That didn’t take long. The United dropped the gloves as soon as negotiations for NAFTA kicked off on Wednesday. United States Trade Representative Robert Lighthizer is not interested in minor tweaks to the agreement and wants a major overhaul in the trilateral trade deal with Canada and Mexico. One of the biggest issues? Tighter rules of origin to support domestic manufacturing. Other priorities for the United States include safeguards against currency manipulation, tougher labor provisions, stronger anti-dumping rules, and a dispute settlement that focuses on US interests.
The United States opened up the negotiations by stating that President Trump believes that NAFTA has fundamentally failed many Americans. This is in sharp contrast to both the Canadian and Mexican representatives, who were less aggressive in their opening salvos and stated that they were looking to update and upgrade the deal versus scrapping the deal. Both countries want to modernize the agreement to reflect globalized economic conditions.
US negotiators claim that NAFTA is directly responsible for the loss of over 700,000 American jobs over the past 23 years due to outsourcing, primarily to Mexico. But Lighthizer’s tough words dont’t match the nuanced appeal of the trade deal. For example, states on the northern border have trade surplus with Canada. Canada is also interested in tougher labor provisions to decrease the incentive to move jobs to Mexico but adamantly opposed to a dispute mechanism that overtly favors the United States courts.
Negotiations are going to be tough. The auto industry is carefully holding its breath on this as changes to the rules of origin could have a tremendous impact on a very carefully balanced global supply chain. American automakers might be in the strange position of hoping that the Canadian and Mexican negotiators protect their interests.