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Nafta renegotiation reveals some stark differences

[WASHINGTON] Negotiators from Canada, Mexico and the United States opened the first round of talks on Wednesday to revamp the 23-year-old North American Free Trade Agreement, as the US doubled down on demands the deal be revised to address trade deficits and protect American jobs.

But Washington's negotiating partners made clear they view the free trade deal as a success and only want to see it modernised and improved, not weighed down with unreasonable goals.

Anyone who thought Washington would put aside the tough anti-Nafta rhetoric of President Donald Trump and get down to the serious, nuanced business of trade diplomacy were disappointed.

Instead, US Trade Representative Robert Lighthizer insisted that Nafta must undergo wholesale revision.

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"The views of the president about Nafta - which I completely share - are well known. I want to be clear that he is not interested in a mere tweaking of a few provisions, and a couple of updated chapters," Mr Lighthizer said at the opening ceremony.

"We feel that Nafta has fundamentally failed many, many Americans and needs major improvement."

Those comments were in stark contrast to those by Canadian Foreign Minister Chrystia Freeland and Mexican Economy Secretary Ildefonso Guajardo Villarreal, who stressed the pact brought benefits for all three economies.

Ms Freeland said trade is not "a zero-sum game," and deficits are not the way to gauge success of any free trade deal.

Canada's goal is "bolstering what works, improving what can be made better" in the accord, which encompasses a quarter of the world's economy and seven percent of the world's population, she said.

Mr Guajardo said "Nafta has been a strong success for all parties" and cannot be improved by "tearing apart what has worked."

Deficits and job losses

Mr Lighthizer said revamping Nafta would fulfill Mr Trump's repeated campaign promises to help US workers.

Mr Trump famously denounced Nafta as "the worst trade deal maybe ever signed anywhere," and threatened to pull out of the agreement he said has destroyed US jobs. But he eventually succumbed to pressure to renegotiate instead.

Given recent criticism over his handling of North Korea, Venezuela and the white supremacist violence in Charlottesville, Virginia, Mr Trump is entering the talks in need of something he can call a victory.

However, he recently warned again that he will "terminate Nafta" if "we don't get the deal we want."

Mr Lighthizer did not repeat the threats to pull out of Nafta. But he said Washington cannot ignore the lost manufacturing jobs that resulted from "incentives, intended or not, in this agreement." US negotiators will insist on measures to ensure "the huge trade deficits do not continue," he said.

Although US trade with Mexico shifted from a US$1.7 billion surplus in 1993 to a US$55.6 billion deficit in 2016, total trade with Canada and Mexico more than tripled during that period, reaching US$1.2 trillion by last year, with millions of US jobs depending on export industries.

And Mr Guajardo said the regional supply chains established under Nafta helped all three countries better withstand growing competition from Asia.

Mexico is "part of the solution, we are not part of the problem," he told reporters following the first day of talks.

The job losses the US laments would have been even "more radical and disastrous" without the trade integration, he said.


Mr Lighthizer also called for increased Nafta content requirement for goods, especially autos, and an increased share of US-manufactured content.

Ms Freeland told reporters Canada does not support specific national content requirements, but is open-minded about looking at the Nafta content rules.

However, she warned that negotiators must "take very great care in any changes that are made that they don't disrupt supply chains."

Mr Guajardo said "rigidities" like national content are not helpful to trade.

Despite the aggressive US stance, negotiators from all three countries agree on the need to update the pact, which was signed before the internet was a force, including by adding a chapter on e-commerce and addressing the growing role of trade in services.

The timeline for the talks is expected to be accelerated, given elections in Mexico in July 2018, as well as the US legislative calendar, with seven to nine rounds expected to finish the revisions by the end of the year.

Large negotiating teams from Canada, Mexico and the United States will meet through Sunday to develop the new text of the pact. They are due to reconvene September 5 in Mexico City, with a third round expected in Canada thereafter.