America First: the nemesis of free trade deals

WASHINGTON - "America First," the starting point of the Trump administration's trade policies, might prove to be the biggest hurdle of free trade deals yet, best epitomized by the first round of talks to renegotiate the North America Free Trade Agreement (NAFTA).

Representatives from the United States, Canada and Mexico kicked off negotiations to update the 23-year-old trade treaty on Aug 16, and announced an ambitiously fast-paced negotiation schedule on Sunday after five days of closed-door talks.

Although a joint statement said the three countries were "committed to an accelerated negotiation process to upgrade the agreement," trade experts viewed that it still will take time and efforts to bridge deep differences between the United States and its North American neighbors.

Freer trade or fairer trade

The renegotiation comes as a pillar of President Donald Trump's "America First" agenda, which aims to reverse America's huge trade deficit and curb the outflow of America's manufacturing jobs.

US trade representative Robert Lighthizer has said that realizing free and fair trade between the three countries is the main goal in renegotiations, however, it is obvious that the United States cares more about fair trade rather than free trade, analysts said. "We feel that NAFTA has fundamentally failed many, many Americans and needs major improvement," Lighthizer said in his opening remarks of the first round negotiation, indicating that NAFTA has encouraged many manufacturers to move to low-wage Mexico, which made at least 700,000 Americans lost their jobs.

While Canadian Foreign Minister Chrystia Freeland and Mexican Economy Secretary Ildefonso Guajardo made clear that they view the free trade deal as a success and only want to see it modernized and improved, not weighed down with unreasonable goals.

NAFTA should be modernized to "produce more trade among its participants, not less," Guajardo said.

Trade experts and economists pointed out that America's trade deficit could never be reduced by a so-called fairer trade treaty, the Trump administration insisted the issue be included in the talks.

"America First" strategy, which is seen as "Mexico second," could be counterproductive in free trade talks, said US news outlet Politico.

Upgrade or rewrite

On Wednesday, Lighthizer told the negotiators that Trump is not interested in "a mere tweaking of a few provisions, and a couple of updated chapters," revealing the US ambitions to seek an essential rewrite for the deal to change the current rules of free trade.

The trilateral trading bloc in North America, came into force on Jan. 1, 1994, has greatly benefited the region's economy and citizens by eliminating almost all the tariffs between the three countries.

Since 1994, trade volume between the United States, Mexico and Canada has more than tripled, reaching around 1.2 trillion US dollars in 2016 and forming the bloc with a combined Gross Domestic Product of about 20 trillion dollars.

To improve the deal, the three sides are discussing how to include environmental and labor standards, e-commerce and other technological developments that did not exist when NAFTA was first negotiated.

Besides, the United States demands more. Its long list, including especially reducing its trade deficits and increasing jobs, could make it difficult for the three parties to reach agreement on modernization plans.

For a successful deal, "it has to work for all parties involved.Otherwise, it is not a deal," said Guajardo.

Protectionism harmful to US economy

Worried that the "America First" strategy might derail current trade flows, the US business community has warned that the Trump administration should "do no harm."

"If they go off in a sharply protectionist direction, it will upset the global apple-cart and could backfire and hurt US economic interests," said C Fred Bergsten, director emeritus of the Peterson Institute for International Economics, a think tank based in Washington DC.

Apart from the renegotiation of NAFTA, the Trump administration also planned to revamp the bilateral trade deal with South Korea, and launched investigations into China's intellectual property practices.

The underlying mindset of "America First" might render all these trade initiatives fruitless, Bergsten said.

Trade experts, however, largely doubted the three countries' plan to wrap up talks by early next year.

"Because the agenda of the negotiations is so extensive, so comprehensive, it will be very difficult for the three countries to come together on agreement on this entire agenda of issues in the next few months," said Jeffrey Schott, a renowned US trade expert.