Canada Says Some US NAFTA Proposals Violate WTO Rules, Drawing Vehement Rebuttal From USTR

Canadian Foreign Affairs Minister Chrystia Freeland complained of U.S. negotiating positions during the ongoing NAFTA renegotiation, some of which she said violate World Trade Organization rules, during an Oct. 17 press conference. U.S. Trade Representative Robert Lighthizer shot back later by saying he is “surprised and disappointed” that both U.S. partners are resisting a U.S. call to help reduce its trade deficit. During a closing trilateral ministerial press conference at the conclusion of the fourth round of the NAFTA renegotiation in Washington, Freeland said that a formal U.S. proposal during this round to create a 50 percent U.S. content requirement for automobiles would “severely disrupt” North American supply chains and make U.S. car producers less competitive, relative to imports from outside the region.

“Honestly, I have no idea what she was talking about,” Lighthizer told reporters after the trilateral press conference, referencing Freeland’s claim that some U.S. proposals would violate WTO rules if adopted. Freeland did not specify which proposals violate WTO rules. Lighthizer acknowledged that some observers have speculated whether a U.S. content requirement for automobiles violate WTO rules, but said, “show me the WTO provision” that runs counter to U.S. proposals. Mexican Economy Secretary Ildefonso Guajardo was more tempered than Freeland and Lighthizer in his remarks, noting that parties should understand that the three nations have limits as to what they can concede. He noted that no parties want to leave the NAFTA renegotiation emptyhanded, and there’s “no reason” for that.

Responding to a statement from Freeland that Canada doesn’t see trade deficits as a useful measure of trade, Lighthizer noted the U.S.’s overall $500 billion trade deficit in goods, adding, “for us, trade deficits do matter. And we intend to reduce them.” He said Canada and Mexico have rejected text proposals for NAFTA that they agreed to in the Trans-Pacific Partnership. “I would have thought by now we could have cleared chapters dealing with digital trade, telecommunications, anticorruption, and several sectoral annexes, for example,” he said. “I understand that after many years of one-sided benefits, their companies have become reliant on special preferences and not just comparative advantage. Countries are reluctant to give up unfair advantage. But the President has been clear that if we are going to have an agreement going forward, it must be fair to American workers and businesses that employ our people at home.”

Canada and Mexico had been set to “firmly reject” U.S. "protectionist" proposals, including the five-year sunset provision and provisions that "favor American manufacturing," on the last day of negotiations, CNBC reported on Oct. 17, prior to the close of the negotiating round. CNBC also cited a GOP aide as saying that the House Ways and Means Committee told the Office of the U.S. Trade Representative that a NAFTA containing “protectionist” proposals by the U.S. wouldn’t have enough support to pass Congress. Given their disagreement, Canada, the U.S. and Mexico agreed to leave slightly more time before their next negotiating round, set for Nov. 17-21 in Mexico City. The three countries also agreed to extend negotiations into 2018.

Email ITTNews@warren-news.com for a copy of the joint statement and Lighthizer’s statement.