US administration pledged to use negotiations to revise the North American Free Trade Agreement
"Nafta has fundamentally failed many, many Americans and needs major improvements," US trade representative Robert Lighthizer said as the first round of talks started in Washington. "We need to assure that huge trade deficits do not continue and that we have balance and reciprocity."
The US' negotiating partners instead called for focusing on modernizing the 23-year-old agreement to reflect new areas of trade and on preserving the competitive advantage for North American manufacturers and service providers.
"Trade is not a zero sum game, and deficits are not a measure of whether trade works," Canada's foreign minister Chrystia Freeland said.
"The objective [of talks] is not to tear apart what works, but how to make it better," Mexico's economy minister Ildefonso Guajardo said. "Nafta has been a resounding success for all parties."
The three countries are at least in agreement on the need to insulate energy trade during the negotiations. The US will work to improve Nafta's energy provisions, Lighthizer said. Mexican officials are seeking to put energy at the forefront of the negotiations, while Canada is making the case that its exports of oil and natural gas are helping to power US economic growth.
The US ran a $10.5bn deficit in trade of goods with Canada in January-June, and an even wider deficit in energy trade, at $26.7bn, US government data show. Canada is the largest source of crude imports for the US, at an average of 3.5mn b/d in January-May, Energy Information Administration data show.
The US has an even larger overall trade deficit with Mexico, at $36.3bn in January-June. But US energy exports to Mexico — mostly natural gas and products — exceeded imports — mostly crude — by $3bn in January-June.
North American energy companies want an updated Nafta to maintain tariff-free trade for all energy commodities and to protect investor-state dispute settlement provisions. On the latter, both Canada and the US are pushing for revisions to the existing text to make it more difficult for companies to challenge tariffs and duties imposed by a government in that country's courts.
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