Demonstrators protest during an America First rally in Laguna Beach, California, U.S., August 20, 2017. (Xinhua/REUTERS)
by Xinhua writers Yang Shilong, Wang Wen
NEW YORK, Aug. 21 (Xinhua) -- Though it is unclear whether Mexico, the United States and Canada could strike a deal by the end of this year on rewriting their trilateral trade pact, it is tenable to say the "America First" agenda promoted by President Donald Trump will undermine the U.S. regional and global economic leadership, experts warned.
The three North American neighbors Sunday wrapped up their five-day Round One renegotiations on the North American Free Trade Agreement (NAFTA)that removed tariff barriers and led to tripling of trade among them over the last 23 years.
Sunday's joint statement offered no details on the initial talks, but negotiations are likely to become increasingly tense and difficult over the next months as the Trump administration pushes its "America First" agenda and pledged "Buy American and Hire American" during the talks.
FUTURE TALKS COULD BE TOUGHER
NAFTA can "probably be revised and improved" in a "relatively short timeframe" if the three countries are dealing with "additional areas that are up for renegotiation," like labor standards, e-commerce and intellectual property, Robert Salomon, associate professor at the Stern School of Business, New York University, told Xinhua on Monday.
However, there are certain areas where the United States, especially with the Trump administration pursuing the "America First" agenda, will find "much more difficult" to renegotiate with Mexico and Canada.
"The toughest issue I think will be dispute settlement under the agreement," said Edward Alden, a senior fellow at the Council on Foreign Relations, in an earlier interview with Xinhua.
A dispute-resolution mechanism under Chapter 19 of NAFTA, which allows Canada and Mexico to appeal countervailing and anti-dumping duties imposed by the United States through independent tribunals that have often ruled against Washington rather than through judicial reviews in U.S. courts.
"The Trump administration wants to eliminate that mechanism. Both Canada and Mexico see it as tremendously important because they believe that otherwise they could face arbitrary restrictions on their access to the U.S. market so that will be a very hard issue," Alden said.
Another difficulty would be government procurement, he said, as the Trump administration wants to expand "Buy American" rules for it.
NAFTA prohibits preferential treatment for American companies when they bid on U.S. government contracts, with a similar restriction on Mexico and Canada when dealing with their own government procurement.
"Canada and Mexico want more opportunities for their companies to sell to governments in the United States. That will be a very difficult issue too," Alden said.
"After all, it is a free-trade agreement. It is not a trade agreement with trade barriers, and so if the trump administration tries to push that protectionist agenda, I would expect Canada and Mexico to push back rather strongly," Salomon said.
Talking about the "Buy American" policy, Canada's Foreign Minister Chrystia Freeland said recently that these buy-local rules were poor public policy, driving up prices, resulting in worse infrastructure, and harming the economy
"(It's) political junk food -- superficially appetizing, but unhealthy in the long run," she said.
TEST FOR TRUMP'S DEAL-MAKING SKILLS
Alden noted that the three countries probably will have a new NAFTA, but the question will be "whether the outcome is politically acceptable" to President Trump.
"If you look at the negotiating objectives for the United States, most of them are quite modest and reasonable. There are some difficult issues but President Trump has already moved a long way to soften the positions he took in the campaign," he said.
Trump has called NAFTA a "disaster" and blamed it for the country's widening trade deficit with Mexico, and huge job losses in U.S. manufacturing-dependent states in the Midwest.
"So there is already been a significant softening in the U.S. position and I think more is certainly possible," Alden said, adding Trump was not threatening, for example, to impose a 30 percent border tax on Mexican imports.
"The challenge (of the negotiation) will be to produce an outcome that President Trump can credibly argue is more in American favor while allowing Mexico and Canada to tell their people that they have held firm and maintained the integrity of the NAFTA," he said.
"This will be the test," Alden added.
Alden's words were echoed by the San Diego Union-Tribune editorial board.
"This is a test of the president's negotiation skills that he almost can't afford to fail," the board wrote in a recent editorial.
"The NAFTA negotiations present a president in need of a big policy victory with a bigger opportunity than before. The stakes were already high, following Washington's healthcare debacle and weeks of White House aide departures," it said.
"I think if they can reach agreement then I think the unintended consequences will be modest," Alden said, noting that the danger comes if negotiations break down and President Trump threatens to withdraw from NAFTA.
Experts mostly agree that NAFTA has overall provided benefits to the world's largest economy though it caused a huge trade deficit for the United States with Mexico.
NAFTA was harmful to U.S. jobs and manufacturing but helpful in other areas -- agriculture, services and tourism, Alden said, noting that on balance NAFTA is beneficial to the United States.
Alan Deardorff, professor of international economics and public policy at the University of Michigan, also told Xinhua recently the Trump administration's efforts to list "reducing trade deficit" as a top priority were driven more by political concerns rather than economic development.
"I understand that politically they have to vow against the trade deficit. And I am sure whatever they end up negotiating, if they succeed and come with an agreement with Canada and Mexico, they will probably claim that what they have negotiated would reduce the trade deficit," Deardorff said, "But that is just not true."
U.S. NO LONGER CHAMPION OF FREE TRADE
Whatever the outcome, the NAFTA renegotiations will have a far-reaching impact on U.S.ties with its trade partners.
A new NAFTA can be both an update for NAFTA to a service, digital economy as well as a template for U.S. trade agreements with other countries and regions, said Stephen Gallagher, the U.S. chief economist at Societe Generale.
"Every other trade negotiation will be on hold pending the outcome of NAFTA," Alden agreed with Gallagher, "If it can be concluded successfully, then some of these other negotiations may go forward. But if not, I think the whole U.S. trade agenda will be stalled."
Under the Trump administration, the United States was "not any longer" the champion of free trade, Alden said.
"The United States is going to be looking more narrowly at its economic self-interest in these negotiations and I think that will make it harder to harder to arrive at deals," Alden said.
"NAFTA will be the first big test of that. I do think all the issues can be resolved, but the question is can they be resolved in a way that allows President Trump to claim victor," he said.
Though without U.S. leadership, it will be difficult to make progress in WTO negotiations, Alden said, "But on the other hand ... there's no reason it seems to me that other countries can't at least attempt to step into the vacuum that the United States is currently left."
He said a lot of the countries would be interested in leading the efforts as many governments in the world were quite strongly committed to freer trade.
"It's not impossible to imagine that you could have a coalition of countries that could jump start new negotiations even if the United States were skeptical," he added.
"The U.S. needs to put aside recent flirtations with protectionism, and instead reclaim its vital leadership role in terms of advancing free trade," wrote Ray Keating, an economist and a novelist, in his article "U.S. Trade Leadership Has Been Absent Over a Decade".
"As other nations work to reduce trade barriers, the U.S. quite simply is at risk of being left behind," Keating said.
"Trade policy should be focused on reducing government obstacles to trade, not on trying to 'fix' meaningless trade deficits nor on complaints from businesses that face increased competition," Keating said.