U.S. President Donald Trump’s administration is circulating an eight-page draft letter to Congress outlining its objectives for a renegotiation of the North American free-trade agreement with Canada and Mexico.
The missive lays out 40 agenda items – from the possibility of slapping tariffs on Canadian and Mexican goods if they pose a “threat” to U.S. companies to making it easier for American firms to bid on government contracts in the other NAFTA countries – that may be on the table when talks get underway.
While some of the letter, signed by acting United States Trade Representative Stephen Vaughan, speaks the language of open markets and freer trade, other sections suggest Mr. Trump plans to make good on his promise to usher in more protectionist measures to help U.S. companies.
The negotiating mandate is still being finalized, and could change before talks begin. The administration must present a final version of the letter to Congress as 90 days’ notice before starting the negotiations.
But the draft offers the most extensive outline so far of what Mr. Trump will demand from Canada and Mexico when they sit down to reshape one of the world’s most lucrative trading partnerships.
Here are five key things the Trump administration is looking for in a renegotiated NAFTA:
- A “safeguard mechanism” that would allow it to impose temporary tariffs if a flood of Canadian and Mexican exports hurts U.S. companies. While most trade deals include so-called “snap-back” provisions, which allow countries to revert to previous tariffs if the other side does something harmful to the interests of its companies, the broad language in the letter raises the possibility of sweeping power for the U.S. to impose tariffs to protect American firms. Such levies could be brought in “if increased imports from NAFTA countries are a substantial cause of serious injury or threat of serious injury to the domestic industry,” it reads.
- Tougher rules of origin meant to protect “production and jobs in the United States.” Such rules stipulate how much of the content of a manufactured good must come from within the NAFTA zone for the finished product to be sold across NAFTA borders tariff-free. Tightening the rules would be meant to incentivize the manufacturing industry to buy more of its materials within the NAFTA countries. It could, however, impose higher costs on them: Some firms would have to choose between buying more expensive materials within NAFTA or paying tariffs to continue importing from countries outside of it.
- More market access for American companies on everything from government contracts to agriculture. The goal to “reduce or eliminate…trade restrictive measures” to U.S. agricultural exports could mean scrapping Canada’s supply-management system for milk, eggs and poultry, which currently restricts competition in order to guarantee prices and market-share for Canadian producers. Another section of the letter discusses opening up public procurement to give American firms more opportunity to bid on government projects in Canada and Mexico.
- Do away with panels that resolve anti-dumping and countervailing duty disputes. NAFTA’s Chapter 19 offers companies an alternative to the court process in trade disputes, by allowing them to have cases heard by expert panels. The letter suggests getting rid of these.
- Provisions to “level the playing field on tax treatment.” It is not immediately clear what this clause refers to. Some of Mr. Trump’s advisors want other countries to stop rebating value-added taxes, such as the GST, to their exporters (most economists, however, contend that such rebates merely serve to put companies on the same footing as American firms, due to the difference in the way U.S. sales taxes are collected.) This section could also refer to the narrower issue of e-commerce: Robert Lighthizer, Mr. Trump’s nominee for U.S. Trade Representative, told the Senate that he would like Canada to raise its $20 cap on the amount of goods people can buy online from other countries without paying an import duty. The U.S. cap, by comparison, is $800.