Editorial Board

Don't Scrap Nafta; Improve It

The coming talks could make a deal that’s already good even better.

The new USTR isn't looking for a fight.

Photographer: Andrew Harrer/Bloomberg

President Donald Trump has frequently denounced the North American Free Trade Agreement, promising either to renegotiate it with extreme prejudice or terminate it altogether. On Thursday his administration served official notice that he is serious, notifying Congress that it intends to start negotiations with Canada and Mexico in 90 days.

So Nafta is as good as doomed? Maybe not. The agreement can easily be changed in ways that enlarge rather than shrink opportunities for mutually beneficial trade -- and there’s reason to hope that this might actually happen.

U.S. Trade Representative Robert Lighthizer’s letter to Congress is far from belligerent. It proposes “modernization” of the agreement, with new provisions on digital trade, intellectual-property rights, labor and environmental standards, regulatory measures and so on. There’s no suggestion of higher tariffs. Lighthizer told reporters, “As a starting point for negotiations, we should build on what has worked in Nafta and change and improve what has not.”

Good idea! And it so happens that a convenient template for most of those changes already exists in the abandoned Trans-Pacific Partnership, which the U.S. stupidly failed to close last year. TPP’s purpose was precisely to establish a modern approach to free trade by encompassing new products and services -- sectors in which the U.S. has most to gain -- and by making labor and environmental standards easier to enforce. A Nafta modernized along those lines would indeed be a better deal than the good one that’s already in force.

Canada and Mexico supported TPP, and so they might be open to renegotiating Nafta in that way. Admittedly, they expected TPP to help them mainly by granting better access to Asian export markets -- something that Nafta-plus can’t give them. This shows the benefits to the U.S. of pursuing big multilateral trade deals, where bargains of that kind can be struck, rather than the narrow or bilateral agreements that Trump says he prefers. Even so, a modernized Nafta seems achievable.

An earlier draft of the letter to Congress included several booby traps capable of spoiling this plan. In particular, it proposed tougher “rules of origin” to require that imports from Canada and Mexico include more U.S.-made content. Insisting on ideas like that would make agreement hard to reach. The much shorter letter that was actually sent makes no mention of this.

Recently the Trump administration announced a mini-deal with China on trade -- the first fruits of a larger effort to renegotiate the U.S.-China trade relationship. Small as it was, and despite Trump’s campaign promises, that agreement expanded trade. With luck, the Nafta renegotiation might do the same.

    --Editors: Clive Crook, Michael Newman

    To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at davidshipley@bloomberg.net .

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