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Trump Targets Trade Deficit, Currency Manipulation in NAFTA Renegotiation
August 23 2017, 11:15 | Alexander Lowe
It is true the United States trade balance with Mexico became a deficit under NAFTA - swinging from a $1.7-billion surplus in 1993 to a $55.6 billion deficit in 2016 - but total trade with Canada and Mexico more than tripled, reaching $1.2 trillion by a year ago. But at its worst, the plan, if mishandled, could end up inflicting real and lasting damage to the USA economy and US relations with our two closest neighbors.
The Trump administration released its objectives for a new trade deal earlier this week, including better access for its agricultural exports. It calls for negotiating new rules to protect the freedom of cross-border data flows and to prohibit requirements for the use or installation of local computing facilities.
The 18-page document does not specifically mention the Canadian dairy industry, but said the US wants to reduce or eliminating remaining tariffs, as well as try and get rid of non-tariff barriers to its agricultural exports.
They said the objectives contain pro-corporate provisions lifted wholesale from the now-dead Trans-Pacific Partnership "free trade" pact, which unions, their allies and congressional Democrats forced the Obama administration to dump previous year.
Trump has pushed for a renegotiation of NAFTA, threatening to dump it if he can not rework the accord to the benefit of the United States. It offered no details on such incentives and did not specify how much of a product's components must originate from within North America.
"The other NAFTA parties - Canada and Mexico. their position has been: the US wanted to re-open this and modernize it". Canadian Minister of Foreign Affairs Chrystia Freeland said the US list was "part of its internal process" although a source familiar with the Canadian government's thinking said the document was "not earth shattering". At times Trump had threatened to cancel NAFTA altogether, prompting a similarly heated response from Mexico. Deficits are not primarily driven by differences in trade barriers but by macroeconomic factors, such as growth rates and levels of national savings and investment. Supporters note that NAFTA enabled companies to charge cheaper prices for products that range from cars to vacuum cleaners, helping many US consumers.
The negotiating document also mistakenly blames NAFTA for closed factories and for millions of workers that it has supposedly "stranded". In the first five years of the agreement, 1994-98, the US economy added more than half a million new factory jobs. Nonpartisan congressional research in 2015 concluded that NAFTA did not cause mass job loss. Both Mexico and Canada have agreed.
Wording in the document on perennially problematic Canada-U.S. issues such as agriculture and softwood lumber is rather vague, which suggests these NAFTA sections might require more complex negotiation. Important U.S. industries, such as the automotive sector, have become more competitive under NAFTA's integrated North American platform.
This, like most things related to the United States of America these days, will not be easy. The deal went into effect in 1994. USA auto factories are exporting a record number of vehicles. Under Nafta, most tariffs on USA agricultural exports have dropped to zero. "If it comes out that it is not a good deal, no deal is better than a bad deal".