Trump Administration Starts NAFTA Renegotiation Talks

Published June 9, 2017

U.S. Trade Representative Robert Lighthizer notified Congress in May of President Donald Trump’s intent to begin formal talks with Canada and Mexico to renegotiate the North American Free Trade Agreement (NAFTA).

Negotiations can start as early as August 16, 90 days after the May 18 notification.

Lighthizer did not provide details in the letter to lawmakers, in which he wrote, “[O]ur aim is that NAFTA be modernized to include new provisions to address intellectual property rights, regulatory practices, state-owned enterprises, services, customs procedures, sanitary and phytosanitary measures, labor, environment, and small and medium enterprises.”

Across-the-Board Benefits

Daniel Griswold, a senior research fellow and co-director of the Mercatus Center’s Program on the American Economy and Globalization, says NAFTA has been a win-win for everyone, including the United States.

“Any objective look at the record of NAFTA would conclude it has been a successful agreement,” Griswold said. “It delivered on its central purpose of encouraging more trade. Trade grew significantly, surpassing $1 trillion in three-way trade.”

Incremental Improvements

Any major changes to NAFTA would harm all three countries, Griswold says

“People in all three countries could suffer major damage if NAFTA was to be undone,” Griswold said. “It has been hugely beneficial to workers and consumers and businesses, including the automobile industry. If we can maintain NAFTA with some incremental improvements, everybody will be winners.

“If the president heeds the advice of his more economically savvy advisers, I think we could end up with an improved NAFTA—we will preserve this beneficial trilateral trade investment relationship and expand the agreement to cover digital trade,” Griswold said. “Let’s hope the administration handles this in a responsible way, and the signs are there that we are moving in that direction.”

Oversold and Underwhelmed

Scott Lincicome, an adjunct scholar at the Cato Institute, says lawmakers’ failures to explain NAFTA properly to voters, both during the 1990s and today, have caused people to conclude the agreement has failed.

“NAFTA worked as we expected,” Lincicome said. “What politicians did poorly, however, is explain all of this, and they oversold the deal.”

Renegotiating NAFTA isn’t necessarily a bad idea, Lincicome says.

“NAFTA is now almost 25 years old,” Lincicome said. “The agreement was revolutionary for the early 1990s, but today, there’s no chapter on e-commerce. NAFTA is in need of an update.”

“There has been a sigh of relief that the Trump administration is not doing something … like withdrawing entirely,” Lincicome said. “There is also a lot of confusion and people waiting to see.”