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Draft Nafta order signals tougher US stance on trade partners

Donald Trump plans to end or renegotiate any trade deal that does not increase US economic growth, reduce the US trade deficit or contribute to higher US wages, according to a leaked draft of an executive order obtained by the Financial Times.

The draft of the order Mr Trump had been planning to sign on Saturday before his high-profile U-turn this week calls for US officials to notify Canada and Mexico within five days of the US’s intention to exit the North American Free Trade Agreement.

The document blames Nafta for a “massive transfer of wealth” away from the US, the loss of some 700,000 jobs and a cumulative trade deficit of $1tn with Mexico. It also holds Nafta responsible for “waves” of illegal immigration to the US from Mexico.

The White House did not immediately respond to a request for comment. Two people briefed independently by White House officials on the planned Nafta executive order confirmed the draft echoed what they had seen or been told.

Mr Trump, who is due to celebrate his 100th day in office on Saturday, reversed course this week on withdrawing from Nafta and said he would seek to renegotiate the treaty, albeit while warning that he could still pull out if a “fair deal” was not reached.

But the draft order sets a high bar for such a deal and strikes an acrimonious tone. It also sets ominous “America First” targets for any of the other deals the US has with 18 countries outside Nafta such as Australia, Colombia, South Korea and Singapore.

In an interview with Reuters published on Thursday Mr Trump levelled his ire at South Korea, warning that an agreement negotiated by the administration of George W Bush was a “horrible deal” and a “one-way street”.

Any trade agreement signed by the US needed to “increase America’s economic growth” and US wages while also decreasing the trade deficit the US has run with the world since the 1970s, the draft order declares. It also should “strengthen” the US “manufacturing and defence industrial bases”.

“It is the policy of this Administration to renegotiate, or withdraw from, every trade agreement that does not serve the interests of the United States,” the document adds.

Nafta, it says, “has not met any of these conditions”.

“Instead, Nafta has led to a massive transfer of wealth, an exodus of factories from our shores, successive waves of illegal immigration, and a surge in the United States trade deficit,” the order states.

“At the same time, Canada has continued to exploit the American dairy and lumber industries,” it says.

Mr Trump’s decision not to sign the order came after pro-business aides intervened to lobby for a renegotiation of Nafta. That included appeals from Wilbur Ross, the US commerce secretary, and Sonny Perdue, the agriculture secretary, who warned that pulling out of Nafta would lead to massive job losses in farm states and others that had supported Mr Trump in last November’s election.

But the order — and the fact that it came so close to being signed — highlights the strident views of economic nationalists such as Peter Navarro, the China hawk and economist who heads Mr Trump’s National Trade Council.

The order “does not look like [the product of] a group that has settled in to sensible economics,” said one person who had seen the draft. “It’s like an indictment — ‘On all these counts, Nafta, how do you plead?’”

Mr Trump on Saturday is due to sign a separate executive order calling for a review of the US’s existing trade agreements with a view to renegotiating those that fall short of his standards.

Mr Ross said the study would be a “detailed, systematic review of what went wrong” with previous deals and focus on “what could be done to fix them”.

The message of Mr Trump’s victory, Mr Ross said, was that voters were “fed up with having their jobs go offshore” and that “it is about time to fix these things”.

Additional reporting by David J Lynch in Washington

Via FT