Monthly Archives: October 2017

Trump’s Trade Endgame Could Be the Undoing of Global Rules

What if President Trump’s ultimate goal is to kill the World Trade Organization?

31PORTER2-master675When Robert Lighthizer, Mr. Trump’s top trade negotiator, cut his teeth on trade diplomacy, back during the presidency of Ronald Reagan, the United States had an idiosyncratic way of solving its grievances over trade: asking its trading partners to curb their exports, or else.

In the early 1980s, Japan signed on to “voluntary export restraints” to curb the exports of Toyotas, Hondas and Nissans that were causing so much heartburn in Detroit. “Voluntary restraint agreements” were negotiated with 15 countries that accounted for 80 percent of American steel imports. They were voluntary in the sense that foreign exporters preferred these agreements over the threat of punitive duties. In Washington, they were popular. As the Dartmouth College economist Douglas Irwin notes in his timely new book, “Clashing Over Commerce: A History of U.S. Trade Policy,” the share of American imports covered by some form of trade restriction rose to 21 percent in 1984, from only 8 percent in 1975.

Today, trade grievances are adjudicated differently: Since 1995, the United States has been required, like any other country, to take its complaints to the World Trade Organization’s dispute settlement system. It has lost some cases, especially those against Washington’s unique way of measuring dumping. But it tends to win when it brings a charge against some unfair practice abroad. Taking account as Mr. Trump’s trade negotiators talk tough to their Mexican and Canadian counterparts as they try to renegotiate the North American Free Trade Agreement, some diplomats and trade experts are beginning to wonder whether the administration’s ultimate goal is to blow up the entire legal framework governing world trade. What Washington truly seems to want is the kind of free hand it had in the 1980s to coerce one country after another into bringing its surplus with the United States down to zero.

While emasculating the trade organization may seem foolhardy, trade experts warn that blowing up international trade law may be the only way the Trump administration could pursue its quixotic goal of eliminating the bilateral trade deficits that it has with most countries. And that presents the world with a sort of Catch-22. The American current account deficit — a broad measure of its trade — is the mirror image of the gap between the United States’ national savings and its national investment. Because it invests more than it saves, it draws money from abroad and spends it on foreign goods and services. Until it closes the savings gap, no amount of diplomacy, bullying or cajoling will close the gap in trade.

If the United States leaves Nafta, it’s possible that its deficit with Mexico will balloon rather than shrink, as uncertainty sends the peso into a tailspin and makes Mexican exports cheaper. But even if Mr. Trump’s Nafta gambit worked and bilateral trade came into balance, it wouldn’t necessarily change the balance of American trade over all. Mr. Lighthizer might remember that after Canada, Japan and the European Community agreed in the early 1980s to voluntary restraint agreements limiting exports of steel to the United States, producers in countries like South Korea and South Africa simply picked up the slack.

As another Dartmouth economist, Robert Staiger, told me, unless the American savings-investment imbalance corrected itself, too, the former deficit with Mexico would simply pop up somewhere else. “Bilateral deficits are going to keep popping up everywhere,” he said. “Trump is going to be playing Whac-a-Mole.”

And if Republicans pass their smorgasbord of tax cuts, the mushrooming budget deficit will push the savings-investment imbalance in exactly the wrong direction. The problem for the rest of the world is that any of these situations is likely to produce great frustration in an administration that appears to believe trade balances are negotiated like real estate deals. They all put the United States on a collision course with the legal regime administered by the W.T.O.

It is unclear whether Mr. Trump has the legal authority to pull the United States out of the trade regime governed by W.T.O., or even out of Nafta. Rufus Yerxa, a former top American trade diplomat on the team that negotiated both Nafta and the Uruguay Round of multilateral talks that led to the creation of the W.T.O. in 1995, argues that whatever the legalities, the thought that Mr. Trump may pull the United States out of the trade organization is not credible. The losses, he said, would be far too steep. Countries would discriminate at will against American products and services. “Everybody in the world could do anything they wanted to do to us,” Mr. Yerxa said. The sprawling supply chains that American companies have laid out across the world since the trade organization came into being would be under threat.

Chad P. Bown, an economist at the Peterson Institute for International Economics, agreed. “It would hurt economic activity much more than in the 1980s,” he said. “So much trade back then was in final goods. Now a lot is in intermediate parts.”

Read the full article by Eduardo Porter on the New York Times website.

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Canadians researched how Trump could have achieved quick NAFTA win

The Canadian government produced a paper shortly after Donald Trump’s election outlining in broad strokes how the incoming U.S. president could have pursued a quick, substantive, and successful renegotiation of NAFTA.

nafta-mainThe paper was produced late last year and provides a glimpse at a now-hypothetical alternate reality where the new administration might have opted for a renegotiation by executive order, rather than the current legislative process.

It lists different areas where changes might have been achieved by executive actions: auto parts rules of origin, professional work visas, intellectual property protections, digital commerce, procurement, state-owned enterprises, and interpretations of dispute-settlement cases.

It was produced at the request of senior political officials, who in initial conversations with top-ranking members of the incoming Trump administration heard some suggest a preference for quick action that bypassed the complex legislative process.

“It never got very far,” one Canadian official said.

But the resulting research, obtained by The Canadian Press through the Access to Information Act, offers a peek down a road not travelled. Gathered by departmental bureaucrats, it was signed by deputy trade minister Tim Sargent and date-stamped Dec. 30, 2016.

 Sargent’s 13-page response examines the procedural differences between legislated and non-legislated changes to NAFTA in all three countries, with half of the document specifically looking at non-legislated changes in the U.S.

It begins: “The explanation below provides a preliminary assessment of actions that could possibly be taken to supplement or amend the NAFTA in a reasonably quick manner that also would not require Congress to act.”

It cites three ways to change a trade deal without congressional votes:

–Amendments to annexes and tariff schedules

–Country-to-country agreements that require no legislation

–Clarifying statements

It offers examples of how these three measures could achieve changes in some key areas now central to the negotiations.

But even those supposedly simpler fixes carried potential trouble.

There are still competing visions months later on how to handle auto rules, procurement, dispute-resolution, and professional visas, with no resolution yet in sight, and warnings that the talks could fall apart.

A spokesman for Foreign Affairs Minister Chrystia Freeland says a quick fix was never within reach.

“In trade negotiations there is no such thing as a quick win,” Alex Lawrence says.

“Modern negotiations are complex, and require time and hard work.”

He says this document was simply research that flowed from the work done since the summer of 2016, when, in the midst of the U.S. election, his minister asked for a wide-ranging review of possible procedural outcomes for NAFTA.

The Canadian official agreed that an insta-negotiation was always a longshot. For example, even one of the people in Trumpworld who supported the idea of a speedy process, Peter Navarro, is a well-known trade hawk who also favours an aggressive U.S. posture.

It’s all history now, anyway.

One source said the idea of a quick executive-to-executive agreement virtually vanished from the conversation, and never came up seriously in subsequent weeks while the countries planned Prime Minister Justin Trudeau’s first visit to the Trump White House.

One of Washington’s foremost trade experts, at the time, publicly predicted that a quickie deal was impossible. Gary Hufbauer of the Peterson Institute said American lawmakers would insist on playing a role, given that international trade belongs to Congress under the U.S. Constitution.

“I can’t anticipate what the problems are going to be, but there’s going to be problems,” he said in an interview, speaking right after Trump attempted to reassure his northern neighbour that he just wanted a few tweaks to trade with Canada.

“That’s a Pandora’s box — once you open it, everything’s open. How can you say, ‘We want to reopen NAFTA for you, you and you — and all you other guys, go play in traffic?’ You can’t.”

Now some lawmakers are urging the president not to act on his oft-repeated threat — to cancel NAFTA as a negotiating ploy.

NAFTA RENEGOTIATION MONITOR

A STATUS REPORT ON THE NORTH AMERICAN FREE TRADE AGREEMENT RENEGOTIATION

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For more than two decades, the United States, Mexico and Canada have adhered to the North American Free Trade Agreement (NAFTA). As these countries’ governments engage in a contentious renegotiation, it is imperative for businesses in all three countries to stay abreast of the process and of the impact of any changes to NAFTA. As of mid-October 2017, four rounds of negotiations have taken place and more than 30 issues are on the table for discussion. Busy companies have limited resources to track and monitor the NAFTA renegotiations, and it is difficult for companies involved in international trade to follow specific issues of interest.

As a service to stakeholders across all of the key industries impacted by NAFTA, Haynes and Boone, LLP, with offices in Mexico City and throughout the United States, as well as in Shanghai and London, and McCarthy Tétrault, LLP, with offices across Canada, as well as in New York and London, have teamed up to create the NAFTA Renegotiation Monitor.

This new report provides an up-to-date overview of the disposition of the most important NAFTA issues, as well as a comprehensive and straightforward reference to the topics in the current NAFTA renegotiation process. This reference comprises a table comparing the positions of the three countries on each of the topics, as well as a comment on the current status of the negotiations and prospects for resolution of each issue. We will update our NAFTA Renegotiation Monitor report periodically to reflect the latest developments and topics of interest such as:

  • Trade Deficit
  • Rules of Origin and Mandatory U.S. Content
  • Mandatory Five-year Sunset
  • Labor Issues
  • Agricultural Goods
  • Trade Remedies
  • NAFTA PROVISIONS
  • Agricultural Goods
  • Anti-Corruption .
  • Competition Policy
  • Cross-Border Data Flows
  • Currency Manipulation.
  • Customs and Trade Facilitation.
  • Digital Trade.
  • Dispute Settlement
  • Dollar Value Below Which No Customs Duty Required
  • Energy ..
  • Environment.
  • Financial Services
  • Five-Year Sunset.
  • General Exclusion.
  • Government Procurement.
  • Harmonization and Transparency of Regulations
  • Industrial Goods .
  • Intellectual Property
  • Investment .
  • Labor .
  • Mobility .
  • Reduce Bilateral Merchandise Trade Deficit 
  • Revised Rules of Origin 
  • Sanitary and Phytosanitary Measures (SPS)
  • Services
  • Small-and Medium-sized Enterprises (SMEs)
  • Technical Barriers to Trade (TBT)
  • Telecommunications
  • 15 Textiles.
  • Trade Remedies 

 

You can read the regularly updated report hereScreen Shot 2017-10-24 at 9.05.30 AM

REPUBLICAN CONGRESS REPS PUSH TO DROP ISDS

 Three House Republicans wrote a letter last week to urge Lighthizer to eliminate the investor-state dispute settlement process from any new NAFTA deal or future trade agreements.

1060x600-e96f55bd7df3bd1fde8d282f767fb696Three moderate Republican lawmakers urged U.S. Trade Representative Robert Lighthizer to use the talks on the North American Free Trade Agreement to scrap its investor-state dispute settlement provision, saying that it undermines the U.S. legal system.

The Trump administration has reportedly pushed to make participation in the system voluntary but is facing opposition from NAFTA partners Canada and Mexico.

The system allows a business that thinks it has been harmed by a country’s action to protest before an international tribunal. The business picks one arbiter, the country picks a second, and they jointly agree on a third. The tribunal then presides over the case and issues a binding ruling much like a regular court. The system has been highly controversial because it effectively puts all trade disputes outside the respective countries’ domestic courts.

“We support expanding trade and elimination of unfair and discriminatory barriers to foreign products and investment. However, ISDS extends beyond disciplining such barriers. Rather, it deeply implicates the fundamental principles of our domestic legal system, undermining our sovereignty and threatening our system of federalism with a form of international preemption. And the very structure of ISDS provides foreign investors and corporations operating here greater rights to pursue claims against the U.S. government than are provided to U.S. citizens and firms under our domestic legal system,” said Reps. Daniel Donovan of New York, David Joyce of Ohio, and Brian Fitzpatrick of Pennsylvania.

They argued that the system encourages offshoring of jobs by making it less risky and cheaper for U.S. companies to move jobs outside the U.S. Instead of companies having to factor in the cost of risk insurance when making offshoring decisions, they rely on ISDS to require governments in low-wage nations either to provide them with their special offshored investor protections or compensate them.”

Business groups are lobbying hard to retain the current language, arguing it is crucial to international trade and attracting investment.

Comments by the three top negotiators at the conclusion of the third round of talks indicate the three countries are deeply divided over key provisions of the deal. The NAFTA renegotiations will resume in Mexico City on Nov. 17.

NAFTA talks at a standstill

WASHINGTON, D.C., U.S. — The fourth round of negotiations aimed at revitalizing the North American Free Trade Agreement ended without fanfare and with only limited results on Oct. 17.

NAFTA_Embedded

If anything, the future of the agreement was in greater doubt as the Trump administration tabled proposals sharply opposed by the governments of Mexico and Canada, and with the president repeatedly affirming his willingness to end U.S. participation in NAFTA if U.S. demands weren’t met.

A joint statement from representatives of the three nations noted a “significant conceptual gap” over revision to the 23-year-old agreement, but said some common ground had been reached in the less controversial parts of the negotiation.

U.S. Trade Representative Robert Lighthizer noted the talks had “substantively completed discussions on the competition chapter” as well as agreement in principle on customs, trade facilitation, digital trade, regulatory practices, and NAFTA annexes related to specific sectors.

But Lighthizer noted that, in the United States’ view, “the agreement has become very lopsided and needs to be rebalanced.”

“We have a $500 billion trade deficit,” he said. “For us, deficits do matter.”

Canadian Foreign Minister Chrystia Freeland said some of the “America first” language proposals from the United States would disrupt supply chains and violate commitments made previously by trading nations through the World Trade Organization. Freeland said she hopes for “fresh creative perspective” when talks resume.

“We knew this process would be difficult,” said Ildefonso Guajardo, Mexico’s economic minister. “We must realize we have limits. None of us wants to leave this process empty-handed.”

The next round of negotiations will begin Nov. 17 in Mexico City. Altogether, there were to be seven rounds aimed at completing the NAFTA revisions for approval by the governments by the end of the year. But given there has been so little progress to date, at least on the most controversial issues, it was expected talks may extend into 2018, if they are not ended altogether.

U.S. negotiators tabled most of their new proposals just ahead of the fourth round of negotiations. One U.S. proposal would require that 50% of the value of all cars, trucks and large engines produced in the NAFTA countries and benefiting from the pact’s provisions be derived from components manufactured in the United States. Additionally, the Trump administration would raise NAFTA’s regional automotive content requirements to 85% from the current 65%.

Another U.S. proposal sought to limit or even eliminate independent panels that resolve disputes on trade and investments under NAFTA.

Also, the United States proposed a sunset clause that would see NAFTA expire after five years unless the three governments agree to extend it on a regular basis.

The proposals were opposed not only by Mexico and Canada but by the U.S. Chamber of Commerce and other U.S. business and agricultural organizations.

On Oct. 13, John Murphy, senior vice-president of international policy at the U.S. Chamber of Commerce, said the administration’s proposals had “no identifiable constituency backing them” and had sparked “a remarkable degree of unity in their rejection.”

In response to the Chamber’s sharp criticisms, Emily Davis, spokeswoman for the U.S. Trade Representative, said, “The president has been clear that NAFTA has been a disaster for many Americans, and achieving his objectives requires substantial change. These changes of course will be opposed by entrenched Washington lobbyists and trade associations. We have always understood that draining the swamp would be controversial in Washington.”

Apparently at the 11th hour of the fourth round of negotiations, the United States put forward yet another problematic proposal that aimed to end Canada’s internal dairy supply management system by eliminating tariffs on supply-managed dairy products over 10 years.

The International Dairy Foods Association earlier indicated its No. 1 priority was maintaining the U.S. dairy industry’s export market in Mexico. At the same time, the IDFA has pushed for negotiators to address problems with Canada’s use of new milk pricing policies it said undercut skim milk powder prices on the world market.

“Securing NAFTA provisions that curb these actions is the most important way we can ensure that new Canadian market access is meaningful for U.S. dairy companies and that U.S. dairy products can compete fairly in third-country markets,” said Michael Dykes, president and chief executive officer of the IDFA.

Leaders of the U.S. Grains Council, U.S. Soybean Export Council, National Sorghum Producers, National Renderers Association and the National Corn Growers Association met with  representatives of the Mexican livestock industry that are part of the Consejo Nacional Agropecuario (National Agricultural Council in Mexico) last week in Washington. They issued a joint statement at the close of the fourth round of negotiations affirming their commitment to a strong trading relationship under NAFTA.

“NAFTA has provided the trade policy basis for the most efficient and effective interregional grain and livestock value chain in the world,” the groups said. “Our organizations are committed to work together — as we have for more than 30 years — to ensure the success of the industries on both sides of the border.”

Grains and soy trade between Mexico and the United States in 2016 was valued at more than $6.6 billion dollars with more than 90% of these ingredients consumed by the Mexican livestock industry.

The groups said Mexico and the United States should be seen as an integrated supply chain for livestock production.

“In order to continue building on the successful relationships fostered by NAFTA, we jointly support efforts to achieve further regional economic integration and preserve and expand upon the existing benefits of our mutual cooperation,” the groups asserted. “We encourage our negotiators to continue their participation in good faith and produce an agreement that builds upon our ongoing success. We stand ready to give them any help in this endeavor in every way possible.”

 

From World Grain News

NAFTA Renegotiation: What’s at stake for food, farmers and the land?

The re-negotiation of the North American Free Trade Agreement (NAFTA) between the U.S., Mexico and Canada began on August 16, and there is much at stake for farmers and rural communities in all three countries.

cornPile_j_regan_webDespite promised gains for farmers, NAFTA’s benefits over the last 23 years have gone primarily to multinational agribusiness firms. NAFTA is about much more than trade. It set rules on investment, farm exports, food safety, access to seeds, and markets. NAFTA, combined with the formation of the World Trade Organization (WTO) and the 1996 Farm Bill, led the charge to greater consolidation among agribusiness firms, the loss of many small and mid-sized farms and independent ranchers, the rapid growth of confined animal feeding operations (CAFOs) and further corporate control of animal production through often unfair, restrictive contracts with producers. The Trump administration’s negotiating objectives reflect relatively small tweaks to NAFTA, while adopting deregulatory elements of the defeated Trans-Pacific Partnership (TPP).

Family farm groups have called for the existing NAFTA to be scrapped and propose a fundamentally new agreement with a goal of improving the lives of family farmers and rural communities in all three countries.

What is NAFTA?

The North American Free Trade Agreement (NAFTA) was agreed to by the U.S., Mexico and Canada in 1992, ratified by the U.S. Congress in 1993, and became enforceable in 1994. The Agreement has 22 chapters, grouped into eight sections.1 Those sections cover trade rules on a variety of goods, including textiles, agriculture and food safety, and energy; technical standards for traded goods; government procurement; protection for investors and trade in services; intellectual property; notification of new laws and how to handle trade disputes.

NAFTA was the first of its kind in several ways: the first trade agreement among countries at very different levels of economic development; the first to include controversial private arbitration panels that allow foreign corporations to sue governments to challenge actions that impede their potential future profits; and the first trade agreement to include side agreements on labor and environment. It was the template for the U.S.-Central America Free Trade Agreement (CAFTA), the U.S.-Korea Free Trade Agreement, and the defeated Trans-Pacific Partnership (TPP), among others, as well as dozens of other agreements negotiated by Canada and Mexico. Each of the trade deals that followed included additional elements that strengthened corporations’ ability to move production and investments in all participating countries.

What promises were made to farmers?

During the NAFTA debate in the early 1990s, U.S. farmers and ranchers were promised that they would export their way to prosperity but that didn’t happen. A U.S. Department of Agriculture fact sheet at the time pledged that NAFTA would “boost incomes in Mexico and increase demand for a greater volume and variety of food and feed products” from U.S. farmers.2 The USDA fact sheet vowed that U.S. farmers would gain from “higher agricultural export prices” among other benefits. An International Trade Commission analysis advising Congress in 1993 downplayed the impact NAFTA would have on agriculture, predicting only “a minimal effect on overall U.S. agricultural production and employment,” aside from some increases in grain and meat exports, and a slight increase in fruit and vegetable imports.3 The same ITC report predicted that U.S. Midwest soy and corn farmers would benefit from increased exports to Mexico.

The General Accounting Office (now Government Accountability Office) concluded that NAFTA would “reduce unauthorized Mexican migration to the United States in the long run…”4 President Bill Clinton made a similar argument at the time stating: “By raising the incomes of Mexicans, which this (NAFTA) will do, they’ll be able to buy more of our products and there will be much less pressure on them to come to this country in the form of illegal immigration.”5 Conservative think tanks like the Peterson Institute for International Economics joined in the NAFTA cheerleading through opinion pieces in the media that exclaimed “Everybody Wins,” and predicted strong long-term growth in Mexico’s per capita income with associated declines in immigration to the U.S.6

These false promises, supported by a compliant media, gave Congressional backers the fuel they needed to narrowly pass NAFTA in 1993. Whether economic gains for farmers or reduced migration from Mexico, NAFTA’s promises of prosperity have proven to be empty ones.

What parts of NAFTA relate to food and agriculture?

Phasing out of tariffs

NAFTA’s Chapter 3 on National Treatment and Market Access set a schedule to phase out tariffs on most agricultural goods traded among the three countries, finally coming into full force in 2008. Tariffs on some goods, such as imports of corn and soybeans to Mexico, were phased out over 15 years—although Mexico accelerated that timetable under pressure from the U.S.7 (Previously, Mexico had charged an average tariff of 11 percent on imports of agricultural goods.) U.S. agricultural tariffs were for the most part already low. Many Mexican farm goods entered the U.S. duty-free prior to NAFTA under the Generalized System of Preferences, which gives tariff preferences to developing countries. Tariffs on U.S.-Canada trade for most agricultural goods had already been eliminated under the U.S.-Canada Free Trade Agreement, which formally came into force in 1989.8

Some exceptions to the free flow of agricultural goods were established under NAFTA. Canada retained the right to maintain its dairy, poultry and egg supply management programs, which support fair prices for Canadian producers and consumers. These programs include some limits on imports and high tariffs for those products. NAFTA also includes a side agreement that expands the volume of Mexican sugar imports into the U.S., while still protecting the U.S. sugar program, which also functions essentially as a supply management program.

Food safety

The Agriculture and Sanitary and Phytosanitary (SPS) Chapter of NAFTA (Chapter 7) sets broad rules for domestic support, eliminates export subsidies, and establishes a mechanism to handle trade disputes. The second part of the chapter focuses on food safety rules, and ensuring that those rules will not act as a barrier to trade. Equivalency agreements between the three countries streamlined inspections of foods crossing borders, and put pressure on inspectors and food safety agencies to facilitate trade. NAFTA also established an ongoing food safety standards committee to settle disputes between the three countries.

Special rights for foreign corporations

NAFTA was the first free trade agreement to establish special legal rights for foreign corporations. NAFTA’s Chapter 11 established the Investor State Dispute Settlement (ISDS), which grants foreign investors the right to sue local or national governments over measures that affect their real or potential profits on existing or planned investments.9 This ground-breaking corporate privilege provision has been replicated in nearly every ensuing U.S. trade deal. There have been only a few agricultural ISDS disputes under NAFTA. Cargill, Archer Daniels Midland and Corn Products International have all successfully sued Mexico and won multimillion dollar settlements, for the country’s tariffs on high fructose corn syrup.

Intellectual property

NAFTA’s Chapter 17 was the first free trade chapter to include meaningful rules on intellectual property rights (IPR) for seeds and other biological resources. NAFTA built upon on-going international negotiations that ultimately created the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement in the WTO. The NAFTA IPR chapter references the International Convention for the Protection of New Varieties of Plants 1978 (UPOV Convention 1978), and the International Convention for the Protection of New Varieties of Plants 1991 (UPOV Convention 1991)—which place restrictions on farmers’ and researchers’ rights to save and share seeds.10 While all NAFTA parties were expected to either be part of these Conventions, or join the Conventions soon after, Mexico never did join UPOV 1991—an issue that re-surfaced during the TPP negotiations, and will likely be raised again during NAFTA renegotiations. During the negotiation of Chapter 17, IATP was part of a coalition that criticized the legal and economic disruption by patent holders of traditional agricultural practices, such as the planting of saved seeds and cross-breeding of shared seeds.11

What is the relationship between NAFTA, the World Trade Organization and the Farm Bill?

The rules set in NAFTA (1994), the WTO (1995) and the 1996 Farm Bill are mutually reinforcing. The WTO set a foundation of international trade rules for more than 160 countries. The WTO’s Agreement on Agriculture set international trade rules on agriculture policy, including the types of farm programs that are allowed (non-trade distorting), tariff levels on agricultural goods and how those tariffs may be applied. If NAFTA were eliminated, the trade rules set at the WTO would be the fallback.

The 1996 Farm Bill passed by Congress was designed to comply with trade rules agreed to in NAFTA and the WTO. It stripped away the final remnants of U.S. supply management programs (with sugar the exception), which had intentionally limited production for the purpose of ensuring fair prices to farmers. The 1996 bill was given a slick market-friendly name, “Freedom to Farm” and its elimination of supply management was sold to farmers as necessary for expanding U.S. export markets. That expanded access, the bill’s supporters claimed, would itself ensure fair prices to farmers. This did not turn out to be the case. “Freedom to Farm has really positioned the U.S. very well to take advantage of the opportunities in the world market,” said a Cargill executive shortly after the bill was passed.12

Shortly following the passage of the 1996 Farm Bill, U.S. farm prices predictably plunged following the expanded production—and tens of millions of dollars of emergency payments were needed to prevent many farmers from losing their farms.13 Those low prices, coupled with NAFTA’s and the WTO’s requirements to lower tariffs, facilitated the rapid growth of agricultural export dumping (exporting below the cost of production) by U.S. agribusiness over the next decade.14 Many Mexican farmers who were particularly hard hit by a flood of U.S. corn exports eventually emigrated to the U.S. to work on farms and in meat packing plants. In 2002, the Farm Bill took steps to convert the emergency payments for farmers into commodity program farm subsidies. These programs, further adapted in ensuing Farm Bills, support farmers when prices drop due to over-production, and continue today in the form of revenue-insurance programs.

What are the outcomes of NAFTA?

Because NAFTA entered into force around the same time as the formation of the WTO and the 1996 Farm Bill—not to mention the series of free trade agreements that followed—it is difficult to tie precise outcomes in the agriculture sector to NAFTA. But the trends in agriculture post-NAFTA very clearly show the loss of small and medium sized farms, the rapid expansion of CAFOs and contract production in the meat and poultry sector, and the growing power of multinational agribusiness firms across the North American market. Below we explore outcomes and trends in agriculture and food following the passage of NAFTA.

Agricultural trade

NAFTA has dramatically contributed to the integration of North American agricultural markets, according to the USDA.15 Integration is when formerly separate markets have combined to form a single market. Final food products, like beef, experience integrated markets as well as raw materials like animal feed.

Agriculture trade among the three countries has expanded considerably, though the U.S. agricultural trade balance with NAFTA partners has fallen with both partners, according to an analysis of government data by the University of Tennessee’s Agricultural Policy Analysis Center (APAC). APAC found that from 1997 through 2014, U.S. overall agricultural trade balance with Canada was a negative $30.4 billion and with Mexico a negative $9.6 billion.16

The top U.S. agricultural exports to Mexico are animal products, grains, oilseeds and sugar, which together made up 79 percent of exports in 2015. Mexico is the top market for U.S. pork, chicken and corn. U.S. corn exports to Mexico more than quadrupled in volume compared to the decade prior to NAFTA.17 Mexico bought about 28 percent of all corn exported from the U.S., $2.5 billion worth, in 2015-16.18

Mexican exports of fruits and vegetables and some animal products to the U.S. also expanded under NAFTA. In the year before NAFTA, the U.S. was largely a net fruit and vegetable exporter, and now is a net importer by a wide margin. Mexico’s annual exports of fruit and vegetables to the U.S. more than tripled by 2013. Mexico and Canada are the largest foreign suppliers of U.S. fruits and vegetables.19

Read the full article on the Institute for Agriculture and Trade policy website here

Labour rights need to be at the core of any amended NAFTA deal

Labour and environment were part of side deals in the original NAFTA, with language that watered down their impact.

Anti-NAFTA1-660x400Memories being what they are — fragile — one has to reach into the newspaper archive to reclaim the tempest mood, some 24 years ago, when the not-yet-ratified North American Free Trade Agreement had American voters storm tossed.

Would presidential hopeful Bill Clinton endorse the agreement, negotiated by President George Bush, despite the glaring absences in the Mexico-Canada-U.S. marriage?

Clinton was a rising-tide-lifts-all-boats globalist Kool-Aid drinker — skol! — but he was a pragmatist too and so, in October 1992, he came out in support of the deal, with a qualifier: negotiators would have to cut side agreements on labour and the environment. I see this as killing two birds with one stone, winning the support of Congress (Clinton became president in January 1993), while not messing with the core agreement.

Students of the free trade pact may recall that one of the loudest anti-NAFTA voices was Democratic House majority leader Dick Gephardt, who repeatedly and so eloquently argued that environmental controls, protection for workers and an international dispute resolution covering the right to strike and collective bargaining were essential.

Gephardt made a couple of trips to Tijuana to assess matters for himself. He returned with a first-hand understanding of buck-an-hour jobs and industrial waste flowing freely through the places where children play and cattle graze.

It took a year to work up the so-called environmental and labour protection provisions of NAFTA. Who among us can recall the council of Canadians — Doris Anderson, Farley Mowat, Pierre Berton and many more — who protested these “side-bar deals,” rightly pointing out that the labour provisions failed to even cover basic union rights? See: collective bargaining.

The final language of the labour provision had more weasely words than those mission statements so beloved by transnational corporations who very much like what they term “nimble cost structures.” The parties were “committed to promote” a few “guiding principles” governing “broad areas of concern.” Dialogue was “encouraged.”

Dick Gephardt voted against NAFTA, and that was a blow. So did House Majority Whip David E. Bonior of Michigan. “It will cost jobs,” Bonior said. “It will drive down our standard of living. It will lock in place a Mexican system that exploits its own people and denies them the most basic political and economic rights.”

Still, the deal passed quite breezily.

And then a flood of manufacturing jobs rushed to low wage sites in Mexico. The workers there had rare hope of forming true, as opposed to sham or “phantom,” unions.

No wonder Foreign Affairs Minister Chrystia Freeland felt compelled to acknowledge this week that, as she put it, “There are reasons why Canadian workers might have some skepticism about trade agreements.” She continued: “Canadian workers have legitimate anxieties about the ways in which international trade can lead to a race to the bottom in labour standards.”

She noted that she was “quite optimistic” about the chances of improving the labour chapter in the current NAFTA talks, which resume in Washington on Oct. 11.

If I’ve got my timing right, Freeland’s comments arrived just about the time workers at Rexnord Corp.’s bearings plant in Indianapolis exited their place of work for the last time. The company had announced months before that it would be transferring operations, and more than 300 jobs, to Monterrey. Local reports pegged the average wage at the Indianapolis plant at $25 (U.S.) an hour, adding that by moving south of the border the company aimed to realize $15.5 million in savings — or a wage reduction to $8 an hour.

Indianapolis, we remember, is home to the Carrier air conditioning/furnace company which announced the outsourcing of jobs to Mexico, which drew the ire of Donald Trump, which resulted in tax breaks and incentives being doled out to the company. In July, more than 300 workers were nevertheless let go, with another 300 due to exit before Christmas. The president appears to be vexed by this turn of events, no doubt wondering if he got his money’s worth.

How will Mexico engage on this in the next round?

Mexico’s negotiators have some cover with the country’s newly enacted constitutional reform amending its labour justice system. That won’t work for long. There can’t be any patience any longer for denying core principles in the core agreement enshrining fundamental labour rights, rights that should have been enshrined a quarter century ago.

 

Mexico warns that abandoning NAFTA could end broader cooperation with US

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The threat from the foreign minister, Luis Videgaray, came as Donald Trump once again threatened to tear up the three-country trade treaty between the US, Canada and Mexico ahead of a fourth round of Nafta negotiations.

Mexico and the US work closely on issues such as border security, combatting drug cartels and efforts to stop migrants reaching the US border, but relations between the two neighbors have grown increasingly tense since Trump launched his election campaign on a wave of anti-Mexican sentiment.

Speaking in a senate hearing on Tuesday, Videgaray stressed that Mexico “wants an agreement” on Nafta – but also warned that Mexican officials were ready to walk away from negotiations or even withdraw entirely from the deal.

“We always have to be ready to get up from the table. This is a logical posture in any negotiation. It’s also a principle of dignity and sovereignty,” Videgaray said. “Mexico is much bigger than Nafta and we have to be ready for any scenario in the negotiations.”

He added that the end of Nafta “won’t be the end of the world”.

Videgaray’s comments departed sharply from Mexico’s previous strategy of trying to avoid antagonizing Trump. Officials have gone out of their way to ignore the US president’s repeated insults and his promise that Mexico will pay for the construction of a border wall.

Analysts said that Mexico’s apparent patience with Trump’s rhetoric suggested it was trying to keep the treaty at any cost – and for understandable reasons: more than $1m a minute in merchandise crosses the US-Mexico border.

Mexican business also bet big on Nafta, which was enacted in 1994 and turned Mexico into an outward-looking and manufacturing-oriented economy, with 80% of its exports heading to the US market.

Closer economic ties have been mirrored by closer cooperation on law enforcement and migration: traditionally wary of its northern neighbor, Mexico has over the past 15 years allowed much closer US involvement in its efforts to fight criminal groups.

Under pressure from Washington, Mexico launched an aggressive campaign against illegal migrants in 2014, and has detained and deported thousands of people fleeing violence and corruption in Central America.

But Videgaray’s statements in the senate suggested sentiments in Mexico were turning tougher and patience running out with Trump, whose Twitter attacks and Nafta threats have tormented the Mexican economy and sent the peso plunging.

Mexican officials have traditionally kept trade negotiations separate from talks on security issues, but Videgaray appeared to be playing hardball, said Brenda Estefan, former security attaché at the Mexican embassy in Washington.

“Videgaray is stressing now that the entire bilateral relationship is on the table,” she said. “With the whole bilateral relationship on the table, Mexico has more leverage – it makes it more costly for the US to walk away.”

The escalation in rhetoric followed the publication of an interview with Trump in Forbes magazine, in which the US president mused openly of ending Nafta.

“I happen to think Nafta will have to be terminated if we’re going make it good. Otherwise, I believe you can’t negotiate a good deal,” Trump said.

“[The Trans-Pacific Partnership] would have been a large-scale version of Nafta. It would have been a disaster,” he added. “I like bilateral deals.”

Business leaders meeting in Mexico City on Monday at a US Chamber of Commerce gathering warned that US negotiators had introduced several “poison pills” to sabotage the Nafta negotiations, including a sunset clause and the elimination of dispute resolution mechanisms.

Speaking in Mexico City, Thomas Donohue, the president of the US Chamber of Commerce in Mexico, warned that the “existential threat” to Nafta endangered regional security, Reuters reported.

Videgaray also described several deal breakers being brought to the negotiating table, such as “administered trade, restrictions, tariffs, barriers, which perverts the kind of agreement that it is, and this doesn’t suit Mexico”.

“What we cannot lose is that a free trade agreement stops being a free trade agreement,” he said.

Read the article on The Guardian here.

Trudeau fights to save NAFTA deal, but Trump offers little hope

Canadian Prime Minister Justin Trudeau visited the White House on Wednesday seeking a new “fairer trade” deal among the United States, Canada and Mexico amid growing alarm from business leaders that President Trump is leaning toward jettisoning the North American Free Trade Agreement in favor of bilateral accords.

Botsford171011Trump20725In a news briefing at the Canadian Embassy, Trudeau insisted that maintaining the trade deal between the United States, Canada and Mexico would “produce better outcomes for the citizens of all three countries,” enabling North American businesses to compete more effectively in the global market.

Coming up with ways to achieve “fairer trade” was “the president’s focus, and it’s certainly my focus,” Trudeau said.

However, Trump continued to disparage the 23-year-old accord and promote the idea of bilateral trade deals. “We’ll see what happens,” Trump told reporters in the Oval Office after being asked whether NAFTA was dead. “We have a tough negotiation, and it’s something you will know in the not too distant future.”

The two leaders met as the fourth round of NAFTA negotiations began just outside Washington, with trade experts, businesses, labor and lawmakers from all three countries warning of a possible breakdown in the talks.

While Trudeau reaffirmed that he continued to believe in ­NAFTA, Trump said that he was willing to strike bilateral trade deals with Canada or Mexico if the negotiations failed.

“Absolutely it’s possible we won’t be able to reach a deal with one or the other, but in the meantime we’ll make a deal with one,” Trump said in the Oval Office, seated next to Trudeau. “I think it’s going to work out well for both countries and Mexico.”

The sense of urgency about the talks has been building after earlier rounds in Mexico City and Ottawa. On Monday, U.S. Chamber of Commerce President Tom Donohue, speaking in Mexico City, said it was time to “ring the alarm bells” on NAFTA. He said that abandoning the agreement would pose an “existential threat” to the continent’s national and economic security.

Labor and environmental groups were taking aim at the talks, which have remained closed to the public. Ben Beachy, trade expert at the Sierra Club, said that “it is completely unacceptable that two months into NAFTA’s renegotiation” the sessions remained closed.

In his Oval Office comments, Trump added that “we have to protect our workers, and in all fairness, the prime minister wants to protect Canada and his people also. So we’ll see what happens with NAFTA.”

The president reiterated that “I’ve been opposed to NAFTA for a long time in terms of the fairness of NAFTA. I said we’ll renegotiate.” He said, “I think Justin understands that if we can’t make a deal, it will be terminated and that will be fine. They’re going to do well. We’re going to do well. But maybe that won’t be necessary. But it has to be fair to both countries.”

Earlier Wednesday, during meetings with members of the House Ways and Means Committee, the Canadian prime minister stressed that he did not want negotiations to collapse.

“He made it clear they don’t want to pull out. They want a successful renegotiation,” said Rep. Sander M. Levin (D-Mich.), a member of the committee. Levin said Trudeau shared his concern about labor conditions and wages, saying he did not want the treaty to speed “a race to the bottom.”

But Trudeau also told committee members that he was worried about “poison pills,” proposals the United States might make that were designed to kill, not repair, the NAFTA agreement.

The Trump administration’s decision to impose 219 percent tariffs on Canadian aircraft — designed to block a Bombardier sale to Delta Air Lines that might otherwise go to Boeing — also inflamed tensions with Canada. Delta chief executive Ed Bastian said on an earnings call that Boeing’s case was weak and that he did not expect to pay the tariff, though he added that Delta’s 75-plane order could be delayed.

Trudeau said he “highlighted” the dispute in his talks Wednesday. Switching to French, he added that “this was not an easy conversation but an important conversation.” He said Canada’s military might seek alternatives to Boeing for future fighter-jet purchases.

Read the whole article on the Washington Post: here

 

CHALLENGING CORPORATE POWER IN TRADE DEALS

Does Your Member of Congress Reject the Expansion of Corporate Power in Our Trade Deals?

congress_wide-9ab36a85f99af5c6ba124eed26b3951b79076c41-s1000-c85The North American Free Trade Agreement (NAFTA) gave vast new powers for corporations that make it easier to offshore jobs and attack the environmental and heath laws on which we all rely. Deals like NAFTA give multinational corporations the power to sue the U.S. government in front of a tribunal of three corporate lawyers.

These lawyers can order U.S. taxpayers to pay the corporations unlimited sums of money, including for the loss of expected future profits. The multinational corporations only need to convince the lawyers that a law protecting public health or the environment violates their special NAFTA rights. The corporate lawyers’ decisions are not subject to appeal. This corporate power grab is formally called Investor-State Dispute Settlement (ISDS). ISDS is also rife with conflicts of interest. One day a corporate lawyer can sit on a tribunal deciding cases, and the next day they can attack our laws on behalf of a corporation. Not only do corporations get a special system of “justice” outside our courts, but it’s totally rigged in their favor.

There is one clear way to judge whether a trade agreement is designed to benefit people or if it has been hijacked by special interests to expand corporate power: Does the deal include ISDS? If ISDS is included, no matter what else is in the deal, the trade agreement obviously puts corporations before people and the planet. GET YOUR MEMBER OF CONGRESS ON THE RECORD These corporate powers are at the heart of NAFTA and were the foundation of the TransPacific Partnership (TPP).

Yet many members of Congress still haven’t taken a position on ISDS. This toolkit will help you educate your members of Congress about the expansion of corporate power through the ISDS system and find out where they stand. We recommend that you focus your energy on advocacy with your Representative, though in some cases it may make sense to focus on your Senators. Contact@ISDScorporateattacks.org for guidance.

Why this matters

Any trade policy that puts working people and the planet first must not empower corporations to attack our laws in shady tribunals and make off with unlimited amounts of taxpayer money. The ISDS system is a power grab that puts corporations before people.

What’s in this toolkit

  • How to Plan a Visit to Your Representative’s Office
  • How to Hold Your Member of Congress Accountable in Public
  • Sample Letter for Your Member of Congress
  • Petition to Your Member of Congress
  • How to Write a Letter-to-the-Editor

Download the toolkit here