Trump's NAFTA Changes Aren't Much Different from Obama's
President Donald Trump’s campaign promise to bring sweeping changes to the “terrible” North American Free Trade Agreement just got a dose of reality.
An eight-page draft letter to Congress outlining the administration’s negotiating objectives shows how daunting it will be to translate campaign rhetoric to real policy changes that will achieve Trump's goals of bringing jobs back to the U.S.and cutting the trade deficit.
Critics are pointing out that the White House blueprint for changing NAFTA sounds a lot like the defunct Trans-Pacific Partnership deal negotiated by the Obama administration because it includes calls for U.S. trading partners to adhere to strict labor and environmental standards. At the same time, it doesn't address issues that Trump touted on the campaign trail, such as currency manipulation.
“For those who trusted Trump’s pledge to make NAFTA ‘much better’ for working people, it’s a punch in the face because the proposal describes TPP or any other same-old, same-old trade deal,” said Lori Wallach, director of Public Citizen’s Global Trade Watch and a leading critic of current trade policy.
The U.S. Trade Representative sent the draft to lawmakers this week. But White House press secretary Sean Spicer said Thursday that the document is "not a statement of administration policy."
"That is not an accurate assessment of where we are at this time," Spicer said at the daily White House press briefing. Spicer said the administration's policy toward NAFTA wouldn't fully materialize until Trump's pick for U.S. Trade Representative, Robert Lighthizer, is confirmed.
The draft, obtained by POLITICO on Wednesday, implicitly recognizes that Trump's hands are tied by laws requiring trade agreements to meet certain requirements to get speedy approval from Congress.
The Obama administration included those provisions in the TPP agreement that Trump abandoned right after he took office. They include enforceable labor and environment standards aimed at leveling competition in poorer countries, rules requiring that state-owned enterprises operate on commercial terms and data free flow requirements, among other things.
"It is ironic that they want to fix a ‘terrible’ agreement by including provisions from the TPP, one deal that the administration claims is even worse,” said Bill Reinsch, a distinguished fellow at the Stimson Center.
The letter also lays out a proposed NAFTA deal that retains concepts maligned by critics as counter to Trump’s populist message.
One example is a process allowing companies to seek damages from governments for policy decisions damaging to their bottom lines. The document suggests that it would be improved to minimize abuse, but labor groups have advocated that it be taken out of a revamped NAFTA.
The document also fails to address rules that would punish countries for devaluing their currencies to gain an export advantage, which is something Trump himself has raised. U.S. businesses have resisted any push to address that issue for fear it might spark trade wars.
“Mostly what I see here is the same corporate wish list and a set of international rules that work quite well for global corporations,” said Celeste Drake, the AFL-CIO’s trade policy specialist.
However, the administration does include some new concepts in line with its economic nationalist views on trade, but it remains to be seen how those would be executed to the benefit of workers.
One big example is the administration’s promise to ensure that U.S. jobs are bolstered by the agreement’s rules of origin, which set how much of a final product must originate in the U.S., Canada or Mexico to qualify for tariff cuts. The issue is of particular importance to auto workers whose jobs rely on complex, cross-border supply chains.
“I don’t think there’s many ways that the rules of origin can be changed to expand U.S. production and jobs because tighter rules would lead to higher production costs and have adverse effects on U.S. competitiveness,” said Jeffrey Schott, a senior fellow at the free-trade oriented Peterson Institute.
In the letter, the administration also seems to want to safeguard the U.S. government’s ability to deny foreign companies from bidding on government projects and requirements that American-made steel and other products are used.
At the same time, the administration says it wants to push Canada and Mexico to open their government procurement to more U.S. goods and services, something those countries will likely fight unless the U.S. agrees to do the same thing.
The administration also promises a new “safeguard” provision that would allow the U.S. to ratchet up tariffs to defend against import surges. Another promise would “seek to level the playing field on tax treatment,” which could be a reference to addressing Mexico’s value-added tax system for imports.
“There are a lot of questions for how this document gets translated out for the very workers that voted for him in Ohio and Michigan and Pennsylvania,” Drake said. "Of all the things people were voting for in November, it's clear they were not voting for more of the same."
Doug Palmer contributed to this report.