The Trump administration formally laid out plans Thursday to renegotiate the North American Free Trade Agreement with Canada and Mexico, potentially preserving successes in agriculture and energy sectors that are important to Louisiana while targeting deficiencies in manufacturing.
“Our aim is that NAFTA be modernized,” U.S. Trade Rep. Robert Lighthizer said in a letter formally notifying Senate Democratic leader Charles E. Schumer of New York of the renegotiation effort.
That starts 90 days of consultations with lawmakers over how to revamp the pact. Talks with Canada and Mexico can begin after that. Mexico and Canada signaled that they welcome the opportunity to modernize the agreement.
Lighthizer said he believed that NAFTA, which took effect in January 1994, had proved successful for some sectors, including investment services, agriculture and energy. But he singled out manufacturing as an area of deficiency, particularly involving Mexico.
Lighthizer told reporters that any new deal should do a better job of protecting U.S. factory workers and should be updated to reflect new technologies.
Eddy Hayes, chairman of the World Trade Center New Orleans, said NAFTA is 23 years old so it’s a good idea to take another look at the agreement. It’s also wise to keep the parts of the agreement that work, particularly market access for Louisiana products, he said.
“Market access and the decline of non-tariff barriers really helped our ag industry, our forest products, all those things that we produce in Louisiana,” Hayes said. “We want to make sure that we don’t lose that.”
He also noted that Mexico is one of the countries moving forward on the Trans-Pacific Partnership, designed to cut tariffs and boost trade among a dozen countries bordering the Pacific Ocean.
Under TPP, Vietnamese rice would have preferential access to Mexico, Hayes said. By reworking NAFTA, Louisiana can maintain its competitiveness in North American markets.
Hayes said it’s a better idea to renegotiate than to impose some sort of unilateral tariff, an approach that would leave U.S. firms vulnerable to retaliation.
As for the energy sector, a south Louisiana executive noted at a recent trade conference the importance of exporting the state's oil and gas expertise and technology.
Among the provisions that Lighthizer cited that would be addressed in negotiations are intellectual property rights, regulatory practices, state-owned enterprises, labor and environment. The list did not mention currency practices, something that Schumer and other congressional Democrats have sought to be included in trade deals.
Lighthizer did not address specific areas in manufacturing. But Trump and his administration officials, including Commerce Secretary Wilbur Ross, who with Lighthizer is leading the charge on trade, have been critical of how NAFTA prompted car and car parts makers to establish plants in Mexico.
Hayes noted that Louisiana’s textile industry lost thousands of jobs following NAFTA, with much of that work moving to lower-cost labor in Mexico.
Although the Trump administration wants to bring back manufacturing jobs and a draft letter on reworking NAFTA specifically mentioned textiles, that may not be possible for textiles, Hayes said. The supply chains may have moved, and the investments made in foreign factories may prevent firms from shifting production back to the United States.
Trump’s trade officials also are likely to try to limit Canadian and Mexican companies’ ability to win U.S. government procurement contracts, and the administration is almost certain to seek the elimination of a provision that allows an arbitration panel to decide complaints about goods that are allegedly dumped or unfairly subsidized by governments — a change that Canada in particular is expected to resist.
Cheap subsidized sugar from Mexico is one area of contention for sugar producers in Louisiana.
Last month, White House aides spread word that Trump was ready to pull out of NAFTA. Within hours, the president reversed course and said he'd seek a better deal first.
"We are going to give renegotiation a good strong shot," Lighthizer said. He refused to say whether leaving NAFTA remained an option.
In March, the administration circulated an eight-page draft letter on NAFTA that disappointed critics by appearing to keep much of the existing trade agreement in place. Thursday's letter had fewer specifics.
Lori Wallach, director of Public Citizen's Global Trade Watch, called it "markedly vague."
But Republican congressional leaders promised to work with the administration to craft a better deal.
Thomas Donohue, president of the U.S. Chamber of Commerce, urged the administration to reach a deal quickly. Political pressures in 2018 — a presidential election in Mexico and congressional elections in the United States — could make it harder to seal an agreement next year.