Trade deficit top priority in Nafta talks, says US

US, Mexico & Canada would meet in Washington to discuss logistics of the talks

The United States on Monday launched the first salvo in the renegotiation of the 23-year-old North American Free Trade Agreement (Nafta), saying its top priority for the talks was shrinking the US trade deficit with Canada and Mexico.

In a much-anticipated document sent to lawmakers, US Trade Representative Robert Lighthizer said he would seek to reduce the trade imbalance by improving access for US goods exported to Canada and Mexico under the three-nation pact.

For the first time in a US trade deal, the administration also said it wants an “appropriate” provision to deter currency manipulation by trading partners. The move appeared aimed at future trade deals rather than specifically at Canada and Mexico, which are not considered currency manipulators.

The 17-page document asserted that no country should manipulate its currency exchange rate to gain an unfair competitive advantage, an often-cited complaint about China in past years.

Shortly before the release of the document, President Donald Trump lashed out against trade deals and unfair trade practices, saying he would take more legal and regulatory steps during the next six months to protect American manufacturers.

Canadian Minister of Foreign Affairs Chrystia Freeland said the US list was “part of its internal process” although a source familiar with the Canadian government’s thinking said the document was “not earth shattering.”

The source said officials from the United States, Mexico and Canada would meet in Washington on Tuesday to discuss logistics of the talks. No date has been announced for the Nafta talks, but they are expected in mid-August.

Mexico’s economy ministry said in a statement it would work “to achieve a constructive negotiation process that will allow trade and investment flows to increase and consolidates cooperation and economic integration to strengthen North American competitiveness.”

Speaking on condition of anonymity, a senior Mexican government official said the list of priorities was “not as bad as I was expecting” and welcomed that the United States was not pushing to impose punitive tariffs, as Trump has threatened.

Trade experts have argued that shrinking the yawning US trade deficit will not be achieved through trade deals but rather by boosting US savings.

“The first bullet point shows their pre-occupation with bilateral trade deficits and that’s unfortunate,” said Chad Bown, a senior fellow and trade expert at the Peterson Institute for International Economics. “There’s not much that trade policy and trade agreements can do to change those. That’s more of a macroeconomic issue.”

Among the priorities, Lighthizer said the administration would seek to eliminate a trade dispute mechanism that has largely prohibited the United States from pursuing anti-dumping and anti-subsidy cases against Canadian and Mexican firms.