Washington Insider - Wednesday

No NAFTA Stalemate, but No Deal Either

Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.

TPA Renewal to Be Sought

President Donald Trump has decided to ask Congress to renew Trade Promotion Authority (TPA/fast track) for three years, U.S. Trade Representative Robert Lighthizer said. The 2015 TPA law expires June 30, unless Trump formally requests a three-year extension by April 1.

Congress could block the renewal by passing a resolution of disapproval, but Lighthizer was upbeat. "I shouldn't maybe be making an announcement, but the reality is the president has decided. We’re going to ask for fast track," Lighthizer said. "Remember, the president says he wants to do bilaterals with people in Asia and other parts of the world. He made that speech in Vietnam. So we’re clearly going to ask for fast track and I think it’s extremely likely given the process we will get that."

USTR Lighthizer Calls On Senate to Approve Agency Nominees

Holds placed on four nominees to posts at the Office of the U.S. Trade Representative (USTR) need to be removed, USTR Robert Lighthizer urged during the post-negotiation presser following the Montreal-based NAFTA 2.0 talks.

"We've had 230 days since we nominated the first deputy, and I've had none confirmed. Are we slow or is the Senate slow?" Lighthizer said. "And these guys are all going to get 80 votes. Right? It's not like these are controversial people, 51 votes. No! It's just a bad process. ... So how many negotiations am I going to do?"

The nominations have been held up by both Democrats and Republicans and include Gregg Doud who was nominated to be the chief U.S. ag negotiator.

Washington Insider: No NAFTA Stalemate, but No Deal Either

The New York Times is reporting this week amid the State of the Union hoopla that discussions to revamp NAFTA moved from stalemate to actual negotiation during the sixth round that concluded on Monday, but that a deal was still far from guaranteed as negotiators “continue to squabble.”

Government officials and trade analysts described the mood around the talks as “cautiously optimistic” as Canada, in particular, joined Mexico in offering counterproposals to America’s requests for drastic changes. This seemed to persuade some that this outcome that seemed likely to dissuade the United States from imminent withdrawal.

Still, the reality is that more than six months into the talks, a conclusion still appeared elusive. And tensions between the countries grew as the United States criticized Canada’s suggested changes to the pact on areas including automobile manufacturing and investment.

Robert Lighthizer, the United States trade representative, suggested that Canada had been responsible for the stalled talks. He said discussions were now progressing as the nation recognized the need to protect its trading relationships, though he added that talks were not moving fast enough.

“The reality is some of the participants weren’t willing to talk about anything,” Lighthizer said. “Now, they’re starting to realize that we have to begin to talk. I think that’s a reason for guarded optimism. But you know, I’m never really very optimistic,” he added.

Officials from Canada and Mexico sounded more positive. Ildefonso Guajardo Villarreal, the Mexican economic secretary, said that the three countries were at “a better moment in this negotiation process,” and that progress made so far had put the countries “on the right track to create landing zones to conclude the negotiation soon.”

Chrystia Freeland, the Canadian foreign minister, said that Canada had come to the table “with creative ideas we believed could move us forward.” She also emphasized the benefits of trade with Canada for the United States.

Trump has repeatedly threatened to walk away from the trade pact if it cannot be renegotiated in the United States’ favor, a position that has put him at odds with many in the business community and Congress, who see trade with Mexico and Canada as integral to industries as varied as manufacturing, agriculture and energy. The auto industry, in particular, has arranged its North American supply chains around the deal’s terms.

With talks now reaching into their seventh month, negotiators are about to butt up against several political events that could make an agreement even more difficult, including the Mexican general election on July 1.

The election could usher in a leftist political party that may be less willing to make concessions. The front-runner, Andres Manuel Lopez Obrador, has advocated a more combative approach to the Trump administration.

“Doing this before the Mexican election is critical, because you don’t know who is going to be leading afterward,” said Representative Will Hurd, a Texas Republican who attended the talks.

The negotiations have faced a series of collapsing deadlines. Last year, officials insisted that the deal must be largely concluded by the end of 2017. Then in October, they decided to extend the talks into the first quarter of 2018, with March widely cited as a deadline.

Midterm elections in the United States on Nov. 6 could also complicate the deal. The administration will need a simple majority in both the House and Senate to approve their revised trade agreement, which could prove difficult if Democrats win control of either chamber.

Lighthizer reiterated in his remarks on Monday that he hoped to win the support of some Democratic lawmakers. That may hinge on the administration’s efforts to improve labor standards. Last Tuesday, more than 180 Democrats and one Republican lawmaker sent a letter to Lighthizer urging the administration to propose stronger measures to improve Mexican labor conditions.

The United States has proposed significantly raising the so-called rules of origin and Canadians last week discussed changing the way the figures were calculated to include design, investment and parts of an automobile like high-tech software and sensors that are common in cars today but not measured under NAFTA.

The change is likely to raise the proportion of a car’s value produced by the United States, because many high-tech industries are centered there. Lighthizer criticized the idea, saying that it “may actually lead to less regional content than we have now” and said “this is the opposite of what we’re trying to do.”

Lighthizer also used his remarks to criticize a recent case Canada brought to the World Trade Organization, in which it claimed that the United States system for policing dumping and subsidies was unfair. “It is imprudent, and my suspicion is, spiteful,” he told reporters.

So, progress is progress, although the U.S. position still seems to be aimed at holding back and increasing the risk of running out of time. This certainly is an effort producers should watch closely as it proceeds and hopefully succeeds in further opening, rather than restricting, North American markets, Washington Insider believes.

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