NAFTA Negotiations Make Real Headway

The sixth round of negotiations on the North American Free Trade Agreement (NAFTA) made real headway, according to U.S. Trade Representative Robert Lighthizer. The latest round of discussions between the United States, Canada and Mexico concluded yesterday in Montreal, Canada.

In his closing statement, Lighthizer discussed the bilateral relationship between the United States and Canada, saying he believes there is some misunderstanding that the U.S. is somehow being unfair in these negotiations. “This is not the case,” Lighthizer said.

Agreements are essentially grants of preferential treatment to other countries in exchange for an approximately equal grant of preferential treatment in their economy, Lighthizer explained, adding, “Thus, it is reasonable from time to time to assess whether the bargain has turned out to be equitable.”

Lighthizer offered the following example to illustrate his point:

Using Canadian statistics, Canada sold the United States $298 billion U.S. dollars in goods in 2016, the last numbers that we have. We sold Canada $210 billion dollars in goods. Now that’s a lot of two-way trade, but it also means that Canada has an over $87 billion U.S. dollar surplus with the United States. To put this in perspective, that figure is equal to approximately 5.7 percent of Canada’s GDP. When energy is removed, and in some people’s opinion that’s a fair thing to do, the number is still $46 billion dollars. The projected figures for 2017 show that the surplus will be even larger when those numbers are in.

Now I ask Canadians because we’re in Canada, is it not fair for us to wonder whether this imbalance could in part be caused by the rules of NAFTA? Would Canada not ask this same question if the situation were reversed? So we need to modernize and we need to rebalance.

Some progress was made during this latest round of negotiations, specifically on corruption, closing one of the nearly 30 chapters of discussion.

Lighthizer went on to reject the notion that there is a presumed compromise on the rules of origin. “We find that the automobile rules of origin idea that was presented, when analyzed, may actually lead to less regional content than we have now and fewer jobs in the United States, Canada, and likely Mexico. So this is the opposite of what we are trying to do,” Lighthizer said.

He concluded that the United States views NAFTA as a very important agreement and is hopeful for a “major breakthrough” during the next round of negotiations.

There will be another round of negotiations in Mexico in late February. According to The Associated Press, negotiators had originally hoped to reach an agreement before Mexico’s July presidential election and U.S. midterms turn up the political pressure.

CalChamber Position

The California Chamber of Commerce understands that the NAFTA was negotiated more than 25 years ago, and, while our economy and businesses have changed considerably over that period, NAFTA has not. We agree with the premise that the United States should seek to support higher-paying jobs in the United States and to grow the U.S. economy by improving U.S. opportunities under NAFTA.

The provisions of the NAFTA with Canada and Mexico have been beneficial for U.S. industries, agricultural enterprises, farmers, ranchers, energy companies and automakers. Any renegotiation of NAFTA must recognize the gains achieved and ensure that U.S. trade with Canada and Mexico remains strong and without interruption.

The CalChamber actively supported the creation of the NAFTA among the United States, Canada and Mexico, comprising 484.3 million people with combined annual trade with the United States being around $1.069 trillion in 2016. In 2016, goods exports exceeded $496.919 billion while goods imports totaled nearly $572.217 billion.

The CalChamber’s longstanding support for NAFTA is based upon an assessment that it serves the employment, trading and environmental interests of California and the United States, as well as Canada and Mexico, and is beneficial to the business community and society as a whole. Since 1993, trade among the three NAFTA countries has nearly quadrupled.

Staff Contact: Susanne T. Stirling

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