NAFTA talks kick off: Early signs raise little alarm, but strategy still in 'pre-game state'

As the renegotiation of the North American Free Trade Agreement begins, industry groups and U.S. congressional leaders are warning President Donald Trump to be careful.

"It is important that the administration follow the spirit of the Hippocratic Oath: First, do no harm," Republican Senator OrrinHatch, of Utah, said duringU.S. Trade Representative Robert Lighthizer's confirmation hearings.

Pro-trade groups from the U.S. Chamber of Commerce to export-dependent farmers repeat"do no harm" like a mantra in their lobbying.

The tone of Thursday's letter to Congress which officially triggered the 90-day consultation period required before opening up NAFTA suggests thismessage isgettingthrough.

• Trump administration writes Congress to officially trigger NAFTA renegotiation

"As a starting point for negotiations, we should build onwhat has worked in NAFTA, and change and improve what has not," the newly sworn-in Lighthizer told reporters.

How could Canada or Mexico disagree? They didn't. All three are calling for"modernization" of the 23-year-old deal.

Mere weeks ago, Trump was writing NAFTA off as a"disaster" that hemight scrap. Now comes this short, let's-get-to-work kickoff notice from Lighthizer.

It'seven less threatening thanthe draft priorities Congress saw in March.

Border taxes? Buy America rules? Longstanding agriculture beefs? The only sound heardwas crickets.

That doesn't mean they're off the table.

"Bob understands that he doesn't want to pre-empt the Congress," said Gordon Ritchie, who negotiated Canada's free trade agreement with the U.S. in the '80s. "Putting the kitchen sink in at this point was unnecessary, because Congress will put it in."

'Aggressive enforcement'

That's the point of the 90-day consultation period now underway: Congress givesitswish list,then negotiatorstryto deliver.

"If they'd had more detailed stuff in, in a sense, they'd be more constrained," Ritchiesaid. "This gives Lighthizer all the freedom he needs to put something together."

"We're still in a pre-game state," hesaid."They haven't even fielded a team really, let alone decided their game plan."

Monica de Bolle, a senior fellow at Washington's Peterson Institute for International Economics, said the letter to watch for isexpected two months from now.

Thirtydays before negotiations start, the USTRpublishes its negotiating objectives.

The lack ofspecifics in Thursday's letter could be a combination of not wanting to tip the U.S. hand, and lackingtime to staff up and strategize, she said.

The standoutsentence in that letter, she says, refers to "establishing effective implementation and aggressive enforcement of the commitments made by our trading partners" language she called "Rossian" for mirroring theperspective of U.S. Commerce Secretary Wilbur Ross.

Canada has already had a strong taste of "aggressive enforcement" from Ross's department, including softwood lumber duties applied last month and, earlier this week, anaerospace investigation targeting Canada's Bombardier.

"They will now take a much tougher stance," she said, suggesting the U.S. will self-initiate investigations over any possibleunfairness.

Reworking, not scrapping, Chapter 19

Simultaneously, the Trump administration has mused about scrappingNAFTA's Chapter 19, which providesthe arbitrationpanels that Canada and Mexico can useto appeal U.S. duties like these.

"It's very strange," de Bollesaid, because the other two countries will never agree to that, particularly with this "aggressive enforcement" staring them in the face. "They're soon going to hit a wall if they don't change their stance."

Ritchie agrees that Americaninsistence on ending Chapter 19 something Canada made concessions to get could be a sticking point.

"On what planet could Canada agree to eliminate our barriers against imports only to have the Americans agree to do the same, but with the right to, anytime they feel like it, slap on phoney countervailing duties?"

Canada mayagree to create a permanent tribunal to replace Chapter 19'sad hoc panels, but scrapping it? Not possible, Ritchie said.

Another puzzler emerged this week as Lighthizer talked of includingcurrency manipulation in a reworked NAFTA.

Both Canada and Mexico have floating exchange rates, meaning they don'tmanipulate currency, so it seemslike an odd NAFTAdemand.

On the other hand, there'sno reason to disagree to it, de Bollesaid. Its inclusion would allow the U.S. to then turn around and raise the issue with China or South Korea, the realtargets.

Ending currency manipulation letsTrump say he's got a"fair" trade agreement, she said. Easy win.

'Canada'sreally not the problem'

De Bolle, an analyst of Latin American trade issues, said there was nothing in Thursday's letter that Mexicanscouldn't deal with.

Theyremainhighlyconcerned about border tax issues, but the thingsin this letter digital trade, intellectual property protections, and labour and environmental standards already appearedinthe Trans-Pacific Partnership agreement all three countries negotiatedin 2015.

TPP language could be recycled,if everyone's politically savvy enough not to emphasize where it'sfrom. (Trump and many in Congress still portray the TPP as a bad deal that the U.S. was right to bail on.)

AsLighthizersent his letter to Congress on Thursday, Ross was meeting with JerryDias, the leader of Canada's largest private-sector union, Unifor.

"It was a good discussion,"Diassaid after. "We agreed that Canada's really not the problem. The problem is Mexico."

Far from fearing renegotiation, Dias said "we have the opportunity to fix a lot of things," including preventingmore jobs from heading south.

Revised rules of origin for the automotive sector determiningwhat products areduty-free whencomponents come from multiple countries appearinevitable.

Trump triggers NAFTA renegotiations

7 years ago

Duration 9:08

Trade experts Lawrence Herman and Flavio Volpe break down how Canada should prepare for tough talks.

FlavioVolpe, who representsCanadian auto parts manufacturers, told CBC News Network'sPower & Politics he expects his industry to come out on the right side of the negotiations.

"What we found was that the American interest and the Canadian interest overlaid very well," he said Thursday.

Canada and Mexico have already worked together to keep the U.S. from calling all the automotive shots in the TPP. Mexico now needs to bring its labour rights up to standard, Diassaid.

He also points out that the U.S. needs access to Canadian energy and resources something that putsCanada in control.

"The American threat to rip up the agreement is simply not credible," said Ritchie."If they take that position, the answer on the Canadian side must be 'Be my guest.'"