators remain deadlocked on how to rework, and save, the North American Free Trade Agreement (NAFTA). There’s now a renewed sense of urgency, because time is running out to reach a deal to spare NAFTA, the pact that has governed cross-border trade since 1994. If no agreement is reached in May, things will become much more complicated. Here’s why:

Even if the three sides come to an agreement this month, Trump can’t just sign it into law. The U.S. Constitution gives Congress, and not the President, power to regulate commerce with foreign nations. Under trade promotion rules, Trump must notify Congress 90 days before he intends to sign it. Then the U.S. International Trade Commission must report to Congress on the likely impact of the deal before lawmakers can vote on it. That will take more time. Then Congress has 90 session days before voting yes or no on the deal. House Speaker Paul Ryan calculated that lawmakers would need to see a deal by May 17 in order to be able to vote on it this year.

Why the hurry? Because the political headwinds aren’t in the deal’s favor–and not just in the U.S. Canada’s federal elections aren’t due to be held until 2019, and in any case, both the Liberal and Conservative parties support NAFTA. But the situation in Mexico is more complicated. Mexicans will choose a new President on July 1. The clear front runner in that election is the veteran leftist Andrés Manuel López Obrador. He doesn’t oppose a NAFTA renegotiation on principle, because he knows the loss would harm Mexico’s economy far more than that of the U.S. or Canada. But if he wins and no deal has been agreed upon by the time he takes office in December, he will certainly replace virtually the entire Mexican negotiating team, throwing the entire process back to an earlier stage.

Then there is the complex political calculus in the U.S., where many of the members of Congress who are facing re-election on Nov. 6 are less than enthusiastic about casting a vote on a controversial trade deal. Pro-trade Republican lawmakers may find themselves in a tough spot if Trump presents them with a union-friendly deal that prevents investors from being able to sue foreign governments in tribunals, or requires more automobile production in the U.S., or includes a sunset clause that could automatically kill the deal after five years. These are the sorts of changes that some Democrats will like and that Republicans and the business community won’t want.

Yet the midterm elections might come directly into play if Democrats take control of Congress and decide that, even if they like many of the agreement’s new terms, they don’t want to hand Trump a political victory. They might push for yet more changes to the deal, which would also give Mexico’s López Obrador a chance to push for some amendments of his own.

But the U.S. President’s notoriously mercurial temperament is the X factor in all of this. The longer a deal is delayed and the more it becomes an agreement that Democrats and López Obrador can get behind, the more likely that, as with the Iran nuclear deal, Trump will decide to simply walk away from NAFTA altogether.

This appears in the May 28, 2018 issue of TIME.

PRESSING PAUSE ON THE TRADE WAR

Donald Trump and his administration have decided — at least for now — not to impose any new tariffs on China as Beijing and Washington continue to hammer out agreements on trade, Treasury Secretary Steven Mnuchin said on Sunday.

Male hand pressing pause button on the virtual screen

The comment came after two days of high-level trade talks between Chinese and U.S. officials, during which the two sides agreed on a framework to address technology trade irritants and the trade deficit between the two countries that Trump has repeatedly railed against.

“We’re putting the trade war on hold,” Mnuchin said in an interview on “Fox News Sunday.” “Right now, we have agreed to put tariffs on hold while we try to execute the framework.”

The administration had previously threatened to impose tariffs on up to $150 billion in Chinese goods as punishment for what the White House views as the theft of intellectual property in China and technology practices that harm foreign companies trying to operate in the Chinese market. The Office of the U.S. Trade Representative held three straight days of hearings last week to hear concerns from lawmakers and industry representatives on both the technology practices themselves and on the looming tariffs, which some technology companies have warned are not the best way to force China to change its ways.

The threat of tariffs is not completely off the table

 A senior administration official said Trump wants to keep the possibility alive but is satisfied with the direction of talks thus far. So he is inclined to tone down the threats and trade war rhetoric as the discussions continue, the official told POLITICO.

Plus, it remains unclear whether the administration plans to remove tariffs that have already been imposed on Chinese steel and aluminum exports to the U.S. China has already retaliated against those duties with its own punitive penalties on roughly $3 billion worth of U.S. exports.

DEVIL IN THE CHINA DEAL’S DETAILS

After the two days of talks in Washington, which ended late Friday afternoon, the Chinese delegation offered to help American companies increase their exports to China by about $200 billion, two senior officials told POLITICO. But in the official joint statement released Saturday, the two sides left out that language — perhaps a sign of how much work is left to be done on the agreement — and announced that China has promised to buy significantly more U.S. agriculture and energy products to help cut the U.S. trade deficit.

“Both sides agreed to continue to engage at high levels on these issues and to seek to resolve their economic and trade concerns in a proactive manner,” the statement said.

The officials had said that it was possible a final deal might not come together before Chinese Vice Premier Liu He returns to Beijing on Saturday, but that negotiations appeared to be headed for success even if additional meetings are required. Mnuchin also said Sunday that Commerce Secretary Wilbur Ross would be heading to China with “very hard commitments in agriculture.” More from Doug here.

LIGHTHIZER KEEPS UP THE PRESSURE

 U.S. Trade Representative also chimed in on Sunday, saying that despite the agreement on a framework there is still plenty of work to be done to push for “real structural change.”

“Real work still needs to be done to achieve changes in a Chinese system that facilitates forced technology transfers in order to do business in China and the theft of our companies’ intellectual property and business know how,” he said in an emailed statement. “Getting China to open its market to more U.S. exports is significant, but the far more important issues revolve around forced technology transfers, cyber theft and the protection of our innovation.”

He also noted that while the tariffs are on hold, they’re still on reserve if needed. “Nothing less than the future of tens of millions of American jobs is at stake,” he added.

AVERTING A TRADE WAR — GOOD OR BAD? 

Reactions to the China news over the weekend were somewhat mixed, with some groups applauding the administration’s move to ratchet down tensions with Beijing and others expressing disappointment.

The tech industry, for one, welcomed the ceasefire as “a sign of progress” that would shield consumers from higher costs, said Dean Garfield, president and CEO of the Information Technology Industry Council, which lobbies on behalf of Amazon, Google and others.

“We are hopeful, and strongly encourage both sides to build on that positive step by addressing persistent issues regarding data transfer, cloud services restrictions, and discriminatory regulations and standards in order to level the playing field,” he added.

But others were less enthused. “The administration is making a big mistake in putting the China tariffs on hold,” Scott Paul, director of the Alliance of American Manufacturing, wrote on Twitter. “It’s the best leverage we have right now. China has no incentive to make a real deal. In this round, the art of war has vanquished the art of the deal.”

KUDLOW: HAMMER’S STILL COMING DOWN ON ZTE

 Trump may have pledged to find a way to help Chinese telecommunications giant ZTE amid broader trade negotiations with Beijing, but the company is not going to get off “scot-free,” White House economic adviser Larry Kudlow said Sunday.

Trump made a surprise announcement last week that he would try to save Chinese jobs by asking his Commerce Department to ease an enforcement ruling from last month that had been imposed after ZTE was found to have violated U.S. sanctions via telecommunications sales to North Korea and Iran.

In an interview Sunday on ABC’s “This Week,” Kudlow said penalties on ZTE would continue to be “very, very tough, including big fines, compliance measures, new management, new boards.” The question, he said, is whether “there are perhaps some small changes around the edges.”

From the Politico newsletter.

 

Speaker Ryan Dives In to Save NAFTA

Against all odds, the North American Free Trade Agreement (NAFTA) renegotiations launched by the Trump administration in August 2017 were heading towards an outcome that could have generated support from Democrats in Congress, unions, and Public Citizen. NAFTA’s job outsourcing incentives and investor-state dispute settlement (ISDS) regime were on their way out.

3f3943d8-cea4-4f6b-96ac-3c25fd3ef24e-1.jpgThe timeline to finish talks for a vote to occur this year was looming in June, due to the requirements of Fast Track negotiating authority.

 The corporate lobby was apoplectic.

Many issues remained under discussion. Dairy market access, intellectual property rules, labor standards, and even the de minimise value for a shipment to trigger NAFTA’s customs rules were unresolved. But to the horror of legions of lobbyists, U.S. negotiators were making progress on major changes to NAFTA that labor wanted and corporate American opposed.

Enter Speaker Paul Ryan and the House Republican leadership. Last week Ryan abruptly announced an arbitrary deadline for a final deal—today—that he knew could not be met.

The May 17 date he set did not reflect the timelines established under the problematic Fast Track process that applies to the negotiations. But thanks to quirks in that system, Ryan has the power to deny his president a vote on a renegotiated NAFTA during this Congress. What a convenient calling card for a retiring GOP speaker to secure another year of NAFTA’s job outsourcing protections for corporate America.

That once again Ryan and the Republican congressional leadership would stick it to working Americans to protect their big corporate donors is not news. Ryan’s lifetime rating on voting in the interests of working families is only 26 percent. His artificial May 17 deadline for a new NAFTA is all about preserving NAFTA as it is.

But that talks to rewrite NAFTA might actually help working people has a distinctly man-bites-dog sensibility given who is president. It’s actually not as strange as one might think. …

First, Trump appropriated the trade reform agenda from Democrats, unions and progressive groups. And whether a president is a Democrat, Republican or Martian, if he or she hopes to reduce our large NAFTA trade deficit and reduce job outsourcing and related downward pressure on wages, there are only certain changes that can make a difference.

Second, Trump appointed Robert Lighthizer as the top U.S. trade official. Lighthizer, who progressive Senator Sherrod Brown dubbed “the best appointee in the Trump administration,” predicted NAFTA would gut American manufacturing when he opposed it in 1993. Make no mistake, Lighthizer is a conservative and has deep ties to Republican policymakers. He also has a long commitment to American manufacturing, is furious about the almost one million jobs that the U.S. government has certified as lost to NAFTA including hundreds from his hometown of Ashtabula, Ohio, and has worked with unions and Democrats in Congress for decades. And, he knows NAFTA inside and out.

 As a result, Lighthizer is uniquely positioned to broker a deal that could obtain broad support. He also knows what terms must be changed to alter NAFTA’s outcomes. That is why the corporate lobby is unhinged and key U.S. demands reflect changes that NAFTA’s leading critics—progressives—have demanded for decades.

 That includes elimination of investor-state dispute resolution, which makes it less risky and cheaper for corporations to outsource jobs. ISDS empowers multinational corporations to sue governments before a panel of three corporate lawyers. These lawyers can award the corporations unlimited sums to be paid by taxpayers, including for the loss of expected future profits over claims that domestic laws violate their NAFTA rights. The decisions are not subject to outside appeal. The system operates like free risk insurance subsidizing outsourcing. Already under NAFTA nearly $400 million has been paid to corporations after attacks on environmental and health policies. In a sign of panic that the NAFTA countries were poised to agree, corporations launched a big dollar MSNBC and Fox ad campaign in defense of ISDS.

 The administration is also demanding that NAFTA’s waiver of Buy American procurement rules be rolled back. That would mean that firms seeking lucrative U.S. government contracts cannot outsource production of their government-acquired goods and our tax dollars would get reinvested in creating jobs here. That is how it worked before NAFTA. Afterwards top federal contractors like General Electric were free to shift production to Mexico and did.

 To be added is a sunset clause that requires an affirmative decision every five years to continue the deal so that it either performs as expected or gets modified again before another quarter century of damage accrues.

 Finally, significant progress has been made to establish a higher “rule of origin” so that no longer could products with one-third of their value coming from China or other non-NAFTA countries get NAFTA’s duty-free access. For autos, which represent a huge share of NAFTA trade, USTR is demanding 75 percent of value come from the U.S., Mexico or Canada. And, that 45 percent of a good be produced by workers making $16 per hour. The wage standard is aimed at ensuring that U.S. workers produce a share of the increased North American content, while creating incentives for Mexico to raise wages. Given the Mexican government’s strategy has been to attract investment with low wages, since NAFTA Mexican wages are down and manufacturing wages are now on par with coastal China.

 But any revised NAFTA that merits support also must include strong labor and environmental standards with swift and certain enforcement to raise wages and stop the outsourcing of pollution. Otherwise, companies will continue to move U.S. jobs to Mexico to pay workers $2-an-hour poverty wages and dump toxins and then import those products back for sale here.

When Ryan dropped his delay bomb last week, considerable work remained to make the pact’s Labor Chapter acceptable, even as progress had been made. Nor has Mexico passed the labor law reforms necessary to empower workers to improve their outrageously low wages. Mexican law allows “protection” unions to be formed and contracts “signed” before the first worker is hired. When workers at new high tech auto assembly plants strike over wages that typically are less than $2 per hour, they are attacked by the police for opposing the terms the fake union agreed.

Given there is no acceptable deal for progressive unless these issued are addressed, is there any hope for a Labor Chapter that could make a difference? Before NAFTA talks started, the AFL-CIO issued recommendations about how to do just that. AFL-CIO President Richard Trumka declared: “If President Donald Trump follows our recommendations, if he renegotiates NAFTA, so it’s a real force for higher wages and broadly shared prosperity, we will help pass it.”

Lighthizer has been working closely with American unions to develop terms that could earn their support. That’s a smart approach, because the game-changing deal necessary to improve job and wage numbers can only get through Congress with significant Democratic support.

As Ryan’s willingness to deny his president a vote on a priority issue reveals, some congressional Republicans will not abide any trade deal that gives working people a raise or removes their corporate donors’ outsourcing incentives.Indeed, they continue to demand that NAFTA talks effectively revive the terms of Trans-Pacific Partnership (TPP), even though the politics of trade are so dramatically altered that the TPP remained dozens of votes short of passage despite a massive effort to enact it in 2016.

This political dynamic means that Democratic members of Congress also have been able achieve some improvements to a new NAFTA Environment Chapter. Perversely, the text submitted for NAFTA renegotiations was better than the final TPP Environment Chapter text. However it was not at all sufficient. Some headway has been achieved, but this is a process still underway and in the face of this administration’s relentless attacks on climate and environmental policy, U.S. environmental groups have not engaged in the process.

Also meriting close scrutiny is the resolution of a basket of issues on which progressives and the USTR part company. Indeed progressives have long argued these terms should not be included in trade deals in the first instance.

This includes rules on patents and other monopoly rights that block competition so pharmaceutical firms can raise medicine prices and excessive copyrights and other protections that limit access to information and Internet freedom and threaten our privacy. Also of concern are prospective new limits on foods safety, labeling and inspection and rules foreclosing regulation of e-commerce giants. Democrats in Congress have made clear that they cannot support a revised NAFTA that rolls back such critical consumer protections.

So, what happens next? Talks are continuing, regardless of Ryan’s fake deadline.

 So, what happens now? Talks are continuing, regardless of Ryan’s fake deadline. A game-changing deal that prioritizes working families will be determined by the content, not the calendar.

Indeed, given the midterm elections are projected to increase Democrats’ power in Congress, by trying to shut down a vote this year and pushing it into the next Congress, Ryan may have made it easier to pass the sort of deal that would merit progressives’ support.

But even assuming such a shift in the compensation of Congress and that Trump does not abandon his high profile NAFTA fix or nix pledge or tweet torpedo a deal, if a transformative NAFTA replacement is negotiated a battle royal will be joined.

 In a stunning role reversal, powerful elements of the corporate lobby would be trying to kill a new deal that might establish a fairer trade policy. And unions, progressives in Congress and groups like Public Citizen will be to fighting to build a majority to replace NAFTA and end NAFTA’s ISDS regime, remove its job outsourcing incentives—and the biggest IF—add labor and environmental standards that could actually help raise wages and improve conditions for people throughout North America. That could be the only positive thing that could come out of this terrible administration.

If the deal fails, Trump has threatened to pull out of NAFTA. So corporate America could lose either way. It would be far better to fix NAFTA along progressive lines. That may yet occur.

LORI WALLACH

MAY 17, 2018      HTTP://PROSPECT.ORG/ARTICLE/SPEAKER-RYAN-DIVES-SAVE-NAFTA

US auto proposals pose big challenge for NAFTA talks

House Speaker Paul Ryan (R-Wis.) said that he needs a proposed North American Free Trade Agreement (NAFTA) deal in the days ahead if Congress is to vote on it this year. The prospects for meeting that timeframe is unclear.

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Getting a NAFTA  deal now would boost North America’s economies, but trade ministers and negotiators from Canada, Mexico and the U.S. remain divided on difficult issues. Ministers have left negotiating teams to work in Washington and remain on call. They focused on rules for automanufacturing last week.

The so-called “rules of origin” (ROO) determine which autos can gain duty-free entry under a new agreement. The U.S. has proposed a complex system for which autos will be acceptable, and controversially seeks a minimum wage requirement for portions of the production process. Canada and Mexico pushed back.
President Trump
 made a direct pitch for increasing vehicle production in the U.S. to auto executives Friday. He sharply criticized the current NAFTA agreement and threatened new tariffs on imported cars. Automakers are feeling squeezed.

Potential U.S. tariffs on steel and aluminum would raise production costs. Trade clashes with China could limit access to a growing market. The U.S. attempts to shift production from Mexico and Canada to the U.S. could make them less competitive.

The U.S. administration is in essence trying to forge an “industrial policy” to reshape America’s auto sector via the NAFTA negotiations. The U.S. has reportedly proposed raising the regional content requirement for vehicles to 75 percent from the current 62.5 percent of a vehicle’s content.

It suggested different weights for high-value auto parts and for steel and aluminum, for example. It has also proposed that 40 percent of light passenger vehicles and 45 percent of pickups must be built where wages are $16 an hour or higher. The U.S. suggested relatively short transition periods to implement changes.

Mexico offered a counter proposal last week with lower percentages for regional content, longer transitions and apparently only a soft reference to wages, reflecting how the U.S. proposal would severely damage Mexican auto production.

The U.S. effort to include wage rates aims at Mexico’s lower hourly wages and is particularly controversial. It touches on sensitive questions: What are fair wages in a country whose living costs are much lower than America’s?

Should the U.S. impose wage requirements, not just fair-market rules or practices, on a poorer country?   Previously, the United States has focused on improving the rights of workers through trade agreements.

If the new U.S. proposals were to become part of the agreement, they would add tremendous complexity to measuring if a car meets NAFTA standards for duty-free entry. It could also be a precedent for similar requests to cover other industries or from other countries to challenge U.S. wages.

It is very important to assess whether proposals that emerge will hurt or harm the U.S. auto industry.

An analysis by Scotia Bank argues that the U.S. effort to tighten rules of origin is “an ill-conceived solution in search of a problem,” which could well make North America’s auto sector less competitive against global peers.

The study argues that U.S. content in auto exports from Mexico and Canada has already generally increased since 2011 and that the U.S. auto industry is doing well: U.S. exports to its NAFTA partners rose by 5 percent a year over the past decade, which is twice that rate of other manufacturing goods.

U.S. employment in the auto industry increased by an average of nearly 6 percent, year on year, since the 2008 crisis, which is more than five-times the growth in overall manufacturing employment, Scotia argues.

The auto industry group, Driving American Jobs, adds that in 2016, automakers manufactured over 1 million vehicles more than the year before NAFTA went into effect and that the sector exported $137 billion in products to Mexico, Canada and the world.

A study of the U.S. ROO proposals by the Center for Automotive Research(CAR) argues that high content requirements and onerous reporting rules will make U.S.-made and brand vehicles less competitive. It finds that 25-87 percent of the vehicles currently sold in the U.S. might not be able to claim a NAFTA tariff preference.

This could raise costs from $470 to $2,200 per vehicle and result in 60-150,000 fewer vehicle sales annually and fewer U.S. exports. CAR warns this would create incentives for producers to move manufacturing further offshore.

A proposed system for NAFTA’s auto rules of origin needs careful scrutiny:

  • Will the complexity drive manufacturers to forgo the NAFTA benefit and pay a 2.5-percent tariff? Will it be workable to measure wage rates and content for all the companies in the supply chain?
  • What gives us reason to believe that government officials know better than auto companies how to make cars more efficiently?
  • Is the U.S. ready to accept others proposing a wage test for America? What if the European Union argues that wages are unfairly low in some U.S. states, for example?
  • How much would the new rules raise the prices of vehicles? Would U.S. sales, production and employment decrease or increase? Would manufactures move production out of North America?
  • What would the effect be on U.S. consumers?
  • Is employment in the auto industry going to shrink because of new technology? How do the proposals help develop America’s workforceand industry for the future?

It is important to recall that NAFTA supports 14 million U.S. jobs. Modernizing the agreement to include best practices and areas like the digital economy is widely supported. But the cry from U.S. businesses and farmers has been to do no harm.

Ending NAFTA would be a serious economic blowStudies forecast losses of millions of jobs and well over $100 billion in GDP decline. A new study by AT Kearney found NAFTA withdrawal would cost U.S. consumers $5.3 billion a year.

Businesses, workers and farmers linked by NAFTA with America’s two largest clients, Canada and Mexico, will suffer from continued uncertainty if negotiators miss this opportunity to agree.

Agreement may be delayed until 2019, after Mexico’s new president takes office. It is not clear what positions that Mexican president may take, given the growing frustration with the U.S.

The best option is a good NAFTA agreement now. This moment requires careful scrutiny of the measures being debated and clear messages about the heavy costs if America misses this opportunity.

From the Hill
Earl Anthony Wayne is a public policy fellow at the Wilson Center, a former assistant secretary of state for economic and business affairs and the former U.S. ambassador to Mexico.

DEAL OR NO DEAL, NAFTA EDITION

House Ways and Means Chairman Kevin Brady (R-Texas) put the pressure on NAFTA negotiators to wrap up a deal this week if they want Congress to vote on it this year.

DON-LOGO-STILL-REVERSE-700x325Brady echoed House Speaker Paul Ryan, his predecessor as chairman, when he told reporters Tuesday that “we believe for the 115th Congress to vote this year on a new, modern NAFTA, that this week is important for the negotiators to complete their work.”

“So we’re hopeful they’ll continue to make progress on this agreement,” he added.

But with just a few days left — and the Canadian and Mexican ministers still at home in their respective countries — Brady and other lawmakers remain in the dark about whether there is any possibility that negotiators can meet that deadline. Little has changed so far this week, and U.S. negotiators have yet to back down on any of a series of controversial proposals Canada and Mexico have repeatedly said are unworkable.

“Negotiations should, by definition, include some give and take, but the USTR has not shown such behavior in the past few days,” a source close to the talks said, adding that the window is closing if USTR plans to offer revisions to its positions this week.

The skinny

One emerging viewpoint is that officials will aim to wrap up a so-called skinny NAFTA agreement, packaging changes to automotive rules with some modernization aspects, while dropping what have been deemed poison pill proposals and leaving other aspects largely unchanged.

Two sources briefed on the talks said there is no work being done at the political level to seek compromises on some of the more controversial U.S. proposals to include a five-year sunset provision, alter the pact’s dispute settlement provisions and dramatically limit Canadian and Mexican access to U.S. government procurement contracts — underscoring the belief that if there is any deal to be done, it will be centered on changes to automotive rules.

But critics of that view argue President Donald Trump would be loath to accept any deal that does not go far enough to address his key issues like reducing the trade deficit and preventing job outsourcing.

“Skinny NAFTA may sound good to members that want to avoid NAFTA in 2018 and trade associations arguing for ‘do no harm,’ but it’s political gold for Democrats in 2018” elections, said Dan Ujczo, an international trade lawyer who specializes in Canada-United States matters. “Democrats will point to a skinny NAFTA and say [Trump] did not fulfill his campaign promises to dairy farmers, tomatoes growers, and labor — all in key battleground states of Wisconsin, Michigan, Ohio and Florida.”

GUAJARDO DOESN’T FORESEE NAFTA 2.0 DEAL THIS WEEK

 The NAFTA nations’ top trade officials are unlikely to strike a revamped deal this week because many major issues remain, Mexican Economy Minister Ildefonso Guajardo said Tuesday. Negotiators from the U.S., Mexico and Canada are still meeting in an effort to reach a preliminary deal, but Guajardo specified that “the truth is that our teams are in Washington seeing the definition of some decisions that have already been made – not the most complicated [issues].”

“The possibility that from here to Thursday we have all the negotiations [complete] is not easy. We don’t believe that will happen,” Guajardo said in comments to Noticieros Televisa, a Mexican news outlet.

More on that Trump-Trudeau call: Guajardo also revealed that Canadian Prime Minister Justin Trudeau told Trump in a Monday phone call that the pieces are there for negotiators to arrive at a deal. However, “the problem is that there has to be flexibility from the parts,” Guajardo said.

Mexican media blitz: Guajardo, Trade Undersecretary Juan Carlos Baker and Mexico’s top negotiator Kenneth Smith Ramos each took to the airwaves in Mexico on Tuesday to talk about the status of the negotiations, all emphasizing that the talks continue to move along and are not stamped with a deadline. The media blitz could be a last-minute public push for the U.S. to move on some of the thorny issues that remain on the table — while also helping to assuage concerns in Mexico that May 17 is a hard deadline, one source close to the talks told Morning Trade.

Mexico will remain at the negotiating table, “but there can’t be a result in the negotiation where Mexico gives in on everything,” Baker told El Financiero, a Mexican business newspaper.

From Politico newsletter

Outlook dims for new NAFTA as talks face a final deadline

Efforts to renegotiate NAFTA and fulfill one of President Donald Trump’s signature campaign promises are nearing a breaking point, with trade negotiators struggling to finalize even a preliminary deal in the next few days.

negotiationOfficials are now looking at Thursday as the final deadline by which the Trump administration must notify Capitol Hill of an agreement if there is going to be a vote on the deal this year.

But five full days of ministerial-level talks ended on Friday with top officials having made little obvious forward progress. Canadian Foreign Minister Chrystia Freeland and Mexican Economy Secretary Ildefonso Guajardo headed home to their respective countries and do not currently have any plans in place to travel back to Washington, D.C.

“They would be staying here. They wouldn’t be going home if the U.S. was ready to do a deal,” said Maryscott Greenwood, CEO of the Canadian-American Business Council. “We are at the point where it’s a political decision: Do you want a deal or not, Trump administration?”

Both the Mexican and Canadian ministers emphasized they will remain “on call” and will be ready to return to Washington for another in-person meeting as soon as negotiators have reached “some elements of solutions,” as Guajardo said Friday. U.S. Trade Representative Robert Lighthizer added in a statement that negotiators would be pushing for “needed breakthroughs” and that teams will remain engaged.

But it remains unclear whether they will be able to work through a number of complex and controversial issues that have divided negotiatiors since the talks began nine months ago. On policy areas ranging from automotive rules of origin to dispute settlement mechanisms and government procurement practices, the U.S. has so far shown little flexibility on ideas that Canada and Mexico have repeatedly derided as unworkable.

Even Larry Kudlow, a free-trade supporter who runs Trump’s National Economic Council, is sounding pessimistic. “I don’t know if we are going to get a deal,” he told POLITICO last week. “You are talking to the guy who is the optimist and the happy warrior, and as we meet now, I don’t know.”

Some hope still remains, however, that negotiators can give in and make the necessary compromises and adjustments needed to reach at least a preliminary deal in the coming days. Most trade negotiators and experts subscribe to the maxim that “nothing is final until everything is final” — meaning that things will fall into place only at the very end of talks as negotiators make concessions in exchange for wins somewhere else.

“Once you really arrange the tough issues, you can place the rest rather quickly,” Guajardo said Friday. “Technically, you can do it.”

But even if negotiators reach an agreement, they still need the backing of their respective legislatures and domestic agricultural and industry groups.

“The major inflection point at this stage is not between the U.S. and its negotiating partners. It’s between the administration and Congress,” said Laura Dawson, director of the Canada Institute at the Wilson Center.

House Speaker Paul Ryan for one, last week heightened the stakes for negotiators when he plainly stated that Congress needs to receive formal notice of an agreement from the Office of the U.S. Trade Representative by May 17 if there’s any chance the current Congress will vote on the deal.

And in what could be seen as another warning shot to the administration, pro-trade Sen. Pat Toomey (R-Pa.) said last week that he would vote “no” on any agreement “that diminishes free trade” — even if that means the U.S. might pull out of NAFTA entirely. Toomey said he would encourage his colleagues to do the same.

NAFTA negotiators also need to work with domestic industry groups to ensure that any renegotiated deal would also satisfy their concerns. Guajardo and Freeland said they were returning home in part for consultations with those groups. And in the U.S., some industries have begun to speak out against the push to wrap up a deal in the next few days.

“NAFTA negotiators should take the time to hammer out a good deal rather than causing further damage through the additional outsourcing of jobs and production,” United Steelworkers President Leo Gerard said in a statement Friday, after ministers announced that they would be continuing negotiations. “Rushing to conclude an agreement and lowering the standards will only make things worse.”

Each country still has to take the time to consult with its domestic constituents before negotiators can get truly serious about wrapping up the talks, Dawson said.

“Even pulling all-nighters, each country still has domestic consultations that it has to make, and there just hasn’t been enough time to go back to stakeholders and say, ‘Hey, we’ve moved from A to B or B to C,’” she said.

“If we were ready to finish a deal, we would see a lot of those.”

By MEGAN CASSELLA https://subscriber.politicopro.com/trade/article/2018/05/outlook-dims-for-new-nafta-as-talks-face-a-final-deadline-536930

 

New Fact Sheet on NAFTA 2.0, Junk Food Labeling and Public Health

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With 30 chapters of secret text and closed-door negotiations—and more than 500 corporate advisers with preferential access to negotiators—the final agreement could be as objectionable as the roundly criticized Trans-Pacific Partnership (TPP). According to public reports, the text of the TPP was the starting point for many of the “modernized” NAFTA chapters – with industry advisers calling for even more extreme corporate protections.

While the texts remain secret, we know that the junk food industry has pushed hard for, and the U.S. government is receptive to, new provisions in NAFTA that could derail stepped-up efforts in all three NAFTA countries to tackle the obesity crisis and improve nutrition. We explore these issues in a new fact sheet: Junk Food, Junk Provisions: NAFTA 2.0, Junk Food Labeling and Public Health.

Public statements by negotiators, industry submissions outlining their priorities and preferred outcomes, and U.S. Trade Representative actions and reports all point to the conclusion that NAFTA 2.0 could include several provisions aimed at preventing Canada, Mexico and the U.S. from adopting rules on conveying nutrition and product information about junk food to consumers:

  • First, a U.S. proposal is known to be under consideration that would restrict or prohibit mandatory warning symbols on foods and beverages high in fat, salt, calories or sugar.
  • Second, negotiators from the three countries reportedly have agreed to a provision similar to one in the TPP that aims to keep secret details about food additives used in prepackaged foods.
  • Third, the junk food industry is pushing for new provisions to prevent governments from limiting advertising aimed at children, such as bans on cartoon characters on boxes of sugary cereals.

The junk food industry is invoking a tried and true strategy, following in the footsteps of the tobacco industry which for years effectively used trade agreements to block labeling and advertising rules. Even though Canada’s top NAFTA negotiator has said he won’t agree to the U.S. anti-labeling text, his informal comments were made only after the U.S. demands were widely publicized and attacked by consumer groups. Despite strong opposition to the proposed anti-labeling text, including letters from leading consumer, food and public health organizations requesting that the U.S. back away from the labeling policy, the USTR has not publicly stated that it will do so. In response to a letter signed by IATP, USTR unsatisfactorily stated “we will review your concerns in detail.”

What else is buried in this agreement? Congress and the public need to demand transparency and accountability from the USTR and President Trump, and make sure that the renegotiated NAFTA isn’t even worse than what came before.