The United States could renegotiate the North American Free Trade Agreement by early next year if it sticks to seeking concessions that Mexico and Canada agreed to make in past accords, said the top trade negotiator for former President Barack Obama.
The United States may be able to convince its NAFTA partners to sign a deal that looks similar to the Trans-Pacific Partnership, said Michael Froman, who was U.S. Trade Representative until President Donald Trump took office in January. Froman negotiated the TPP pact linking the United States and 11 other nations, which Trump formally withdrew from in January, days after taking office and before Congress voted on it.
Despite the withdrawal, the Trump administration has indicated it may be open to using parts of TPP as a starting point for negotiations on other trade deals.
Flavio Volpe, the president of Canada’s Automotive Parts Manufacturers’ Association said sticking to any of the auto policies that were part of the original TPP is “not smart.”
The pact included changes in tariffs, rules of origin and content requirements for the auto sector.
In a tweet posted Saturday, Volpe said Froman sold out the North American auto sector during TPP negotiations and that those very policies were the reason Trump killed the deal.
Commerce Secretary Wilbur Ross previously said the best window to negotiate a NAFTA overhaul will close in early 2018, before campaigning heats up ahead of a general election in Mexico in July. Mexican officials have expressed interest in clinching a deal by the end of this year.
“That’s a source of potential leverage for the United States that the Mexicans are so eager to get this done,” Froman said in an interview last week.
But the talks could derail if the United States pushes too hard, he said. “We have a rather long history with Mexico and the feelings of anti-Americanism or concern about being overly accommodative with the United States are really just beneath the surface,” he said.
Froman noted that a draft letter to Congress laying out U.S. priorities looked very similar to the goals he pursued in TPP. However, it also contained items likely to be contentious for Mexico and Canada, such as a promise to “level the playing field on tax treatment.”
U.S. lawmakers have complained that Mexico’s value-added tax unfairly benefits some Mexican exports, which are exempt from the levy. But it would be unprecedented for the U.S. to try to change another country’s tax system through trade negotiations. “We’ve never taken on domestic taxation in a trade agreement,” said Froman.
The final letter to Congress, which was sent last month and kicked off 90 days of domestic consultations over NAFTA, was less detailed about U.S. goals. Trilateral talks on a new agreement could begin as early as Aug. 16.
The TPP withdrawal, as well as Trump’s decision this week to pull the United States out of the Paris climate-change accord, will undermine America’s credibility when pursuing other deals, Froman said. “It has an effect on U.S. credibility and leadership and the willingness of countries to follow our lead,” he said. “That’s damage we’ll have to repair.”