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The Winder Building in Washington, DC where the the Office of the U.S. Trade Representative is based. (Photo: US Government)
Wednesday, July 26, 2017
Perspectives

NAFTA Renegotiation An Opportunity


The renegotiation of NAFTA can be an opportunity, not a death knell.

BY WILLIAM NAYLOR

Last week, the Office of the U.S. Trade Representative released its objectives for the reform of the North American Free Trade Agreement (NAFTA). Though the Office clearly drafted the recommendations with the current occupant of the White House in mind, the document is nevertheless strikingly bipartisan, reasonable and, most important, seemingly workable. Instead of using the negotiations as a tool to further withdraw the U.S. from its role as a leader in regional affairs if it follows its own objectives, the Trump administration can capitalize on the renegotiation of NAFTA as an opportunity to reaffirm the U.S.’s commitment to leadership in the hemisphere.

Some of the objectives outlined in the agreement overlap with Canadian and Mexican objectives for renegotiation.  Though there are points of potential disagreement in the document, all three parties support the idea that the agreement needs refreshing as it enters its third decade. On issues such as updating rules of origin, harmonizing regulations and reducing barriers for the technology and services (telecommunications, banking, etc.) industries especially, there will be little disagreement.

Nevertheless, objectives such as the implementation of stricter environmental and labor provisions and the scaling back of barriers for U.S. agricultural products and Canadian and Mexican exemption from regulations in the U.S. are likely to meet some resistance from U.S. neighbors to the north and south.

And then there’s the language of addressing the imbalance of countries like Mexico with which the U.S. has a trade deficit.  Sure, it flies in the face of basic understanding of international trade economies, but other language in the document that reinforces U.S. support for the free flow of goods and services indicates that the answer will not be protectionism but finding ways to increase U.S. exports to those countries to correct the imbalance.  And who can be against that?   (And who can measure the impact of measures intended to do that in two or three years?  Declare victory, move on.)

The fact that a renegotiated NAFTA won’t exactly mirror American objectives shouldn’t mean that the Trump administration should balk at the opportunity to tally its first major trade achievement. Quite the opposite. This is the chance the administration has been waiting for. The objectives reflect a bi-partisan approach, and the three countries generally agree on the principal aims of renegotiation.

The chances for success increase dramatically if President Trump can focus on substantive areas for improvement, such as holding the Mexican government accountable to creating a more flexible labor market that allows wages to respond to rise with productivity and thus reduce the pressure on the U.S. workforce.  In this, the Trump administration has a golden opportunity: in one fell swoop, its renegotiation can both help the American worker by leveling the playing field with Mexico in terms of wages, improve the living standards and wages of Mexican laborers in the formal sector, and reassert United States leadership in the region.

There are obstacles to achieving what would be perhaps the first tangible and positive policy achievement of the Trump presidency. First and foremost is the president’s tendency for self-destruction. If Trump can’t look past his fixation with the U.S. trade deficit with Mexico (reflected in the document’s mention of surplus and deficit trade partners) the renegotiation efforts may never get off the ground. Next, the president could very well wake up early one morning and blow up the entire effort with an ill-advised Tweet. Finally, sensitive diplomatic issues, such as Mexico’s understandable aversion to the proposed border wall, may also interfere with the negotiations.

When the renegotiation of NAFTA starts on August 16 , keep an eye on how President Trump’s statements (and Tweets) reflect the ongoing process. If he stays on message and focuses on areas with potential for meaningful change for the average American, a renegotiated NAFTA could stand as proof of Trump’s commitment to helping his core demographic—the disillusioned American worker—and also (surprise!) build U.S. leadership in the region.  Who would have thought that a free trade agreement would present President Trump with an opportunity to score a major policy victory?  Fingers crossed.

Originally published in Latin America Goes Global. Republished with permission. 

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