A two-day meeting between Trump administration trade officials and Chinese representatives concluded in Beijing on Friday with an agreement to meet again later, and little else. This was no surprise, considering that the president’s team brought demands to China that ranged from defensible – ending subsidies for high-tech industries, better access to investment opportunities for U.S. companies – to arbitrary: a $200 billion reduction in the bilateral trade deficit by the end of 2020. China had its own demands, including an end to the U.S. threat of tariffs on Chinese goods.
This exchange was certainly preferable to a trade war, but it also illustrated a basic problem with Trump’s approach. Even if you grant there may be some strategic value to threats as a negotiating tool, no one – not American trading partners, not American business and workers – can tell whether the president actually would accept a compromise, or what its content might be. Similar uncertainty prevails in the U.S. relationship with Europe, freshly granted a 30-day respite from Trump’s proposed tariff on steel and aluminum.
And the same goes for Canada and Mexico. Last month, in fact, the president all but confessed that he sees uncertainty as a weapon against them in talks over revising the North American Free Trade Agreement. “We can negotiate forever,” he said. “Because as long as we have this negotiation going, nobody is going to build billion-dollar plants in Mexico.” Oh no? Canada and Mexico can, and do, hedge against Trump’s unpredictability by pursuing closer economic ties with China and Europe.
The administration’s NAFTA agenda reflects the president’s fixation on bilateral trade deficits, especially in automobiles. The U.S.’s neighbors have been willing to at least consider how to keep more automotive production in North America, including the administration’s counterproductive proposal for a minimum-wage rule on cars and car parts that qualify for tariff-free trade within the NAFTA area. Yet U.S. trade representative Robert Lighthizer also appears to be insisting on a five-year sunset clause for the whole treaty. This would be a recipe for more uncertainty and potentially a dealbreaker for the other two countries.
Meanwhile, Lighthizer has picked a fight with the U.S. business community over NAFTA’s dispute resolution system, which business sees as a key protection for their investments in Mexico and Canada – and he considers a de facto subsidy for corporate capital flight.
NAFTA talks resume Monday, and despite upbeat reports from all three countries’ negotiators in recent weeks, there is danger now in the calendar. Even if there’s an agreement, it may come too late for lawmakers to ratify it. U.S. law requires that any preliminary agreement be subjected to a vetting process over a prescribed minimum period before Congress can even vote. And that period would almost certainly not be over before the November midterm election. Lighthizer seems to believe he can win at brinkmanship with both the NAFTA partner countries and Congress. If he cannot, then Trump may have no Plan B, other than the potentially disastrous one of announcing a U.S. pullout from an agreement on which an entire continent’s businesses have relied for a quarter century.
– The Washington Post