US Says It Aims to Cut Trade Deficits Through NAFTA Overhaul

President Donald Trump is taking a page out of his campaign playbook and making it an official goal of his administration to reduce America’s trade deficit as it prepares to kick off talks to revamp the North American Free Trade Agreement.

The office of Trump’s top trade negotiator on Monday released the administration’s list of negotiating objectives for talks with Mexico and Canada expected to begin as early as Aug. 16. First on Trump’s list: “Improve the U.S. trade balance and reduce the trade deficit with Nafta countries.”

The list turns into policy a pledge that Trump made repeatedly during the campaign, when he complained about unfair trade practices by America’s rivals and vowed to tear up trade deals that weren’t in the country’s interests. But making the goal explicit may complicate the chances of reaching a new agreement, with both Mexico and Canada under their own domestic pressures not to cave to U.S. aggression. The U.S. had a $63 billion trade deficit in goods and services with Mexico last year, and a $7.7 billion surplus with Canada.

The negotiating summary acknowledges that some Americans have benefited from the market access provided by the 23-year-old accord. But it adds that the 1994 deal “created new problems for many American workers,” coinciding with the explosion of U.S. trade deficits and the closing of thousands of factories.

“Too many Americans have been hurt by closed factories, exported jobs, and broken political promises,” U.S. Trade Representative Robert Lighthizer said in a statement, adding that he plans to negotiate a “fair deal.”

Trade Deal

Changes to the accord could reshape more than $1.2 trillion in annual trade and shake up the supply chains of companies from Ford Motor Co. to Caterpillar Inc. The renegotiation will test Trump’s pledge to seek fairer trade deals across the globe and attract production back to America.

The negotiating summary also pledges to strengthen so-called rules of origin dictating the amount of North American content included in products, eliminate barriers to U.S. investment in all sectors, and secure commitments from Canada and Mexico not to manipulate their currencies.

Lighthizer was required to notify Congress by Monday of the administration’s objectives for renegotiating the North American Free Trade Agreement with Mexico and Canada. The administration began three months of domestic consultations in May under the so-called fast-track process that enables the government to seek a simple yes-or-no vote from Congress on new trade deals.

Lighthizer told members of the Senate Finance Committee last month that the U.S. plans to start talks with Canada and Mexico on Aug. 16, once consultations with U.S. lawmakers are complete. Trump has threatened to withdraw from Nafta if Mexico and Canada don’t agree to more favorable terms for the U.S.

Commerce Secretary Wilbur Ross has acknowledged that there’s a logic to wrapping up talks by early next year before Mexico’s presidential elections in mid-2018 and America’s midterm election that November. But Lighthizer told senators last month that the administration won’t impose “artificial deadlines.”

Canadian Prime Minister Justin Trudeau has long welcomed a new round of Nafta talks, saying the deal could benefit from an update and calling for it to draw on increased labor and environmental standards included in the Canada-European Union trade pact, which is set to take provisional effect in September. He declined to “speculate” on Trump’s priorities during a visit to the U.S. National Governors Association conference this month.

Mexican President Enrique Pena Nieto’s administration says it’s committed to keeping North America tariff-free and is prepared to walk away from the negotiating. Government officials and corporate executives are trying to boost trade ties with South America as a backup should Nafta end and result in reduced shipments to the U.S.

Mexican officials have called for Nafta talks to finish by the end of this year to prevent them from mixing with election politics ahead of the nation’s presidential vote in July 2018. They have repeatedly listed e-commerce, energy and telecommunications as areas where Nafta could be expanded because the industries have changed from when the deal took effect in 1994.