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Lighthizer says a slew of Latin American free trade deals must be 'modernized' after NAFTA

October 3, 2017

MIAMI – Once the “NAFTA problem” is solved, the U.S. can shift its attention to updating free trade agreements with countries in the Latin American region if certain conditions are addressed, U.S. Trade Representative Robert Lighthizer said on Monday.

Pointing to U.S. agreements with Peru, Colombia, Panama and Chile, as well as the Central America Free Trade Agreement, Lighthizer – in Florida for Gov. Rick Scott's (R) Latin American summit – said all “need to be modernized, more or less.”

The U.S., Lighthizer said, has entered trade agreements “throughout Latin America and throughout the world” that have hurt the U.S. because it cannot “ensure market outcomes” under the terms of such deals.

Asked by Scott to discuss the biggest issues with Latin American trade, Lighthizer flagged digital trade as an area ripe for improvement. He also put what he called “trade facilitation” on the list of areas in which Latin American countries can improve trade relations with the U.S.

“We have to make it easier for sales to happen and products to ship back and forth,” he said. “There’s still a fair amount of inefficiency just in that process, and smaller countries tend to be less efficient than bigger countries.... There’s a whole trade facilitation process that has to go on.”

The trade representative also addressed legal standards, saying “there needs to be a lot of work done” in this area. “They have to have certainty in courts,” he said, also calling for “less corruption.”

Less certainty, Lighthizer said, means less investment, making it “very difficult” to ensure long-term trade benefits. “I mean there’s just a whole lot of good government things that these countries need and I don’t want to single them out because it is true not only there” but also in many countries in Asia and Africa, he added.

“I’m not particularly one who believes that successful trade makes for democratic governments,” he continued, pointing to countries like China and Vietnam with “very fast-growing economies.”

“I do think, though, if you don’t have certainty, you don’t have basic rights and you don’t have property values,” he said, and “if you don’t have those kinds of things that’s going to make it very difficult to get investments.”

More broadly, Lighthizer said the U.S. “need not act alone” to improve trade: “Some strong sovereign nations, including nations throughout this hemisphere, can and should work together on mutually agreeable solutions that adequately serve each other’s interests.” Countries can collaborate to create “better and fairer” free trade agreements that preserve “each countries' ability to forcefully defend the rights of its own people.” He called this approach the “driving principle” behind U.S. efforts to renegotiate NAFTA and amend its free trade agreement with South Korea.

“It will also frame our efforts to address trade issues throughout Latin America,” he said.

But abandoning deals must be an option in cases where trade negotiations are “clearly going nowhere,” the USTR said. “I think this president will walk away from deals and I guarantee you that I will,” Lighthizer said, adding that while it would be “very disruptive” to walk away from agreements like NAFTA and KORUS, “if we don’t get a good deal” the U.S. will have no choice.

The third round of NAFTA talks concluded in Ottawa last weekend; a fourth is scheduled for Oct. 11-15 in the Washington, DC, area. The U.S. and South Korea will meet in Washington on Oct. 4 for a second special session of the KORUS joint committee.

Asked by Scott if South Korea and the NAFTA parties believe the U.S. is willing to walk away from those deals, Lighthizer said “Hopefully they will realize that the president will walk away because that I can guarantee. He will walk away in a heartbeat if he thinks it’s a bad deal for America.”

Lighthizer was also asked about the “thought process” behind the Trump administration's insistence on reviewing trade agreements, and outlined how they are assessed.

“[Number] one, you have certain agreements that we know are not good and have to be renegotiated,” he said, naming NAFTA first given a “$65 billion annual trade deficit with Mexico and difficulties with Canada.”

“You decide which [agreements] you have to renegotiate right now,” he said, adding: “It's like a triage – you are bleeding in those areas.”

“The second thing is you take a step back and look at your overall trade deficits,” he said, pointing to a $350 billion gap with China. “That's just not sustainable,” he asserted.

But trade deficits, he added, should be only one “indicator” of the health of a bilateral relationship – not the only one. “So, then you go down and you say why is this happening? And some of it is completely due to economic process – but a lot of it is not; a lot of it is just pure mercantilism,” he said.

Small deficits – in comparison to “a $19 trillion economy” – could be acceptable, he allowed. “Sometimes you have a small deficit sometimes you have small surplus you go back and forth like that. That doesn’t trouble me at all.” – Isabelle Hoagland (ihoagland@iwpnews.com)

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