While trade played a large role in the President Trump’s election, there have been few specifics on the new Administration’s objectives in that area. This has been particularly the case regarding the Administration’s plans for revising NAFTA and negotiating new trade agreements. The recently leaked draft letter from the Acting U.S. Trade Representative to notify Congress of the Administration’s intent to revisit NAFTA provides insight into the Administration’s thinking.
The purpose of the letter is to comply with one of the Congressional consultation requirements under the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 (TPA). TPA requires certain consultations with Congress regarding the initiation and conduct of trade negotiations, as well as consideration of specified negotiating objectives, in order for a trade agreement’s implementing legislation to receive streamlined consideration by Congress. In this case, the aim of the letter would be to meet the TPA requirement to provide 90 day-notice of the President’s intent to initiate trade negotiations, as well as the date on which the President intends to initiate negotiations, the United States’ specific objectives for the negotiations, and whether the President is seeking a new agreement or change an existing agreement. A draft of the letter was presumably provided to Congress to get input and ensure agreement that the letter would meet TPA’s requirements.
Much has already been written about how the negotiating objectives described in the letter are similar to many provisions of the Trans-Pacific Partnership agreement (TPP), which President Trump pulled out of soon after he was negotiated. This is certainly the case. The objectives of eliminating barriers for digital trade, stronger requirements for science-based food safety protections, improved trade facilitation practices, better services market access, more vigorous intellectual property rights protections, broader investment rights, and disciplines on state-owned enterprises, among others, closely follow TPP.
However, this does not necessarily signify a change in the Administration’s negative view of TPP. The Administration, instead, likely recognized that many of the “21st century” trade issues addressed by TPP are needed for truly updating NAFTA. There are also some significant aspects of TPP provisions missing from the letter. For example, the intellectual property rights portion of the letter does not mention protections for pharmaceuticals or trade secrets. The customs portion likewise does not raise increasing de minimus for customs purposes, which is a significant issue regarding Canada.
The draft letter also reflects several themes that the President has already stated about trade policy. Although trade in agriculture and services are mentioned, improving trade in manufactured products gets greater focus. Likewise, pointing to the U.S. trade deficit with Canada and Mexico as the reason for seeking a revised NAFTA is in line with the Administration’s view that a prime purpose of trade agreements should be to decrease trade deficits. The objective in the letter of leveling the playing field on tax treatment reflects the President’s past stated concerned about Mexico’s value-added tax system discriminating against U.S. exports while benefiting Mexican exports. The letter’s government procurement objective reiterates the Administration’s position of preserving and possibly expanding “Buy America” requirements and the letter repeats past Administration statements about eliminating NAFTA’s Chapter 19 dispute settlement provision for antidumping and countervailing duty determinations.
Nonetheless, despite the above similarities between the letter and the Administration’s stated trade positions, the letter also contains some significant departures. The most notable is the lack of any objective regarding currency manipulation, which is contrary to past Administration statements about trade agreements needing to contain currency provisions. Similarly, the letter’s language about a revised NAFTA creating non-economic benefits, such as in national security, is inconsistent with the Administration’s previous statements that trade agreements should be judged on economics alone, rather than as tools of foreign policy and national security. Finally, the letter’s reference in the environment objective to promoting sustainable development is surprising given the Administration’s general environmental policies.
In sum, the letter shows that the Administration is willing to seek some, but not all, of the provisions in TPP, while also continuing to pursue its own trade policy objectives. The disjointed nature of the letter also indicates that the Administration is still working internally to develop a coherent set of trade agreement objectives. There are indications that the letter was not well received on either side of the aisle in Congress, so further revisions of the letter are expected.