Trump's Draft Proposal Makes Tweaks To NAFTA

Mar 30, 2017
Originally published on March 30, 2017 10:05 pm

The Trump administration is gearing up for a rework of the NAFTA treaty between the U.S., Mexico and Canada. Commerce Secretary Wilbur Ross said Thursday the administration hopes to soon start the 90-day countdown clock to opening talks. A letter circulating on Capitol Hill suggests the administration may take a less extreme approach to negotiations than expected.

During the election campaign President Trump threatened to pull out of NAFTA, which he called the worst trade deal in U.S. history. But, a draft outline of the U.S. objectives from the Trade Representative's office suggests a more temperate approach, including goals on investment and labor that have enjoyed bipartisan support. Jeffrey Schott, of the Peterson Institute for International Economics, says the letter provides the basis for constructive negotiations. But, Schott says, "It also contains a few seeds that could poison those talks and disrupt and perhaps blow up those negotiations."

Among those "seeds" is a reference to tax fairness that could foreshadow conflict over the border taxes Trump has threatened to impose on Mexico, or the Border Adjustable tax supported by the House leadership that would levy a 20 percent tax on all imports.

Ross described the letter as "the very broad outlines of the topics we will be discussing." Ross said it did not represent a change in the administration's thinking.

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President Trump may take a less extreme approach to rewriting NAFTA than his fiery campaign rhetoric suggested. A Trump administration document is circulating on Capitol Hill, and it suggests the White House wants the trade agreement between the U.S., Canada and Mexico to change in ways that both Republicans and Democrats can support. There are still some controversial provisions that could blow up the negotiations, though, as NPR's John Ydstie reports.

JOHN YDSTIE, BYLINE: During the presidential campaign, Donald Trump repeatedly railed against what he termed the disaster called NAFTA.


PRESIDENT DONALD TRUMP: NAFTA was the worst trade deal in the history - it's, like, the history of this country.

YDSTIE: Trump alternatively threatened to rip up, renegotiate or pull out of the 23-year-old deal that has dramatically boosted trade in North America. Trump's threats have raised concerns among lots of U.S. businesses, from farmers to carmakers, but a letter sent by the Office of the U.S. Trade Representative to members of Congress and obtained by NPR suggests a more measured approach by the Trump administration. Jeffrey Schott, a trade expert at the Peterson Institute for International Economics, has reviewed the document.

JEFFREY SCHOTT: This letter provides the basis for a substantive and constructive and successful negotiation with Mexico and Canada.

YDSTIE: All of the parties to the treaty agree it needs some changes. Schott says that 80 percent of the draft letter being circulated by the administration is in line with the mainstream approach to trade deals. Even some prominent Trump supporters think that's a good thing. Steve Moore was an economic adviser to the Trump campaign and is a fellow at the conservative Heritage Foundation.

STEPHEN MOORE: So I think this is a good new development that instead of just ripping it up and starting over, there will be some tweaks to it because NAFTA has been good for Mexico, and I think in the long run, it's been actually pretty good for America and Canada as well.

YDSTIE: But Jeffrey Schott cautions there are potential land mines in the administration's plan for negotiations. They include a simple nine-word objective to, quote, "seek to level the playing field on tax treatment." Schott says that's a placeholder possibly for the border adjustment tax that House leaders and some White House officials support. It would levy a 20 percent tax on all imports coming into the United States.

SCHOTT: That could poison those talks and disrupt and perhaps blow up the negotiations.

YDSTIE: Schott says one other administration objective that could be disruptive is an item on government procurement. The Trump administration wants to favor U.S. businesses in providing goods and services to the U.S. government. Schott says if the U.S. did that, Canada and Mexico would likely follow suit, and U.S. companies selling to those governments would lose business. John Ydstie, NPR News, Washington. Transcript provided by NPR, Copyright NPR.