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After Calling Nafta ‘Worst Trade Deal,’ Trump Appears to Soften Stance

March 31, 2017 12:48 AM
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After Calling Nafta ‘Worst Trade Deal,’ Trump Appears to Soften Stance

Mr. Trump has often said that the United States could abandon Nafta altogether if renegotiating it is not possible. He has signaled that he wants to move swiftly to reorder the nation’s trade policies, and Wilbur L. Ross, the commerce secretary, said during his Senate confirmation hearing that addressing Nafta would be among his first priorities.

But the hawkish rhetoric of the campaign has given way to more measured statements on trade from the administration that track more closely with the stance of many congressional Republicans, who are avid promoters of free trade and deeply skeptical of policies they view as restrictive or protectionist.

Peter Navarro, head of the White House National Trade Council, said this month that Mexico, Canada and the United States should unite to become a regional manufacturing “powerhouse,” where workers in all three countries benefit.

The tone of the eight-page draft letter, which was reported by The Wall Street Journal, did not echo Mr. Trump’s campaign speeches. Nowhere was there a mention of Mr. Trump’s threats to pull out of the agreement. But the letter, signed by Stephen Vaughn, the acting United States trade representative, did say, “The persistent U.S. deficit in goods trade with Canada and Mexico demands that this administration take swift action to revise the relationship to reflect and respond to 21st century challenges.”

Antonio Ortiz-Mena, a former Mexican trade official, said the letter suggested a softening in tone but also contained several proposals that were likely to prompt a strong response from the Mexican government.

“There are some specific problems,” said Mr. Ortiz-Mena, now a senior adviser at Albright Stonebridge Group in Washington. “But in terms of the language used during the campaign and at the beginning of the administration, it’s not as far-reaching as some people could have expected.”

The assessment that the actual policies of the United States might not end up being as harsh as those espoused by Mr. Trump during the campaign is reflected in the confidence in the Mexican peso. Since the inauguration, measured against a basket of currencies, it has gained about 17.5 percent in value, more than any other major currency in the world. On Thursday, it traded at 18.72 pesos to the dollar, approaching the levels it held before Mr. Trump’s victory.

The Canadian government declined on Thursday to comment directly on the draft proposals, since Nafta negotiations have not begun. “Should notice of intent to renegotiate be given, Canada is prepared to discuss improvements at the appropriate time,” said Global Affairs Canada, the country’s foreign ministry.

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Among Canadian trade experts, the proposals were met with relief, but the suspense has not ended. While the draft does not amount to a total dismissal of Nafta, it outlines American priorities that could threaten Canadian industries. “It’s not ripping Nafta, but there are a bunch of sticks of dynamite contained in those pages,” said Mark Warner, a Canadian-American trade lawyer based in Toronto. “It’s going to be a messy, hard-slogging negotiation.”

The letter calls for expanding market access among the three countries and eliminating licensing and permit barriers that tend to stall commerce. It also calls for maintaining “reciprocal access” for textile and apparel products.

Rather than scrap Nafta’s arbitration tribunals, regarded by some free-trade critics as secretive bodies that give private corporations unbridled power to challenge foreign governments outside the court system, the letter proposes to “maintain and seek to improve procedures” for settling disputes.

The draft also makes no mention of currency policy, an issue that many trade experts thought might be on the table.

The administration does give itself room to get tougher. The proposal for reinstating tariffs, often referred to as a snapback, is billed as a “safeguard mechanism” to protect domestic industries. The draft also suggests seeking to “level the playing field” on tax treatment. Such measures could bring objections from Canada and Mexico.

Mr. Trump’s economic advisers have argued that Mexico uses its value-added tax as a tariff that puts the United States at a disadvantage. The president has called for a tax on companies that move their operations to Mexico and try to sell products in the United States. Republicans in Congress are considering a “border adjustment tax” that would make imports more expensive.

American business welcomed the additional specifics on trade policy in the letter. “The details in the letter have whet our appetite for more,” said John Murphy, senior vice president for international policy at the U.S. Chamber of Commerce.

Automakers and car dealers have expressed concerns that any changes to Nafta could disrupt the strong vehicle market in the United States. General Motors, Ford and Fiat Chrysler operate plants in Mexico that supply models popular with American consumers, such as pickup trucks. Their assembly plants in the United States also rely on a steady flow of parts made by Mexican suppliers.

The industry, including dealers, is particularly worried that Mr. Trump might follow through on the border tax on vehicles imported from Mexico.

Mr. Ross, the commerce secretary, said in an interview on CNBC on Thursday that changing the rules of origin would actually benefit car companies. “The many problems with the rules of origins in Nafta as presently drafted is that in the case of, say, autos, it went specifically part by part,” he said. “Nafta’s an old agreement, and many of those parts are no longer even used in cars because automotive technology has moved on.”

Mr. Trump has been adamantly opposed to multilateral trade deals, arguing that he can negotiate better agreements bilaterally. It remains unclear from the draft proposal, however, whether the administration’s ideas for rewriting Nafta would have an impact on trade deficits. It does not put forth any sort of target or range for the size of the trade deficit the United States would be willing to tolerate. And nowhere is there a mention of Mr. Trump’s threats to pull out of the agreement.

Withdrawing from Nafta unilaterally could be more complicated that Mr. Trump realized as a candidate. The draft proposal seems to recognize that opening negotiations among the three countries will be a delicate challenge.

Mr. Trump would need to give Congress 90 days’ notice before he could begin negotiations, meaning they could not start until midsummer at the earliest.

“There is much to like about it. There are areas where we are going to make suggestions,” said Representative Kevin Brady, Republican of Texas and chairman of the House Ways and Means Committee.

Also read: Trump says Canada is ‘very spoiled’ and ‘very difficult’ on trade


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March 31, 2017 12:51 AM

“These actions are designed to let the world know that this is another step in the president fulfilling his campaign promise,” said Wilbur L. Ross, the secretary of commerce. He said the findings would “form the basis for decision-making by the administration” on how to approach trade deficits in the future, including in a renegotiation of Nafta.


March 31, 2017 12:50 AM

The president is poised to give Congress the legally required 90 days’ notice of his intention to renegotiate Nafta, the 1994 pact with Canada and Mexico. In a draft letter circulated among members of Congress this week, the administration proposed adding a provision to allow tariffs to be reinstated if a flood of imports threatens to harm a domestic industry.

New York edition

March 31, 2017 12:50 AM

“For the first time, we’re looking comprehensively at the source of what has been a large and persistent trade deficit that has contributed to job losses, the loss of our manufacturing base and other things,” said Peter Navarro, the director of Mr. Trump’s National Trade Council.


March 31, 2017 12:49 AM

WASHINGTON — President Trump, who has called the North American Free Trade Agreement “the worst trade deal” ever signed by the United States, appears to have backed off his threat to abandon the deal and is instead proposing keeping major planks in place when he begins renegotiating it later this year.


March 31, 2017 12:49 AM

But Mr. Trump, eager to showcase his tough stance against unfair trade practices, plans to sign two executive orders on Friday that will lay the groundwork for new policies and stricter enforcement of trade laws.