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US said to start NAFTA renegotiation process

Trump administration is set to trigger the 90-day period of domestic consultations to firm up the US negotiating position

Gulf News

WASHINGTON: The US Trade Representative office has indicated to lawmakers that it will officially inform Congress on Thursday about its intention to renegotiate the North American Free Trade Agreement, according two people familiar with the plans.

In the first formal step to reopen the two-decade-old pact, the Trump administration is set to trigger the 90-day period of domestic consultations to firm up the US negotiating position. That puts the timing for official talks to start with Mexico and Canada in August.

Since being sworn in Monday, USTR chief Robert Lighthizer has been at Capitol Hill meeting lawmakers for required talks before he can give Congress that official notification.

President Donald Trump’s efforts to find the political capital to support a new trade pact will be complicated by controversies engulfing the White House. The president is facing backlash over his firing of FBI director James Comey, as well as fallout from a memo Comey wrote in which he said Trump tried to shut down an investigation into former National Security Adviser Michael Flynn. The administration denied Comey’s version of events.

A special counsel was named on Wednesday to oversee an inquiry into accusations of Russian meddling in the 2016 elections.

Currency Issues

Reworking the trade deal was a central promise of Trump’s election campaign, when he called NAFTA a “disaster” that has inflated the trade deficit and cost millions of US jobs. After threatening to withdraw from the 1994 agreement last month, Trump reconsidered in favour of a re-negotiation but said he’ll terminate America’s involvement if talks don’t go his way.

Lighthizer, during discussions with a congressional committee this week, indicated that currency issues will be on the table during the NAFTA revamp, according to a Democratic senator who was briefed on the matter. Lighthizer told senators that “it would be fair to say that” currency issues “would be part” of a new NAFTA deal, Ron Wyden, of Oregon, told reporters.

Discussing the effect of currency valuations during NAFTA negotiations is “a model statute that could be applicable generally,” said Wyden, relaying what he heard from Lighthizer. The USTR’s office didn’t immediately reply to a request for comment.

Addressing currency manipulation became a principal US negotiating objective of trade agreements as part of a trade promotion bill passed in 2015.

Currency Talks

The Trade Promotion Authority legislation defines unfair currency practices as “protracted large scale intervention in one direction in the exchange market and a persistently undervalued foreign exchange rate to gain an unfair competitive advantage in trade,” according to a report by the Congressional Research Service.

The TPA, which gives lawmakers a yes-or-no vote on amending trade deals, was passed amid tension over whether the US should sign the 12-nation Trans-Pacific Partnership, championed by then-President Barack Obama. Trump pulled the country out of TPP during his first week in office, before Congress could approve the deal.

According to the TPA, the White House has to give Congress 90 days’ notice before it formally starts renegotiating a trade deal. During that time, the administration must meet with members of the House Ways and Means and Senate Finance Committees, with a view toward coming up with the principles the US will adopt during the negotiations.

Other issues expected to come up in NAFTA talks include so-called rules of origin, which dictate the amount of North American-made parts that must be used in assembled products such as cars. The US has also indicated it would like to overhaul the process under which foreign companies can be challenged in court by the state, and strengthen the ability of government contracts to give preference to US companies.

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