US aims for NAFTA provision to reinstate tariffs

A Chrysler Dodge Ram was unveiled at the Daimler-Chrysler plant in Saltillo, Mexico. The company began manufacturing Ram trucks in Mexico the year after NAFTA went into effect.
A Chrysler Dodge Ram was unveiled at the Daimler-Chrysler plant in Saltillo, Mexico. The company began manufacturing Ram trucks in Mexico the year after NAFTA went into effect.DARIO LOPEZ-MILLS/Associated Press/File 2005

WASHINGTON — The Trump administration plans to seek a new provision in the trade pact with Canada and Mexico that would allow tariffs to be reinstated if a flood of imports threatened to harm a domestic industry, according to a draft letter to Congress that lays out goals for renegotiation.

President Trump, who has called the North American Free Trade Agreement “the worst trade deal” ever signed by the United States, also wants to adjust the agreement’s rules of origin. The administration hopes these changes to how much of a product must be made in a NAFTA country will lift American manufacturing and jobs. And he wants NAFTA partners to expand the market for US-made goods in their government procurement.


“In 2016, voters in both major parties called for this administration to rethink the issue of trade,” read the eight-page draft letter, signed by Stephen Vaughn, the acting US trade representative. “The persistent US deficit in goods trade with Canada and Mexico demands that this administration take swift action to revise the relationship to reflect and respond to 21st century challenges.”

But the document, which was first obtained by The Wall Street Journal, reflects a substantial softening by Trump of the hard-line position that animated his presidential campaign. He had often said that the United States could abandon NAFTA altogether if renegotiating it was not possible.

Trump has signaled he wants to move swiftly to reorder the nation’s trade policies, and Wilbur Ross, the secretary of commerce, said during his Senate confirmation hearing that addressing NAFTA would be among his first priorities. But the hawkish rhetoric of the campaign has given way to more measured statements on trade from the administration that more closely track with the stance of many congressional Republicans, who are avid promoters of free trade and deeply skeptical of policies they view as restrictive or protectionist.


Peter Navarro, head of the White House National Trade Council, said this month that Mexico, Canada, and the United States should unite to become a regional manufacturing “powerhouse,” where workers in all three countries benefit.

“The very highest standards, the broadest coverage, and the most effective oversight of the agreement’s obligations will make the United States, and North America, stronger, a more attractive place to do business, and a model for the rest of the world in the 21st century,” the draft letter says.

The proposal, which could be modified, calls for expanding market access among the three countries and eliminating licensing and permit barriers that tend to stall commerce. It also calls for maintaining “reciprocal access” for textile and apparel products.

Rather than scrap NAFTA’s arbitration tribunals — regarded by some free-trade critics as secretive bodies that give private corporations unbridled power to challenge foreign governments outside the court system — the letter proposes to “maintain and seek to improve procedures” for settling disputes.

The draft also makes no mention of currency policy, an issue that many trade experts thought might be on the table.

The administration does give itself room to get tougher if necessary. The proposal for reinstating tariffs, often referred to as a “snapback,” is billed as a “safeguard mechanism” to protect domestic industries. The draft also suggests seeking to “level the playing field” on tax treatment. Such measures could bring objections from Canada and Mexico.


Trump’s economic advisers have argued that Mexico uses its value-added tax as a tariff that puts the United States at a disadvantage. The president has called for imposing a tax on companies that move their operations to Mexico and try to sell products in the United States. Republicans in Congress are considering a “border adjustment tax” that would make imports from abroad more expensive.

Trump has been adamantly opposed to multilateral trade deals, arguing that he can negotiate better agreements for the United States on a bilateral basis. It remains unclear from the draft proposal, however, whether the administration’s ideas for rewriting NAFTA would have an impact on trade deficits. It does not put forth any sort of target or range for the size of the trade deficit the United States would be willing to tolerate. And nowhere is there a mention of Trump’s threats to pull out of the agreement.