President Donald Trump has made no secret that he wanted the North American Free Trade Agreement gone. A year of on-again-off-again negotiations without a clear view of an endgame has demonstrated the pact’s staying power.
The survival of NAFTA was hardly a given exactly a year ago, when negotiators from the U.S., Canada and Mexico gathered at a hotel in Washington. Their task was to start hammering out a fast update to the 24-year-old pact, which governs $1.2 trillion in trade.
Trump wasn’t backing down from his threat to withdraw from the deal. Still, heading into the opening round of talks, business leaders were hopeful the U.S. would push for a modest revamp that would bring the deal into the 21st century on issues like digital commerce and intellectual property.
Commerce Secretary Wilbur Ross said the U.S. wanted a deal by January, suggesting the administration might settle for a quick makeover. That would likely have satisfied Mexico and Canada, both of which supported the idea of a tariff-free continent.
But when U.S. Trade Representative Robert Lighthizer took the stage on the first day of negotiations, it was clear he wasn’t interested in a “mere tweaking.” The veteran trade lawyer from northern Ohio proclaimed that NAFTA had failed for “countless” Americans, costing manufacturing jobs. The U.S. would be looking for a host of major changes -- foremost among them, a reduction in America’s trade deficit.
Within weeks, Lighthizer unveiled a series of demands designed to “rebalance” trade on the continent, including a hike in the amount of regional content required in cars, and a “sunset clause” that would automatically terminate the deal in five years unless the nations signed back on. Mexico and Canada swiftly rejected the ideas, with some commentators suggesting they were “poison pills” intended to kill the talks.
But 12 months after Lighthizer put his counterparts on notice, the talks continue. The U.S. and Mexico are pushing for a breakthrough on cars, hoping that could pave the way for a deal before Mexico’s new president takes office Dec. 1. However, the nightmare scenario for companies -- a U.S. withdrawal -- hasn’t come to pass.
“The lesson is that it’s always more complicated and it takes longer than you think,” said William Reinsch, a senior adviser at the Center for Strategic and International Studies who served as a senior trade official during the Clinton administration. “You can’t just by fiat suddenly decree that we’re going to go back to 1955 and everything will be made here.”
Company Criticism
Industry groups were swift to denounce the U.S. proposals that would scale NAFTA back. The Business Roundtable, which represents the CEOs of many of America’s biggest companies, warned in November that withdrawing from or weakening NAFTA would threaten jobs and hand opportunities to competing nations.