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NAFTA

What the U.S. wants from NAFTA talks

The United States has released its objectives for the upcoming NAFTA talks. Here are some highlights

Leaders of the U.S. Chamber of Commerce on Tuesday hunkered down at Washington’s St. Regis Hotel with representatives of the Canadian Chamber of Commerce and Mexico’s Consejo Coordinador Empresarial to plan strategy ahead of the NAFTA renegotiations this summer.

United States Trade Representative Robert Lighthizer on Monday released a broad summary of objectives that will underpin the Trump administration's trade talks with Mexico and Canada for the renegotiation of the North American free-trade agreement (NAFTA).

Although the document is vague, it does single out areas where the U.S. may seek concessions from Canada. Here are some highlights:

  • The U.S. says it aims to improve the U.S. trade balance and reduce the trade deficit with NAFTA countries, either by increasing American exports or by reducing Canadian and Mexican ones.
  • Canada’s supply management system for dairy and poultry could face closer scrutiny.
  • The U.S. wants to see Ottawa increase the amount Canadians can buy from the U.S. without paying duties to $800.
  • Another goal is to bring labour and environment provisions into the core of the agreement rather than a side agreement.
  • The U.S. says it wants commitments “to provide fair and open conditions” in telecommunications and financial services, including provisions that prohibit discrimination against foreign service suppliers.
  • On trade remedies, the U.S. seeks to preserve its ability to enforce its trade laws, including anti-dumping, countervailing duty and safeguard laws.
  • Another priority is better access for U.S. firms to sell U.S. products and services into the NAFTA countries.
  • The objectives are vague on energy but do hint at support for ongoing reforms in Mexico, which has begun the slow process of opening up its domestic industry.

For more than 20 years, the North American Free Trade Agreement has tied the continent's economy together. Now, the U.S. wants to give the trade deal a massive overhaul, beginning with talks this summer.

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So, what does Canada have at stake?

Duties and customs

The U.S. wants to see Ottawa increase the amount Canadians can buy from the U.S. without paying duties to $800. Currently, Canadians must pay duty on any cross-border purchases over $20 CAD. This increase would benefit Canadian consumers, but could damage business for Canadian retailers.

The U.S. is also seeking to add a chapter on the digital economy to address intellectual property rules and secure commitments not to impose customs duties on digital products such as software, music and e-books.

Trade and future disputes

The first objective listed is to "reduce the trade deficit" – either by increasing American exports or by reducing Canadian and Mexican ones – but there was little to say exactly how this would be achieved. There would be fewer restrictions on U.S. telecommunications and financial companies to do business in Canada and Mexico.

As part of changes to trade laws, the U.S. proposes to eliminate the NAFTA global safeguard exclusion as well as the Chapter 19 dispute settlement mechanism.

These panels have regularly ruled in Canada's favour, including on the long-running softwood lumber dispute, and have been long disliked by some Americans who see them as an abdication of U.S. sovereignty.

Buy American

Another priority is better access for U.S. firms to sell U.S. products and services into the NAFTA countries, including "fair, transparent, predictable, and non-discriminatory rules to govern government procurement in the NAFTA countries."

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However, the objectives propose excluding state and local governments from commitments being negotiated. Domestic preferential purchasing programs would also be kept in place. They include "Buy America" requirements on federal assistance to state and local projects, transportation services and farm support, as well as procurement for the Department of Defence.

Dairy and poultry

The list of objectives does not mention the matter of Canada's supply management system in dairy, eggs and poultry.

Among other goals, the U.S. says it will "seek to eliminate non-tariff barriers to U.S. agricultural exports including discriminatory barriers, restrictive administration of tariff rate quotas, other unjustified measures that unfairly limit access to markets for U.S. goods, such as cross subsidization, price discrimination, and price undercutting."

Supply management is contentious because it uses price-fixing and tariffs to favour Canadian-produced milk, eggs and poultry over imports.

Energy

The U.S. aims to "preserve and strengthen investment, market access, and state-owned enterprise disciplines benefiting energy production and transmission and support North American energy security and independence, while promoting continuing energy market-opening reforms."

What's next?

NAFTA talks: Shortly after releasing its objectives, the Trump administration set out an aggressive timetable for NAFTA talks, with the first round in Washington on Aug. 16-20.

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With files from Adrian Morrow and Steven Chase


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