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Trump to prioritise cutting US’s Nafta trade deficits

The Trump administration declared reducing US trade deficits with Canada and Mexico as the top priority for its renegotiation of the North American Free Trade Agreement as Donald Trump renewed his promise to bring back manufacturing jobs by embracing a new era of American protectionism. 

The focus on the deficits came in a rundown of Nafta negotiating priorities sent to Congress on Monday and sets the stage for tough negotiations expected to begin as soon as next month. It sat alongside a reminder that Mr Trump — who is now considering new tariffs on steel imports in a move many fear could trigger a trade war — remains convinced of the value of protectionism. 

“For most of our nation’s history . . . American presidents have understood that in order to protect our economy and our security, we must protect our industry. And much of that comes at the border,” Mr Trump told a White House event to celebrate “Made in America Week” featuring cowboy hats, baseball bats, and fire trucks among other nostalgic American products. 

“We have to look at our nation first for a change. We’ve been looking the other way for a long, long time. And if you look at what’s going on or the success of other nations — even in Europe — you look at some of those countries, one in particular, it’s not fair to the United States,” he added, in an apparent swipe at Germany, a regular target of the Trump administration’s trade ire.

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But even as Mr Trump talked tough on trade the 18-page list of bullet-pointed priorities for Nafta sent to Congress on Monday also pointed to an administration still engaged in a vigorous internal debate on the issue just weeks out from negotiations starting. 

Mr Trump in April backed away at the last-minute from a decision to pull the US out of Nafta advocated by economic nationalists in the White House including senior adviser Steve Bannon.

But fierce discussions continue over what to tackle and how in a Nafta renegotiation with many in the business community relying on the influence of Gary Cohn, National Economic Council head, to kill any radical changes.

“There is a lot of stuff that this administration still needs to work out before they begin negotiations,” said one close observer. 

Besides promising to reduce the US trade deficit in goods with both Canada ($11bn in 2016) and Mexico ($64.3bn in 2016) the administration also pledged to ban countries from manipulating their currencies to gain competitive advantage, both important issues for economic nationalists in the administration.

Many of the other priorities listed in areas such as intellectual property seemed in line with those advocated by more mainstream pro-business Republicans, however. Even in the case of currency manipulation the administration said it would seek to tackle the problem “through an appropriate mechanism” in language that appeared to point to a continuing internal debate. 

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In many cases, analysts and lobbyists said, the language used by the administration seemed to be copy and pasted out of some of the very trade agreements that Mr Trump has railed against. Democrats also quickly seized on the lack of detail to question whether the administration was actually ready to begin negotiations that all sides want to wrap up quickly and before Mexican elections next summer. 

Ron Wyden, the top Democrat on the Senate Finance Committee, called the administration’s objectives “hopelessly vague” on issues such as intellectual property, investment, currency manipulation and government procurement. 

On areas such as the environment and digital trade, Mr Wyden said the Trump proposals looked like “watered down versions” of what President Barack Obama secured in the Trans-Pacific Partnership, which included Canada and Mexico as well as Japan and seven other Pacific Rim economies. Mr Trump pulled the US out of the TPP in January in one of his first acts in office. Mr Obama had called the TPP his effort at renegotiating Nafta. 

Besides the focus on bilateral trade deficits, which most economists see as misplaced, the Trump administration’s objectives pointed to other potential clashes with Canada and Mexico. 

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A pledge to eliminate what is known as the “Chapter 19” dispute settlement system that allows Nafta countries to challenge anti-dumping rulings by other members is seen as a red line for Canada. 

The US objectives also called for a new Nafta to allow US companies to do more business with national, state and local governments in Canada and Mexico. But they concurrently pledged to defend state “Buy America” provisions requiring US regional governments to buy domestically-produced steel and other products for their own projects.