Canadian Prime Minister Justin Trudeau says NAFTA created the largest free trade zone in the world, comprising a $19 trillion regional market of 470 million consumers. 
WASHINGTON — Negotiations aimed at modernizing the 23-year-old North American Free Trade Agreement between Canada, Mexico and the United States soon may get under way. On July 17, Ambassador Robert E. Lighthizer, the US trade representative (USTR), issued a required summary of US trade objectives for the NAFTA renegotiation, which cleared the way from the US perspective for talks to begin on Aug. 16. Just ahead of the release of the USTR’s trade objectives document, Canadian Prime Minister Justin Trudeau addressed a summer meeting of the National Governors Association in Providence, Rhode Island, on the importance of NAFTA to the North American economies and to the historic U.S.-Canada partnership.

“To boil this down to one point: Canada is your biggest, best customer, by far,” Trudeau told the governors. “We’re a bigger customer than China by roughly $152 billion. Bigger than Japan or the United Kingdom. No one else comes close. In fact, Canada buys more from the United States than China, Japan and the United Kingdom combined.”

Trudeau said NAFTA created the largest free trade zone in the world, comprising a $19 trillion regional market of 470 million consumers. “The United States, Canada and Mexico together now account for more than a quarter of the world’s GDP. Since the trilateral agreement went into effect in 1994, US trade with your NAFTA partners has tripled. That accounts for millions of well-paying middle-class jobs for Canadians and Americans. Free trade has worked. It is working now.”

Trudeau acknowledged NAFTA should be updated and modernized, “as it has been a dozen times over the past quarter century.” NAFTA has strengthened the historic US-Canada relationship, which, he said, was a model for the world. “It is of critical importance for people on both sides of the border that we maintain it and, indeed, improve it. We must get it right.”

The prime minster cautioned against politically-tempting shortcuts. “More trade barriers, more local-content provisions, more preferential access for home-grown players in government procurement, for example, does not help working families over the long term, or even the mid-term. Such policies kill growth. And that hurts the very workers these measures are nominally intended to protect. Once we travel down that road, it can quickly become a cycle of tit-for-tat, a race to the bottom, where all sides lose.”

Trudeau concluded saying, “I believe to my core that the most important challenge we face, as elected leaders, is that of creating lasting conditions for prosperity and security for all our people in this, our shared North American home. By virtue of our geography, by virtue of our interlinked economies, this is work we are called to do together – within a modernized, renewed and strengthened North American Free Trade Agreement.”

NAFTA renegotiation objectives

Under the Bipartisan Congressional Trade Priorities and Accountability Act of 2015, the USTR is required to issue a summary of objectives 30 days before any trade negotiation may commence. The renegotiation of the 23-year-old trade agreement with Mexico and Canada may now proceed at an agreed date but no earlier than Aug. 16.

For the first time, the USTR included deficit reduction as a specific and, indeed, the primary objective for the NAFTA negotiations. The USTR noted since NAFTA was implemented in 1994, the US bilateral goods trade balance with Mexico has gone from a $1.3 billion surplus to a $64 billion deficit in 2016. Also, market access issues have arisen in Canada with respect to dairy, wine, grain and other products — barriers the USTR said the current agreement is not equipped to address.

“The new NAFTA must continue to break down barriers to American exports,” the USTR objectives document stated.

The objectives outlined in the 17-page document comprise a broad overview of US goals for modernizing NAFTA. No specific trade disagreement was discussed.

For food and agriculture trade, the first enumerated goal was maintaining existing reciprocal duty-free access for agricultural goods. The United States also will pursue reducing or eliminating remaining tariffs on US agricultural products and ending non-tariff barriers to US exports.

The United States also will seek an agreement that will provide for enforceable sanitary and phytosanitary measures that will build upon World Trade Organization rights and obligations “including with respect to science-based measures, good regulatory practice, import checks, equivalence, and regionalization, making clear that each country can set for itself the protection it believes to be appropriate to protect food safety and plant and animal health in a manner consistent with international obligations.”

The USTR’s issuance of its summary of objectives provided food industry and agriculture groups an opportunity to restate their own priorities for the NAFTA renegotiation.

“The administration’s key negotiating objectives include the essential elements to maintain and expand tariff-free trade and set fair rules that level the playing field for U.S. consumer product manufacturers,” said Pamela G. Bailey, president and CEO, Grocery Manufacturers Association.

Michael Dykes, president and CEO of the International Dairy Foods Association, said, “We are pleased to see efforts to address unjustified measures that unfairly limit access to markets for US goods, such as price undercutting, included in the administration’s negotiating objectives. We believe these goals will allow the administration to address Canada’s new milk pricing policy, referred to as Class 7, which has allowed Canadian companies to sell their products below world market prices. In addition, we’re pleased to see an objective to expand competitive market opportunities for US agricultural goods by reducing or eliminating tariffs. Canadian tariffs on some US dairy products are nearly 300 percent.”

Chrystia Freeland, Canada’s minister of foreign affairs, noted the USTR summary of trade objectives was an internal US matter required under US trade promotion authority legislation.

“When negotiations begin, we will be ready to work with our partners to modernize NAFTA while defending Canada’s national interest and standing up for our values,” Freeland said. “Canada is the top customer of the United States. Canada buys more good from the United States than China, Japan and the United Kingdom combined.”