U.S. Nafta Negotiator Takes Aim at Rivals -- Update

By Jacob M. Schlesinger and William Mauldin Features Dow Jones Newswires

President Donald Trump's top trade negotiator exchanged public barbs Tuesday with his Mexican and Canadian counterparts as well as U.S. businesses, magnifying large gaps over the North American Free Trade Agreement and highlighting the obstacles to keeping the pact alive.

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"Frankly, I'm surprised and disappointed by the resistance to change from our negotiating partners," U.S. Trade Representative Robert Lighthizer told reporters after a week of talks on renegotiating Nafta, as Mexican and Canadian ministers stood beside him.

The resistance, countered Canadian Foreign Minister Chrystia Freeland, was in response to a "troubling" vision of change that would "turn back the clock on 23 years of predictability, openness, and collaboration" and in some cases would violate global trading rules.

Mexican Economy Minister Ildefonso Guajardo was more muted in his criticism, but in a later press briefing talked openly about the need for an alternative plan should the talks fall apart. Ms. Freeland did the same.

Mr. Lighthizer also made clear that any successful negotiation, in his view, will have to run roughshod over big U.S. business groups like the U.S. Chamber of Commerce, which have traditionally been the backbone of support for free-trade pacts. Mr. Lighthizer escalated his war of words with the Chamber and other groups that have campaigned to quash the Trump administration's proposals aimed at redefining Nafta in a way that would weaken many of its incentives and protections for creating a more integrated regional economy.

"Business says 'we want to have the market decide, but we would like to have political risk insurance paid for by the U.S. government,'" Mr. Lighthizer said. "To me that's absurd. You're either in the market or you're not in the market."

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Business, he said, was trying to defend a government "thumb on the scale" to protect their investments rather than defending free markets.

Despite the harsh disagreements among the government representatives, they all agreed to keep on talking to try to salvage and modernize Nafta, setting a new round for late November in Mexico, and agreeing to push the talks past their earlier year-end deadline into the first quarter of 2018, according to a joint statement from the three countries.

And while business groups, economists, and Mexican and Canadian officials have been increasingly vocal about their worries Mr. Trump would follow through on his repeated threats to pull out of Nafta, Mr. Lighthizer went out of his way to play down that prospect.

"There's not an active process going on right now" reviewing termination, he said. "We don't really have a plan beyond trying to get a good agreement."

The Mexican peso, which has been weighed down by investor worries about Nafta's future, rose after the public statements from the three ministers.

One proposal of Mr. Lighthizer that has drawn particular business scorn would inject a sunset clause into Nafta, forcing it to expire after five years unless the three countries took action to renew it. Another would dilute a provision aimed at arbitrating disputes between foreign investors and foreign governments, giving multinationals confidence to operate in countries, like Mexico, that don't offer developed-world legal protections.

Business groups say those changes would inject new uncertainty and unpredictability into Nafta, making it harder for them to plan around it.

Mr. Lighthizer said that was precisely the point. Nafta, he said, has been "a great deal for businesses that want to take advantage of a situation" encouraging them to invest in Mexico.

"I think it's possible take a little bit of the sugar away and have them still say we're doing pretty well," he said.

A Chamber of Commerce spokeswoman declined to comment on Mr. Lighthizer's latest remarks, pointing to a speech made last week by Chamber President Thomas Donohue in Mexico City, where he branded those and other ideas espoused by Mr. Lighthizer as "unnecessary and unacceptable" and a threat to the region's "shared economic vibrancy."

The war of words between Mr. Lighthizer, the U.S. trading partners, and American big business came at the end of the fourth round of a fast-moving negotiating process that was launched in mid-August. This round was the most contentious as the Trump administration finished laying out specific proposals defining how it wants to reorient the pact. The objective Mr. Lighthizer said, is to rebalance a pact that called "lopsided" in benefiting Mexico and Canada -- an assessment both countries vehemently reject.

Among the other "unconventional proposals," as Ms. Freeland described them, Mr. Lighthizer put forth a demand that half the value of all cars produced in the continent have U.S. content to qualify for Nafta tariff breaks, and another that would slash by about 90% the amount of U.S. federal spending that would be open to Mexican or Canadian bidding.

--Miguel Gonzalez and Paul Vieira contributed to this article.

Write to Jacob M. Schlesinger at jacob.schlesinger@wsj.com and William Mauldin at william.mauldin@wsj.com

(END) Dow Jones Newswires

October 17, 2017 19:49 ET (23:49 GMT)