WASHINGTON -- The U.S. government isn't interested in incremental changes to the North American Free Trade Agreement and instead will pursue a major overhaul of the treaty that includes tighter rules of origin to address deficits in merchandise trade with Canada and Mexico, U.S. Trade Representative Robert Lighthizer said.
"President Trump is not interested in a mere tweaking of a few provisions and a couple of updated chapters," Lighthizer said here in remarks opening the first round of renegotiation talks. "We feel that NAFTA has fundamentally failed many, many Americans and needs major improvement."
Canadian Foreign Minister Chrystia Freeland, who outlined Canada's priorities in a speech Tuesday, and Ildefonso Guajardo Villarreal, Mexico's secretary of economy, were more conciliatory in their statements, noting that NAFTA has benefited the economies of all three partners and should be modernized to reflect new circumstances, such as the rise of e-commerce, without doing harm to existing trade practices.
Lighthizer claimed that NAFTA is responsible for the closure of factories and the loss of at least 700,000 American jobs in the past 23 years because of incentives to outsource production to lower-cost areas.
During that time, trade with Mexico has gone from relative balance to a $57 billion deficit in 2016, including $68 billion for the auto sector alone, Lighthizer said. And although the $635 billion two-way trade with Canada is almost reciprocal, he said, the goods deficit over the past 10 years exceeds $365 billion.
The top U.S. negotiating priorities, he said, are:
— Reducing large trade deficits
— Tightening the rules of origin to require higher North American content and substantial U.S. content to qualify for zero duties
— Requiring stricter verification of the country of origin for goods seeking duty-free treatment
— Strong labor provisions
— Provisions guarding against currency manipulation
— Dispute-settlement provisions designed to respect U.S. national sovereignty and democratic processes
— Provisions that guard against third-country dumping and state-owned enterprises
— Equal access to government procurement and agricultural markets
A high-standard NAFTA will serve as a template for future deals and should be written with enough flexibility to adapt rules to innovation, Lighthizer said.
The administration's determination to push for stricter rules of origin is bound to rankle the auto industry, which has warned that doing so would disturb the carefully constructed supply chains and hurt the competitiveness of the North American trading bloc.
"We are a seamless manufacturing platform, and it would be extremely difficult to unwind that," Association of Global Automakers CEO John Bozzella said during a forum here last week. "You will create a big advantage for other manufacturing platforms around the world. We have to be very careful that we don't upset that balance between global competitiveness and supporting U.S. production."