NAFTA negotiations: Are the Americans here to talk, or to blow it all up?

By Peter Clark
August 18, 2017

Day two of the NAFTA 2.0 talks was a pleasant Washington summer day. Sunny, not too muggy — and not the “sunny ways” Canada has been hoping for.

Never have so many trade negotiators laboured so much with no apparent progress. Day two was about preparation and atmospherics — and the buzz over U.S. Trade Representative Robert Lighthizer’s over-the-top aggression.

Lighthizer, like Elvis, has left the building, as have his ministerial counterparts — but his forceful opening presentation still dominates the chatter.

It is a strange thing to bring the baseball bats out from under the table so early in a negotiation. But if the objective was to capture the attention, Lighthizer did — like Robert De Niro did in The Untouchables.

Meantime, we will wait for any signs of movement (a breakthrough would be nice) but that might be too much to ask for. We could visit the zoo next door … or should we wait for the zoo to come to us?

This circus is rapidly becoming the Trade Lawyers and Instant Trade Experts Relief and Retirement Act of 2017. They should commission a statue of President Donald Trump and place it in the 2000 block of K Street. It may not live long enough to be an eyesore.

There are stakeholders in abundance — old friends anxious to know what the other thinks about the process, looking for hints from negotiators trained not to tip their hand.

Others are pleased to know nothing is happening because it is sinking in now that no news is good news — that anything Lighthizer is likely to announce will be bad news, or worse.

Sending his message over international TV to viewers in the NAFTA countries this did not sit well with his trading partners. Corridor chat here indicates serious concerns about a U.S. list of demands that would amount to political suicide in Ottawa and Mexico City. Will Canada or Mexico be given a choice, other than take it or leave it?

Importers of Mexican produce are worried that re-jigging anti-dumping laws could be devastating. Without NAFTA, garments and footwear from Mexico could face prohibitive tariffs. This will benefit Vietnam and Bangladesh, where duties don’t matter much. And special arrangements giving access to Canadian and Mexican apparel makers are in highly protectionist crosshairs.

Most worrying is the impending battle over automotive rules of origin; clearly the U.S. team is not listening to the Detroit Three and other industry stakeholders. Mexico and Canada cannot live with rumoured remedies, such as:

• increasing content levels above 70 per cent;
• making steel traceable — no credit for steel content unless it is NAFTA origin steel;
• requiring minimum U.S. content.

Can the Big Three adapt? Do they want to?

U.S. farmers, ranchers and manufacturers are perplexed; they urged the administration to do no harm. Now they are being ignored. At the same time, Lighthizer is stepping up bilateral negotiations with Japan which can mean little good to Canadian beef and pork producers.

The Trump factor has turned the negotiating process on its head. No one knows what to expect. There are Vegas odds on how long he will last. Many were lulled into a false sense of security by his assurances that Canada was not the problem, that all we should expect was a few “tweaks” to the package.

I suggested at the time that playing this game would open a Pandora’s box. I was wrong. It now looks like it will be worse.

Why intelligent businesspeople would believe anything coming from the lifetime winner of the Washington Post’s Pinocchio Award boggles the mind. Those who took a wait-and-see approach to preparing for the Trade Tsunami which will be released in the U.S. negotiating texts this week may find themselves reading post-mortems — their own.

There are voices of reason here, offering messages that are comforting to us. But not to Lighthizer and his ‘Goodfellas’. Nor will they be impressed with our statistics. Lighthizer had to go back 10 years to a strong loonie, pre-Fracking period to pull together a big number for a Canadian 10-year trade surplus.

Lighthizer also has personal skin in the game — skin which he should have parked when he took the job. He spent decades protecting the U.S. steel industry and pursuing personal vendettas through Chapter 19 and WTO dispute settlement.

When Charlene Barshefsky was appointed USTR, she recused herself from dealing with issues she was involved with in her prior private practice. Whatever principles guided Ms. Barshefsky are no longer fashionable in the Trump administration.