The outline of the North American Free Trade Agreement (NAFTA) negotiations that will start as early as August 16 released by the U.S. Trade Representative Robert Lighthizer last Monday is dramatically foreseen by Mexico Economy Secretary Ildefonso Guajardo to be “a rollercoaster” with good, bad and ugly days coming up in renegotiations.
Yet in reality the document contains few novelties and for all the threats that President Donald Trump has issued that if renegotiations are not good for the United States, the United States can do without it are both unwarranted and prominently not part of renegotiations.
The one issue that President Trump has been demanding is to cut down the $64 billion deficit with Mexico. Of course the existence of a deficit does not make Mexico a delinquent nation that is undermining the U.S. economy plus the fact that surpluses and deficits are a natural part of free trade.
There is an overall solution to this demand in order to make free trade fair for the three participating NAFTA nations.
The one part that might be particularly conflicting, however, is the attempt by the USTR to eliminate Chapter 19 which defines the modes of solving controversies over antidumping and countervailing duties in order to really empower the US government – during disputes – to establish the law.
Of course a follow up of the Chapter 19 disputes over the past 23 years of NAFTA is calling upon a humongous file of merchandise that had to go to the five-person controversy solution panels in order to give one of the quarrelling parties a favorable decision.
But then, that’s part of the upcoming renegotiations and whether Chapter 19 – given the humongous negotiating experience accumulated thanks to it – is revamped, goes or stays will be an issue that is ripe for discussions.
A strange demand made by USTR comes right at the end of the program of subjects of negotiations regards currency manipulation by participating nations. It is rare because neither Canada, the United States or Mexico have participated in currency manipulation maneuvers as exchange rates for the past 20 years have been pretty much left to free market whim.
One clause that I don’t recall from the original NAFTA negotiations was on anti-corruption. But surely it has an addressee and that is Mexico itself which holds the most corrupt customs police under the NAFTA nations. How will the United States deal with it and demand proper accounting by companies exporting to Mexico and paying bribes to expedite merchandise transit (a common practice) will force honesty by the Treasury Secretariat or Hacienda, which runs customs? That’s one a zillion Mexicans demanding the elimination of official corruption and absolute transparency want to see.
The novelty in this renegotiation will be the rules on e-commerce. This is a brand new theme in NAFTA negotiations and at least for the moment the trans-national transfer of data without duties seems not to be a problem, but it definitely lacks a regulatory framework.
Also the subjects of rules of origin, intellectual property and labor conditions and wage competitiveness will be revisited and definitely with good will many a rough old age will be filed down thanks to experience. In the past, at least labor and wages, along with the environment, were dealt with as a parallel agreement and not an integral treaty chapter. Negotiations on these issues may not be all that easy.
By the way, the Mexican Entrepreneurial Coordinating Council (CCE) announced Mexico has already hired lobbying U.S. firm Akin, Gump, Strauss, Hauer & Feld as its top negotiator in Washington which is a new move by the Mexican business and government participants as in the original negotiations all was done by the Economy Secretariat, which will have different representatives in the Washington lobby.
But once the USTR has unveiled its renegotiation intentions, Economy Secretary Guajardo put it plainly:
“Nothing is new, we’ve heard all this before in public debates, testimonials and interviews and practically nothing in this document comes as a surprise.”